U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1200
EUROWEB INTERNATIONAL CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3696015
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 Park Avenue, 15th Floor, New York, NY 10022
(Address of principal executive offices)
(212) 758-9870
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirement for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.001 par value 9,145,277 Shares
(Class) (Outstanding at June 30, 1999)
Transitional Small Business Disclosures Format (Check one): Yes No X
<PAGE>
EUROWEB INTERNATIONAL CORP.
INDEX
PART I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets as of June 30, 1999 (unaudited)
and December 31, 1998 (audited) 2
Consolidated statements of operations and comprehensive loss
(unaudited) for the three months ended June 30, 1999 and 1998
and the six months ended June 30, 1999 and 1998 3
Consolidated statements of stockholders' equity (unaudited) for the
six months ended June 30, 1999 and 1998 4
Consolidated statements of cash flows (unaudited) for the six
months ended June 30, 1999 and 1998 5
Notes to consolidated financial statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II. Other Information 17
Signature 20
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
June 30, 1999 December 31, 1998
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $4,303,986 $1,688,280
Certificate of deposit 1,028,280 1,006,567
Current portion of note receivable 159,159 641,785
Current portion of loan receivable 88,339 -
Receivable from Euroweb Rt. 35,388 101,103
Investment in Hungarian Broadcasting Corp. 60,140 156,443
Prepaid and other current assets 115,452 128,027
Total current assets 5,790,744 3,722,205
Property and equipment, less accumulated
depreciation of $3,889 46,777 -
Note receivable, less current portion 782,891 858,215
Loan receivable, less current portion 20,989 -
Investment in Euroweb Rt., at equity 823,127 730,813
Goodwill, less accumulated amortization
of $27,138 1,601,120 -
$9,065,648 $5,311,233
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 259,274 $ 225,590
Commitments
Common stock subject to mandatory redemption,
$.001 par value, 76,190 shares issued
and outstanding 100,000 -
Stockholders' Equity
Preferred stock, $.001 par value - shares
authorized 5,000,000; no shares outstanding
Common stock, $.001 par value - shares
authorized 20,000,000 (1999) and 15,000,000
(1998);
1999 1998
Issued 9,145,277 6,444,916
Less shares subject to
mandatory redemption 76,190 -
Issued and outstanding 9,069,087 6,444,916 9,069 6,445
Additional paid-in capital 24,827,914 20,886,852
Accumulated deficit (15,960,501) (15,760,679)
Accumulated other comprehensive losses:
Foreign currency translation adjustment (52,830) (26,000)
Unrealized loss on investment in Hungarian
Broadcasting Corporation (117,278) (20,975)
Total stockholders' equity 8,706,374 5,085,643
$9,065,648 $5,311,233
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues
Internet $ 71,528 $455,100 $ 71,528 $840,000
Expenses(Income)
Compensation and related costs 83,903 159,999 157,375 316,945
Network costs 42,000 282,029 42,000 453,269
Consulting and professional fees 78,001 49,674 148,478 93,124
Rent 6,000 32,589 12,056 65,593
Depreciation and amortization 3,889 37,119 3,889 56,192
Amortization of goodwill 27,138 97,000 27,138 194,000
Interest and dividend income (66,272) (10,142) (124,134) (26,850)
Interest expense - 13,322 - 15,117
Foreign currency gain (972) - (972) -
Equity in net income of Euroweb Rt. (26,934) - (60,044) -
Other 60,426 10,839 63,425 54,519
Total 207,179 672,429 269,211 1,221,909
Loss from continuing operations
before income taxes (135,651) (217,329) (197,683) (381,909)
Provision for income taxes 2,139 - 2,139 -
Loss from continuing operations (137,790) (217,329) (199,822) (381,909)
Income from discontinued operations - 95,310 - 4,805
Net loss (137,790) (122,019) (199,822) (377,104)
Other comprehensive gains(losses):
Foreign currency translation
gain(loss) (7,744) 19,727 (26,830) 7,592
Unrealized loss on investment in
Hungarian Broadcasting Corporation (87,277) - (96,303) -
Comprehensive loss $(232,811) $(102,292) $(322,955) $(369,512)
Net income(loss) per share -
basic and diluted
Continuing operations $ (.02) $ (.04) $ (.03) $ (.07)
Discontinued operations - .02 - -
$ (.02) $ (.02) $ (.03) $ (.07)
Weighted average number of shares
outstanding 8,339,881 5,210,725 7,412,937 5,118,892
See accompanying notes to consolidated financial statements
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
Accumulated Other
Comprehensive Gains(Losses)
Unrealized
Loss on
Foreign Investment in
Additional Currency Hungarian
Common Stock Paid-in Accumulated Translation Broadcasting
Shares Amount Capital Deficit Adjustment Corporation
SIX MONTHS ENDED JUNE 30, 1999:
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 6,444,916 $6,445 $20,886,852 $(15,760,679) $(26,000) $(20,975)
Issuance of shares in private
placements 2,084,171 2,084 2,951,602 - - -
Issuance of shares for acquisition
of business 450,000 450 899,550 - - -
Exercise of common stock options 90,000 90 89,910 - - -
Foreign currency translation loss - - - - (26,830) -
Unrealized loss on investment in
Hungarian Broadcasting
Corporation - - - - - (96,303)
Net loss for the period - - - (199,822) - -
Balance, June 30, 1999 9,069,087 $9,069 $24,827,914 $(15,960,501) $(52,830) $(117,278)
SIX MONTHS ENDED JUNE 30, 1998:
Balance, January 1, 1998 4,949,936 $4,950 $19,770,725 $(16,188,203) $(35,900) $ -
Issuance of shares on
conversion of debentures 356,814 357 161,325 - - -
Net loss for the period - - - (377,104) - -
Foreign currency
translation gain - - - - 7,592 -
Balance, June 30, 1998 5,306,750 $5,307 $19,932,050 $(16,565,307) $(28,308) $ -
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities
Net loss $ (199,822) $(377,104)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization of property
and equipment 3,889 56,192
Amortization of goodwill 27,138 194,000
Interest on debentures paid in shares of
capital stock - 11,682
Loss on sale of property - 247
Equity in net income of Euroweb Rt. (60,044) -
Foreign currency (gain)loss (972) 6,148
Changes in operating assets and liabilities:
(Increase)decrease in:
Accounts receivable - 67,534
Receivable from Euroweb Rt. 65,715 -
Prepaid and other current assets 33,186 (111,016)
Increase(decrease) in:
Accounts payable and accrued expenses (91,983) (157,005)
Deferred revenue - 46,000
Net cash used in operating activities (222,893) (263,322)
Cash flows from investing activities
Receivable from Hungarian Broadcasting Corporation - 179
Certificates of deposit (21,713) -
Repayment of note receivable 557,950 -
Proceeds of loan receivable (150,000) -
Repayment of loan receivable 40,672 -
Investment in EuroWeb Rt. (59,100) -
Acquisition of property and equipment and construction
in progress (4,222) (29,365)
Acquisition of intangibles - (28,795)
Payable to former owners of business acquired - (115,000)
Acquisition of Luko Czech-Net, s.r.o. net of
cash acquired (669,647) -
Net cash used in investing activities (306,060) (172,981)
Cash flows from financing activities
Exercise of common stock options 90,000 -
Proceeds from issuance of common stock 3,053,687 -
Net cash provided by financing activities 3,143,687 -
Effect of foreign exchange rate changes on cash 972 1,444
Increase(decrease) in cash and cash equivalents 2,615,706 (434,859)
Cash and cash equivalents at beginning of period 1,688,280 697,948
Cash and cash equivalents at end of period $4,303,986 $ 263,089
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ NONE $ 6,000
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock upon conversion of
debentures and accrued interest $ NONE $ 161,682
Issuance of common stock for acquisition of Luko
Czech-Net, s.r.o. 900,000 NONE
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Euroweb
International Corp. (the "Company") and its wholly-owned subsidiaries.
The operations of Euroweb Rt., a wholly-owned Hungarian subsidiary in
the Internet business, were included in the consolidated financial
statements through November 20, 1998, at which date the Company sold
51% of its interest in Euroweb Rt. The remaining 49% interest is
carried on the equity method. The operations of Luko Czech-Net, s.r.o.
("Luko Czech"), a limited liability company, which was acquired in
June 1999, have been included since June 1, 1999. All material
intercompany balances and transactions have been eliminated.
Certain 1998 items have been reclassified to conform to the 1999
presentation.
(b) Use of Estimates and Assumptions
In preparing financial statements in conformity with generally
accepted accounting principles, management is required 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 revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(c) Fiscal Year
The Company's reporting period is the calendar year.
(d) Revenue Recognition
Revenues from monthly Internet services are recognized in the month
in which the services are provided.
(e) Foreign Currency Translation
The Company uses the local currencies, the Hungarian forint and
Czech koruna, as the functional currencies for measuring the
accounts of Euroweb Rt. and Luko Czech. It translates all assets
and liabilities at exchange rates in effect at the balance sheet
date and all income and expense accounts at average rates, and
records adjustments resulting from the translation in a separate
component of stockholders' equity.
(f) Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
(g) Fair Value of Financial Instruments
The carrying values of cash equivalents, certificates of deposit,
note and loan receivable, accounts payable and accrued expenses
approximate fair values.
(h) Investment in Euroweb Rt.
The Company's 49% equity interest in Euroweb Rt. is accounted for
using the equity method, under which the Company records as income
its share of the earnings, net of the amortization of goodwill.
Dividends are credited against the investment account when declared.
The excess of the carrying value of the Company's investment over
its equity in the fair value of the underlying net assets (goodwill)
of approximately $586,000 at the acquisition date is amortized over
an estimated remaining useful life of three years.
(i) Income Taxes
The Company accounts for income taxes in accordance with SFAS
No. 109, "Accounting for Income Taxes." This statement requires
a liability approach for measuring deferred taxes based on temporary
differences between the financial statement and income tax bases of
assets and liabilities existing at the balance sheet date, using
enacted rates for the years in which the taxes are expected to be
paid or recovered.
(j) Net Loss Per Share
The Company has adopted Statement of Financial Accounting Standards
No. 128, "Earnings per Share," ("SFAS No. 128"), which provides for
the calculation of "basic" and "diluted" earnings per share. This
statement became effective for financial statements issued for
periods ending after December 15, 1997. Basic earnings per share
include no dilution and are computed by dividing income available
to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share
reflect the effect of common shares issuable upon exercise of stock
options and warrants in periods in which they have a dilutive effect.
(k) Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
which established standards for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity
except those resulting from investments by, and distributions to,
owners. Among other disclosures, SFAS 130 requires that all items
that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as
other financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
2. Organization, Business, Acquisitions and Discontinued Operations
The Company is a Delaware corporation which was organized on November 9,
1992. On January 2, 1997, the Company acquired three Hungarian Internet
service companies for a purchase price of approximately $1,913,000. These
acquisitions were accounted for using the purchase method of accounting.
The Company operated the Internet service companies into its wholly-owned
subsidiary, Euroweb Rt.
On November 20, 1998, the Company sold a 51% interest in Euroweb Rt. for
$2,200,000, recognizing a gain of $1,516,548 on the sale. Pursuant to
the non-compete provision of the shareholders' agreement, the Company
cannot: (i) engage in any business activity in Hungary listed in the
scope of activities of Euroweb Rt.'s charter, (ii) own or control any
equity interest in any person or entity that engages in any such
business activity or (iii) permit any of its employees to act as a
director, officer, manager or consultant to any person or entity
that engages in any such business activity. If the Company breaches
its obligation set forth under this provision, the Company will be
required to sell to the other shareholder all its shares at the time
of such breach at a price equal to the nominal value of such shares.
The Company's consolidated statements of operations include the equity
in net income of Euroweb Rt. for the three months and six months ended
June 30, 1999 and the results of operations of Euroweb Rt. for the three
months and six months ended June 30, 1998. Operating data for Euroweb Rt.
for the three months and six months ended June 30, 1999 include the
following:
Three Months Six Months
Revenues $727,282 $1,353,000
Net Income $146,563 $ 305,730
Company's 49% equity in net income $ 71,816 $ 149,808
Amortization of the excess of the
carrying value of the Company's
investment over its equity in the
fair value of the underlying net
assets (44,882) (89,764)
Equity in net income of Euroweb Rt. $ 26,934 $ 60,044
On June 11, 1999, the Company acquired all of the participation interests
of Luko Czech, an Internet service provider in the Czech Republic for a
total cost of $1,841,758, consisting of 450,000 shares of the Company's
common stock valued at $2 per share and the balance paid in cash. The
number of shares to be issued is subject to upward adjustment so that
the aggregate market value of the shares isued to the sellers on the
dated the shares are registered is equal to $900,000. This acquisition
was accounted for using the purchase method of accounting. The excess
of the Company's cost over the fair value of the net assets acquired
(goodwill) amounted to $1,628,258, which is being amortized over its
estimated useful life of five years. The results of Luko Czech's
operations from June 1, 1999 to June 30, 1999 have been included
in the accompanying statements of operations and comprehensive loss for
the three months and six months ended June 30, 1999.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
The following pro forma information presents the consolidated results of
the Company's operations as if the acquisition had occurred on January 1,
1998:
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues $232,000 $599,100 $481,000 $1,142,000
Net loss (204,790) (234,019) (339,822) (576,104)
Net loss per share $ (.02) $ (.04) $ (.04) $ (.10)
These unaudited pro forma results have been prepared for comparative
purposes only. They do not purport to be indicative of the results of
operations that actually would have resulted had the combination
occurred on January 1, 1998, or of future results of operations of the
consolidated entities.
During 1998, the Company completed the sale of all of the apartments in
one of two condominium buildings constructed by the Company. The
purchaser of all of the apartments, except for one, was the Company's
former President. In December 1998, the former President also purchased
all of the outstanding shares of stock of the Company's wholly-owned
construction subsidiary for $1,500,000, which resulted in a loss of
$119,678. The subsidiary's only significant asset was the second
condominium building. The sales price was satisfied by a payment of
$500,000 in January 1999 and the issuance of a promissory note of
$1,000,000 payable in sixty equal monthly installments including
interest at approximately 7.3% per annum. The note is collateralized by
the building. With the sale of the construction subsidiary, the Company
has exited the construction business and, accordingly, the construction
operations have been classified as discontinued for the three months and
six months ended June 30, 1998. Revenues for the six months ended
June 30, 1998 were $1,724,468 and the profit from discontinued operations
was $4,805 ($.00 per share).
3. Interim Periods
The accompanying consolidated financial statements for the three months
and six months ended June 30, 1999 and 1998 are unaudited but, in the
opinion of management, include all adjustments, consisting mainly of
normal recurring accruals necessary for fair presentation. Results for
the interim periods are not necessarily indicative of the results for a
full year.
4. Incorporation by Reference
Reference is made to the Company's annual report on Form 10-KSB for the
year ended December 31, 1998 and to the notes to the consolidated
financial statements included therein, which are incorporated herein by
reference.
5. Cash Concentration
At June 30, 1999, cash and cash equivalents included $103,169 and
$1,309,361 on deposit in the United States with a money market fund and
major money center bank, respectively, and four certificates of deposit
of a major U.S. money center bank aggregating $2,630,042. In addition,
$254,807 and $6,607 were on deposit in Czech and Hungarian banks
respectively.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
6. Investment in Hungarian Broadcasting Corp.
On June 30, 1998, the Company settled its receivable of $177,418 from
Hungarian Broadcasting Corp. ("HBC"), a public company, by receiving
68,732 restricted shares of HBC common stock which are subject to a
lock-up through June 30, 1999. The 68,732 shares represent less than 3%
of HBC's total outstanding shares of common stock. The valuation of the
stock represented a discount of 30% from its market value on that date.
The investment is carried at a 30% discount from current market value
and the Company has classified it as available for sale with the
unrealized loss of $117,278 recorded in a separate component of
stockholders' equity.
7. Loan Receivable
In January 1999, the Company loaned $150,000 to its Vice-President for
the purpose of buying an apartment in Budapest. The loan is repayable
in 21 monthly installments of $8,000, including interest at 11% per
annum. The loan is collateralized by the Vice-President's apartment.
8. Capital Stock, Stock Options and Warrants
During the first quarter of 1999, options which were previously granted
to two officers for the purchase of shares of the Company's common stock
were exercised. One officer exercised options for 35,000 shares at $1.00
per share; the second officer exercised options for 55,000 shares at
$1.31 per share.
During April and May 1999, the Company sold the following shares of its
common stock in four private placements:
152,380 shares at $1.31 per share to a company owned
by the Company's former President. The Company
has agreed that until October 1, 1999 (the "Put
Period") it will purchase from the buyer 50% of
these shares at the original purchase price if the
buyer notifies the Company in writing of its
desire to sell these shares to the Company during
the Put Period. The balance sheet at June 30, 1999
includes these shares as common stock subject to
mandatory redemption.
565,141 shares at $1.31 per share
942,840 shares at $1.75 per share
500,000 shares at $1.50 per share
Total 2,160,361 shares
The purchasers of the 942,840 shares also received three-year warrants
to purchase 942,840 shares at $2.00 per share and 942,840 shares at
$2.25 per share.
A private placement agent received 106,520 warrants to purchase shares of
common stock at $2.10 per share. In addition, the Company issued 200,000
warrants exercisable at $2.00 per share to three public relations
consulting firms.
During April 1999, the Company also granted a total of 1,000,000 common
stock options to its Chairman of the Board, President and Vice President.
The options are exercisable over seven years at a price of $1.625 per
share.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
As discussed in Note 2, the Company issued 450,000 shares of its common
stock during June 1999 in connection with the acquisition of Luko Czech.
On May 21, 1999, the Company's stockholders approved the following:
a) An increase in the authorized number of shares of capital stock to
30,000,000 shares, consisting of 25,000,000 shares of common stock
and 5,000,000 shares of preferred stock; the increase has not yet
become effective.
b) An increase in the number of shares of common stock available under the
Company's 1993 Incentive Stock Option Plan from 350,000 to 670,000.
On May 21, 1999, the Board of Directors granted a total of 130,000
five-year options exercisable at 2 3/32 (equal to the market price on
that date) to two directors.
9. Commitments
Employment agreements with the three officers of the Company provide for
aggregate annual compensation of $318,000 through September 30, 2004 and
$150,000 thereafter through December 31, 2005.
10. Subsequent Events
In July 1999, the Company entered into agreements to purchase the
following interests in Internet service providers:
a) All of the outstanding stock of EUnet Slovakia, located in the Slovak
Republic, for $800,000 consisting of $400,000 in cash and $400,000 in
shares of the Company's common stock (200,000 shares at $2 per share).
b) All of the outstanding stock of Global Network Services, located in
the Slovak Republic, for $1,200,000 consisting of $700,000 in cash
and $500,000 in shares of the Company's common stock (250,000 shares
at $2 per share).
c) 80% of the outstanding stock of Bohemia Net, a.s., located in the
Czech Republic, for $1,080,000 consisting of $530,000 in cash and
$550,000 in shares of the Company's common stock (275,000 shares at
$2 per share). The agreement grants the Company an option to Purchase
the remaining 20% for $410,000 in cash and $410,000 in shares of the
Company's common stock.
d) 70% of the outstanding stock of Dodo, s.r.o. Kosice, located in the
Slovak Republic, for $550,000 consisting of $350,000 in cash and
$200,000 in shares of the Company's common stock (100,000 shares
at $2 per share).
As of August 12, 1999, all of the acquisitions described above are
subject to completion of satisfactory due diligence procedures.
The number of shares to be issued for each of the four acquisitions is
subject to upward adjustment so that the aggregate value of the shares
to the sellers on the date the shares are registered is equal to the
stock portion of the purchase price shown above.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
The acquisitions discussed above will be accounted for as purchase
transactions and the acquired companies' results of operations for future
periods commencing with the acquisition dates will be included in the
Company's consolidated financial statements. Any excess of the costs of
these acquisitions over the underlying net assets will be recorded as
goodwill and amortized over the estimated useful lives.
The Company is currently seeking to acquire other Internet service
providers in central and eastern Europe.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operations
The Company is a Delaware corporation which was organized on November 9, 1992.
It was a development stage company through December 31, 1993. Its
wholly-owned Hungarian subsidiary, Teleconstruct Epitesi Kft ("Teleconstruct"),
a limited liability company, was organized on March 19, 1993. The subsidiary
had two operating business segments: (1) building of condominium apartments
and building renovation and (2) design and civil engineering, and laying of
underground fiber optic telephone and cable lines. The latter segment was
discontinued in 1994. The shares of the subsidiary, Teleconstruct, were sold
in December 1998. With the sale of Teleconstruct, the Company has exited the
construction business and accordingly, the construction operations have been
classified as discontinued operations effective January 1, 1998.
In January 1997, the Company acquired three operating Internet service provider
businesses and consolidated the three businesses under one roof. At present,
Euroweb Rt. ("Euroweb") is a leading Internet service provider operating in
Hungary that provides full Internet and Web Site solutions and services
primarily to businesses. Euroweb's services include providing access to an
international backbone and design of web sites. Euroweb markets its services
principally to medium-sized and large companies.
On November 20, 1998, the Company sold a 51% interest in Euroweb Rt. The
Company's consolidated statements of operations include the equity in net
income of Euroweb Rt. for the three and six months ended June 30, 1999 and
the results of its operations for the three and six months ended June 30, 1998.
Revenues of Euroweb Rt. for the first six months of 1999 amounted to
$1,353,000. This represented a substantial increase from the revenues of
$840,000 for the first six months of 1998 and was primarily due to the sale
of more leased lines to business customers. Net income of Euroweb Rt. before
amortization of goodwill for the 1999 period was $305,730 compared to net
income of $72,152 in 1998.
Equity in net income of Euroweb Rt. of $60,044 represents 49% of the
subsidiary's net income less amortization of goodwill.
On June 11, 1999 the Company acquired all of the outstanding stock of Luko
Czech-Net, s.r.o. ("Luko Czech"), an Internet service provider in the Czech
republic. This acquisition was accounted for using the purchase method of
accounting and the results of its operations from June 1, 1999 to June 30, 1999
have been included in the accompanying statements of operations and
comprehensive loss for the three months and six months ended June 30, 1999.
The consolidated net loss for the six months ended June 30, 1999 amounted to $
199,822 ($.03 per share) compared to a net loss of $377,104 ($.07 per share) in
1998. The income from discontinued operations of $4,805 ($.00 per share) in
the 1998 period represents the first quarter's profit from operations incurred
by the construction business which was sold in December 1998.
The pro forma consolidated net loss for the six months ended June 30, 1999
(assuming that Luko Czech had been acquired on January 1, 1998) amounted to
$339,822 ($.04 per share) for the six months ended June 30, 1999 compared to a
net loss of $576,104 ($.10 per share) in 1998.
<PAGE>
Liquidity and Capital Resources
During November 1998, the Company sold 51% of its interest in Euroweb Rt. for
$2,200,000.
In December 1998, the Company sold its holdings of shares in its subsidiary
Teleconstruct Epitesi Kft. for $1,500,000 consisting of $500,000 in cash and a
mortgage for $1,000,000 payable over six years with interest of 8 1/8% per
year.
During the first quarter of 1999, options which were previously granted to two
officers for the purchase of shares of the Company's common stock were
exercised. One officer exercised options for 35,000 shares at $1.00 per
share; the second officer exercised options for 55,000 shares at $1.31 per
share.
During April and May 1999, the Company sold the following shares of its common
stock in four private placements:
152,380 shares at $1.31 per share to a company owned
by the Company's former President. The Company
has agreed that until October 1, 1999 (the "Put
Period") it will purchase from the buyer 50% of
these shares at the original purchase price if the
buyer notifies the Company in writing of its
desire to sell these shares to the Company during
the Put Period.
565,141 shares at $1.31 per share
942,840 shares at $1.75 per share
500,000 shares at $1.50 per share
Total 2,160,361 shares
The purchasers of the 942,840 shares also received three-year warrants to
purchase 942,840 shares at $2.00 per share and 942,840 shares at $2.25 per
share.
A private placement agent received 106,520 warrants to purchase shares of
common stock at $2.10 per share. In addition, the Company issued 200,000
warrants exercisable at $2.00 per share to three public relations consulting
firms.
During April 1999, the Company also granted a total of 1,000,000 common stock
options to its Chairman of the Board, President and Vice President. The options
are exercisable over seven years at a price of $1.625 per share.
On May 21, 1999, the Company's stockholders approved the following:
a) An increase in the authorized number of shares of capital stock to
30,000,000 shares, consisting of 25,000,000 shares of common stock
and 5,000,000 shares of preferred stock; the increase has not yet
become effective.
b) An increase in the number of shares of common stock available under
the Company's 1993 Incentive Stock Option Plan from 350,000 to 670,000.
On May 21, 1999, the Board of Directors granted a total of 130,000 five-year
options exercisable at 2 3/32 (equal to the market price on that date) to two
directors.
<PAGE>
At June 30, 1999, the Company's cash and cash equivalents aggregated $4,303,986
and it owned a one-year certificate of deposit for $1,028,280. The Company
presently anticipates that its current cash position and its cash flows from
current operations as well as the issuances of additional shares of capital
stock discussed above will be sufficient to meet its presently anticipated
working capital and capital expenditure requirements for at least the next 12
months.
On June 11, 1999, the Company acquired all of the outstanding stock of Luko
Czech for a total cost of $1,841,758, consisting of 450,000 shares of the
Company's common stock valued at $2 per share and the balance paid in cash.
During July 1999, the Company entered into agreements to purchase interests
ranging from 70% to 100% in four Internet service providers in the Czech and
Slovak republics. The total cost of these acquisitions will be $3,630,000,
consisting of $1,980,000 in cash and $1,650,000 in shares of the Company's
common stock (825,000 shares at $2 per share).
The number of shares to be issued for Luko Czech and each of the four
subsequent acquisitions is subject to upward adjustment so that the
aggregate value of the shares to the sellers on the date the shares are
registered is equal to the stock portion of the purchase price shown above.
The Company is currently seeking to acquire other Internet service companies in
central and eastern Europe.
The Year 2000
Euroweb utilizes a significant number of computer software programs and
operating systems throughout its organization, including applications used
in operating the basic Internet service, network access, providing content
and fulfilling various administrative and billing functions. Since Internet
technology is constantly improving, both the hardware and software elements
which are provided by third parties must be upgraded at intervals ranging
from three to twelve months. A survey by Euroweb has shown that approximately
90% of these elements are standard software such as Unix and hardware such as
CISC routers and Sun computers which have already been corrected. The
remaining hardware and software will be updated or replaced in the near
future. Furthermore, Euroweb has developed some of its own special software
applications which have already incorporated the necessary modifications to
operate properly in the Year 2000. The Company is prepared to replace certain
computer elements wherever necessary during calendar year 1999, but management
does not believe that this would have any material adverse effect on the
Company's operations or its financial results.
Euroweb does not separately identify costs incurred in connection with
Year 2000 compliance activities. To date, however, the Company does not
believe such costs to be significant since most of the hardware must be
replaced at intervals ranging from three to twelve months. Future expenditures
are not expected to be significant.
Inflation and Seasonality
Internet operations are not seasonal.
Cautionary Statement for Purpose of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
Except for historical information provided in the Management's Discussion and
Analysis, statements made throughout this document are forward-looking and
contain information about financial results, economic conditions, trends and
known uncertainties. The Company cautions the reader that actual results
could differ materially from those expected by the Company, depending on the
outcome of certain factors (some of which are described with the
forward-looking statements) including: 2) heightened competition, particularly
price competition, reducing margins; and 2) slower growth than expected in the
market for Internet services in Hungary or the Czech and Slovak Republics.
<PAGE>
PART II
Item 1. Legal Proceedings
None that would materially affect the Company
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits (numbers below reference Regulations S-B)
(3)(a) Certificate of Incorporation filed November 9, 1992(1)
(b) Amendments to Certificate of Incorporation filed July 9, 1997
and on May 11, 1999(12)
(c) By-laws(1)
(4)(a) Form of Common Stock Certificate(1)
(b) Form of Underwriters' Warrants to be sold to Underwriters(1)
(c) Placement Agreement between Registrant and J.W. Barclay & Co.,
Inc. and form of Placement Agent Warrants issued in connection
with private placement financing(1)
(d) Form of 10% Convertible Debenture used in connection with
offshore private placement financing pursuant to
Regulation S(3)
(e) Form of Common Stock Purchase Warrant in connection with
private placement financing under Section 506 of
Regulation D(3)
(10)(a) Consulting agreement between Registrant and Klenner Securities
Ltd.(1)
(b) Consulting agreement between Registrant and Robert Genova(1)
(c) Consulting agreement between Registrant and Laszlo Modransky(1)
(d) 1993 Incentive Stock Option Plan(1)
(e) Sharing agreement for space and facilities between Registrant
and Hungarian Telephone and Cable Corp.(1)
(f) Articles of Association (in English) of Teleconstruct Building
Corp.(1)
(g) Articles of Association (in English) of Termolang Engineering
and Construction Ltd.(1)
<PAGE>
(h) Letter of intent between Teleconstruct Building Corp. and
Pilistav(1)
(i) Employment agreement between Registrant and Robert Genova(2)
and termination agreement dated February 5, 1997(3)
(j) Employment agreement between Registrant and Peter E. Klenner(2)
and termination agreement dated October 30, 1996, and agreement
for sale of condominium unit to M&A as amended(3)
(k) Employment agreement between Registrant and Frank R. Cohen(2)
and modifications of employment agreement(3)
(l) Letter of Intent agreement between Registrant and Raba-Com
Rt.(3)
(m) Letter of Intent agreement between Registrant and Kelet-Nograd
Rt.(3)
(n) Letter of Intent agreement between Registrant and 3 Pilistav
villages for installation of cable in those areas(3)
(o) Lease agreement between Registant's subsidiary EUNET Kft. and
Varosmajor Passage, Kft. for office space(3)
(p) Acquisition agreement between Registrant and KFKI Computer
Systems Corp. dated December 13, 1996(3)
(q) Acquisition agreement between Registrant and E-Net Hungary(3)
(r) Acquisition agreement between Registrant and MS Telecom Rt.(3)
(s) Employment agreement between Registrant and Imre Kovats(3)
(t) Employment agreement between Registrant and Csaba Toro(3)
(u) Promissory Note from Registrant to HBC(3)
(v) Communication Services Agreement between Registrant and MCI
Global Resources, Inc.(4)
(w) Lease and Option Agreement for Building B as of April 1, 1998
with Hafisa Kft.(5)
(x) License Agreement between GRIC Communications, Inc. and Euroweb
International Corp.(5)
(y) Consulting Agreement between Registrant and Eurus Capital
Corporation and Rescission Agreement(7)
(y)(i)Agreement rescinding Option Agreement with Eurus Capital
Corporation(8)
(z) Financial Consulting Agreement between Registrant and J.W.
Barclay & Co., Inc.(7)
(aa) Mergers and Acquisitions Agreement between Registrant and J.W.
Barclay(7)
(bb) Placement Agreement between Registrant and J.P. Carey, Inc. and
form of Placement Agent Warrants issued in connection with
private placement financing(9)
(cc) Private Placement Agreement between Registrant and Peter E.
Klenner(9)
(dd) Employment Agreement between Registrant and Csaba Toro(9)
(ee) Employment Agreement between Registrant and Robert Genova(9)
(ff) Employment Agreement between Registrant and Frank R. Cohen(9)
(gg) Placement Agreement between Registrant and JP Carey Securities
Inc. and Warrant Agreement in connection with private placement
financing(10)
<PAGE>
(hh) Private placement agreement between Registrant and M&A
Management(10)
(ii) Form of Subscription agreement in connection with private
offering of Common Stock and Warrants pursuant to Rule 506
of Regulation D under Section 4(2) of the Securities Act of
1933(10)
(jj) Acquisition Agreement between Registrant and Luko
Czech-Net, s.r.o. dated June 11, 1999(11)
(kk) Acquisition Agreement between Registrant and Slavia Capital,
O.C.P., A.S. dated July 2, 1999 (12)
(ll) Acquisition Agreement between Registrant and shareholders of
EUnet Slovakia s.r.o. dated July 14, 1999 (12)
(mm) Acquisition Agreement between Registrant and shareholders of
Bohemia Netdated July 29, 1999 (12)
(nn) Acquisition Agreement between Registrant and shareholders of
Dodo, s.r.o. dated August 5, 1999(12)
B. A report on Form 8-K was filed as of April 21, 1999 during the quarter
covered by this report. The report pertained primarily to certain
private placements completed by the Company. Another report on
Form 8-K was filed as of June 11, 1999 during the quarter covered by
this report. The report pertained primarily to the acquisition by the
Company of a Czech Internet Service Provider Luko Czech-Net s.r.o.
(1) All Exhibits are incorporated by reference to Registrant's Registration
Statement on Form SB-2 dated May 12, 1993 (Registration No. 33-62672-NY,
as amended)
(2) Filed with Form 8-K as of February 17, 1994
(3) Filed with Form 10-KSB for year ended December 31, 1996
(4) Filed with Form 10-QSB for quarter ended September 30, 1997
(5) Filed with Form 10-KSB for year ended December 31, 1997
(6) Filed with Registration Statement 333-52841
(7) Filed with Amendment No. 1 to Registration Statement 333-52841
(8) Filed with Amendment No. 2 to Registration Statement 333-52841
(9) Filed with Form 8-K as of October 14, 1998
(10) Filed with Form 8-K as of April 21, 1999
(11) Filed with Form 8-K as of June 11, 1999
(12) Filed with Form 10-QSB for quarter ended June 30, 1999
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 16th day of August 1999.
EUROWEB INTERNATIONAL CORP.
By /s/ Frank R. Cohen
Chairman of the Board
<PAGE>
EXHIBIT 3(b)
<PAGE>
State of Delaware PAGE 1
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF AMENDMENT OF "EUROWEB INTERNATIONAL CORP.", FILED IN THIS OFFICE ON THE
ELEVENTH DAY OF MAY, A.D 1999, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
Edward J. Freel, Secretary of State
2315844 8100 AUTHENTICATION: 9738521
991186313 DATE: 05-12-99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 05/11/1999
991186313 - 2315844
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Euroweb International Corp., a corporation organized and existing under and
by virtue of the General Corporation law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Euroweb International
Corp., resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of
the stockholders of said corporation for consideration thereof. The
resolution setting forth the proposed arnendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered FOURTH so that, as
amended said Article shall be and read as follows:
FOURTH: The total number of shares of all classes of stock which
the corporation is authorized to issue is twenty five million
(25,000,000), consisting of five million (5,000,000) shares of
preferred stock, par value onetenth of one cent($.001) per share
(the"Preferred Stock"), and twenty million (20,000,000) shares
of common stock, par value one-tenth of one cent($.001) per
share (the "Comnmon Stock").
Each issued and outstanding share of Comnmon Stock shall
entitle the holder of record thereof to one vote.
The Preferred Stock may be issued in one or more series as may be
determined from time to time by the Board of Directors. All shares
of any one series of Preferred Stock will be identical except as
to the date of issue and the date from which dividends on shares
of the series issued on different dates will cumulate, if
cummulative. Authority is hereby expressly granted to the Board
of Directors to authorize the issuance of one or more series of
Preferred Stock, and to fix by resolution or resolutions providing
for the issue of each series powers, the designations, preferences,
and relative, participating, optional, redemption, conversion,
exchange or other special rights, qualifications, limitations or
restrictions of such series, and the number of shares in each
series, to the full extent now or hereafter permitted by law.
The redemption or acquiring by the Company of any shares of its
Preferred Stock, shall not be deemed to reduce the authorized
number of shares of Preferred stock of the Company. Any shares
of the Company's Preferred Stock redeemed, retired, purchased or
otherwise acquired (including shares acquired by conversion)
shall be canceled and shall assume the status of authorized but
unissued Preferred stock in the same manner as if the shares had
never been issued as shares of any series of Preferred Stock and
be undesignated as to future series.
<PAGE>
SECOND: That thereafter, pursuant-to resolution of its Board of Directors,
a meeting of the Stockholders of said corporation was duly called
and held, upon notice in accordance with section 222 of the General
Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by statute were voted in
favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of
the State of Delaware.
FORTH: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, said Euroweb International Corp., has caused this
certificate to be signed by Robert Genova, its President, and Frank R.
Cohen, its Secretary, this 1st day of May, 1999.
EUROWEB INTERNATIONAL CORP.
By: Robert Genova
President
By: Frank R. Cohen
Secretary
<PAGE>
EXHIBIT (kk)
<PAGE>
SHARE PURCHASE AGREEMENT
between
SLAVIA CAPITAL, o.c.p., a.s.
as Vendor
and
EUROWEB INTERNATIONAL CORP.
as Purchaser
<PAGE>
SHARE PURCHASE AGREEMENT (THE "AGREEMENT")
MADE ON 2ND JULY, 1999, BY AND BETWEEN THE PARTIES
1. Slavia Capital, o.c.p., a.s. having its registered office at Heydukova 6,
Bratislava, Slovak Republic, registered at the Company Registry of the
District Court Bratislava 1, ID No 31 395 554 represented by Mr. Rudolf
Cizik (hereinafter the "Vendor")
and
2. EuroWeb International Corp., a corporation organised under the laws of
State of Delaware, having its registered address at 445 Park Avenue,
15th Floor, New York, NY 10022, USA (hereinafter the "Purchaser")
WHEREAS
the Vendors has agreed to sell certain part of its shares in the company
Global Network Services, a.s., identification number: 35 698 446, having
its registered address Prazska 27, 811 04 Bratislava, Slovak Republic (the
"Company") and the Purchaser has agreed to purchase certain shares in the
Company, under the terms and subject to conditions set forth hereinbelow,
NOW IT IS AGREED as follows:
1. INTERPRETATION
"1998 Financial Statements" means the Company's Profit & Loss Statements and
Balance Sheet as of 31st December, 1998, reviewed and confirmed by BDO
forming an ANNEX 1 to this Agreement;
"Assets" means the assets included in the Closing Financial Statements;
"Closing Financial Statements" means the Company's Profit & Loss Statements and
Balance Sheet as of 31st March, 1999 submitted to the Purchaser as of the date
hereof certified by the members of the Company's Board of Directors as true,
accurate and not misleading;
"Commercial Code"means the Slovak Act No. 513/1991 Coll., as amended from
time to time;
"Disclosure Letter" means the letter dated the date of this Agreement from the
Vendor addressed to the Purchaser in relation to the Warranties and receipt of
which shall be countersigned by the Purchaser;
"Encumbrance" means any pledge, retention right, option, pre-emption right,
right of first refusal, restriction, fiduciary assignment or transfer of any
right, easement or any third person right
2
<PAGE>
or security interest, or any agreement or arrangement that may lead to an
obligation to create any of such rights;
"Escrow Agent" means a bank, mutually agreed to by the Vendors and the
Purchaser, used for the purpose of financial settlement of the transaction
hereunder;
"Intellectual Property Rights" mean any right patents, trademarks, registered
designs and applications for any of the foregoing, trade names, copyrights and
unregistered or de facto rights of similar nature;
"Liabilities" means the liabilities included in the Closing Financial
Statements;
"Shares A" means each of the Company's 1,000 registered shares having nominal
value of SKK 1,000 each (whether existing in form of global or definitive
shares);
"Shares B" means each of the Company's registered 3,550 shares having nominal
value of SKK 10,000 each, to be issued upon completion of the capital increase
which has been decided by the resolution of the Company's general meeting held
on 21st June, 1999, (whether existing in form of global or definitive shares);
"Purchase Price" means the amount of US$ 1,200,000.00 to be paid for the
Transferred Shares in accordance with Clause 3., subject to adjustments made
in accordance with ANNEX 2 hereto;
"Purchase Price Payment Date" means the 3rd business date following the date
when all the conditions precedent required in this Agreement for the payment
of the cash component of the Purchase Price shall have been satisfied (or wholly
or partially waived by the Purchaser in its sole discretion) and the Purchaser
shall have issued its written confirmation to that end;
"Transferred Shares" means: (a) 700 of the Company's Shares A and (b) 2,485 of
the Company's Shares B;
"Warranties" mean the representations and warranties contained in Clause 5.
(Warranties);
1.2 Interpretation
Unless the context requires otherwise, in this Agreement
(a) headings are for convenience only and do not affect the
interpretation of this Agreement;
(b) a reference to a person includes any of its successors and permitted
assignees;
(c) any words in the singular shall include the plural and vice versa;
(d) all references to clauses, sections and annexes shall mean the
Clauses, Sections and Annexes of this Agreement.
2. SALE AND PURCHASE OF SHARES
3
<PAGE>
2.1 The Vendor agrees to sell to the Purchaser and the Purchaser agrees to
purchase the Transferred Shares, subject to terms and conditions agreed
in this Agreement.
2.2 Within [30] days after the signing this Agreement or within such longer
period of time as the Purchaser may accept, the Vendor shall physically
deliver the Transferred Shares to the Purchaser, duly endorsed to the order
of the Purchaser.
2.3 Upon the delivery of the Transferred Shares to the Purchaser, the full
title to the Transferred Shares passes unconditionally onto the Purchaser
and the Transferred Shares become the Purchaser's sole and exclusive
property.
3. PURCHASE PRICE
3.1 Subject to satisfaction of conditions precedent to the payment of the
Purchase Price to the Vendor, the Purchaser agrees to pay the Vendor
the Purchase Price on the Purchase Price Payment Date as follows:
(a) cash component of the Purchase Price in the aggregate amount of
US$ 700,000.00 (sevenhundred thousands american dollars);
(b) shares component of the Purchase Price in such aggregate number of
ordinary shares of the company EuroWeb International Corp., traded
at NASDAQ of nominal value US$ 2.00 each, so that their market value
as of the Purchase Price Payment Date is US$ 500,000 or (provided that
the Purchase Price Payment Date occurs) such later date, when the
Vendor obtained a permission from the National Bank of Slovakia to
acquire the shares representing the shares component of the
Purchase Price;
3.2 The Purchaser undertakes to enter into an escrow agreement with the Escrow
Agent (negotiations with the Escrow Agent on such agreement to commence
immediately upon the signing of this Agreement) reflecting principles set
forth in this Agreement and to pay the cash component of the Purchase Price
(set forth in section (a) of Clause 3.1) to the escrow account opened
thereunder within 3 (three) business days from the entry into the
escrow agreement.
3.3 The Purchase Price is subject to adjustments in accordance with ANNEX 2
hereto, which may be made by the Purchaser on the basis of results of due
diligence to be exercised by and/or on behalf of the Purchaser. Any
adjustment of the Purchase Price shall apply to its cash component (set
forth in section (a) of Clause 3.1) first and should such cash
component be adjusted to zero, than to the shares component of the
Purchase Price (set forth in section (a) of Clause 3. 1).
3.4 It is the sole responsibility of the Vendor to obtain the permission from
the National Bank of Slovakia to acquire the shares representing his part
of the shares component of the Purchase Price. If any the Vendor shall
fail to obtain the permission from the National Bank of Slovakia to acquire
the shares representing his part of the shares component of the
Purchase Price within one year since the Purchase Price Payment Date,
after having extended its best efforts to obtain it, the Purchaser shall
such Vendor pay in lieu of the
4
<PAGE>
shares component of the Purchase Price an amount in cash of US$ 500,000.00
(subject to potential adjustments as referred to in Clause 3.3) whereupon
the Purchaser's obligations shall have been discharged in full.
4. CONDITIONS TO THE PAYMENT OF PURCHASE PRICE
4.1 The conditions to the payment of the Purchase Price to be satisfied are as
follows:
(a) a certificate signed by all of the members of the Company's Board of
Directors, confirming that all Shares B being fully paid up in cash
by the Vendor and lawfully issued by the Company to the Vendor, being
delivered to the Purchaser, in form and substance satisfactory to the
Purchaser;
(b) the Transferred Shares being duly transferred to the Purchaser in
accordance with Clause 2.;
(c) the Company's Articles of Association being in form and substance
satisfactory to the Purchaser, providing it with (inter alia)
right of first refusal in respect of the Company's Shares A and Shares B
(other than the Transferred Shares) on the basis of an arms' length
valuation of such shares made by a reputable auditing firm acceptable
to both the Purchaser and the Vendor;
(d) management agreements being entered into with persons listed in ANNEX 3
to this Agreement, in form and substance acceptable to the Purchaser;
(e) the Purchaser appearing duly registered in the Company's list of
shareholders as the holder of the Transferred Shares;
(f) clearance from the Anti-Monopoly Office of the Slovak Republic
approving the transaction hereunder without any conditions which are
unacceptable to the Purchaser or a decision of the Anti-Monopoly Office
of the Slovak Republic concluding that the transaction effected
hereunder is not subject to its clearance procedures, unless the
Purchaser waives satisfaction of this condition at its sole discretion;
(g) persons acceptable to the Purchaser being appointed the Company's Board
of Directors and the Supervisory Board and registered at the Company
Register.
4.2 Subject to terms of the escrow agreement, the Escrow Agent shall release
the cash component of the Purchase Price (set forth in section (a) of
Clause 3.1), on the Purchase Price Payment Date, and the shares component
of the Purchase Price (set forth in section (b) of Clause 3.1), on such
later date (provided that the Purchase Price Payment Date occurs), when
all Vendors obtained a permission from the National Bank of Slovakia to
acquire the shares representing the shares component of the Purchase Price.
4.3 If condition set forth in section (e) of Clause 4.1 is not satisfied
because of final and non appealable decision of the Anti-Monopoly Office
denying the transaction or introducing unacceptable conditions for the
Purchaser, the Purchaser shall have transferred the
5
<PAGE>
Transferred Shares back to the Vendor within 30 days from the date of its
receipt of such decision.
5. WARRANTIES
5.1 General
(a) The Vendor represents and warrants and undertakes to the Purchaser that
each of the Warranties contained in this Agreement is true and accurate
in all respects, and not misleading, as of the date of this Agreement.
(b) The Vendor acknowledges that the Purchaser is entering into this Agreement
and into any agreements or arrangements in connection herewith, in reliance
upon each of the Warranties.
(c) The Warranties shall be qualified by the express reference to those matters
only, which fully, clearly and specifically disclosed by the Vendor in the
Disclosure Letter and no other information relating to the Company of which
the Purchaser may have knowledge shall affect any claim made by the
Purchaser for breach of any of the Warranties or reduce any amount
recoverable by the Purchaser upon adjustment of the Purchase Price or
otherwise or affect any of remedies the Purchaser may take as a
consequence of breach of any of the Warranties.
5.2 Specific
Each Vendor represents and warrants to the Purchaser the following
5.2.1 Corporate
(a) The Company is a company duly incorporated and validly existing under
Slovak laws and all corporate steps taken since the Company's
incorporation (including without limitation any amendments to its
corporate documents) have been done validly and legally in accordance
with applicable laws.
(b) The Vendor has the legal right and full power and authority to enter into
and to exercise its rights and perform his obligations under this
Agreement and all the documents referred to in or to be executed in
connection with this Agreement.
(c) The Company has the legal right and full power and authority to carry on
its business and activities as currently being carried on.
(d) All internal corporate action required by the Company's constitutional or
internal documents has been duly taken to enable the Vendor to enter into
and to exercise its rights and perform its obligations under this
Agreement and all the documents referred to in or to be executed in
connection with this Agreement and there is no approval, consent,
standpoint or permission required by any authority or any other person,
for the Vendor to enter into and to exercise its rights and perform its
obligations under this Agreement and all the documents referred to in
or to be executed in connection with this Agreement.
6
<PAGE>
(e) The Vendor's title the Transferred Shares is (or, in respect of Shares B,
will be as of their delivery to the Purchaser) good and legally perfect
and there are (or, in respect of Shares B, will be as of their delivery
to the Purchaser) no Encumbrances existing whatsoever (other than
potential pre-emption rights under the Company's Articles of Association
which have been in each case duly, legally and validly waived by the
other Company's shareholders), in respect of the Transferred Shares.
(f) This Agreement constitutes and all the documents referred to in or to be
executed in connection with this Agreement will constitute, valid and
binding agreements an obligations of the Vendor, enforceable in accordance
with their respective terms.
(g) All the Transferred Shares have been (or, in respect of Shares B, will be
as of their delivery to the Purchaser), duly and fully paid-up by the
Vendor by virtue of cash contributions to the Company's registered share
capital.
(h) The Company has no subsidiaries and holds no investment in any other
company.
(i) The Company has not agreed or undertook to acquire any shares of or
participation interest in any other company.
(j) All claims, rights and receivables of the Vendor towards the Company are
fully and unconditionally satisfied as of the date of this Agreement and
therefore the Purchaser has unrestricted and unconditional right to
freely exercise all rights arising from the Transferred Shares.
5.2.2 Accounts
(a) The 1998 Financial Statements and the Closing Financial Statements have
been prepared in accordance with law and on a proper basis in accordance
with generally accepted accounting standards as outlined by the
regulations of the Ministry of Finance and/or applied in practice by
major accounting firms in the Slovak Republic at the time of their
preparation, consistently applied.
(b) There are no material Assets owned nor accepted to be acquired and no
material Liabilities (whether actual or contingent) assumed nor accepted
to be assumed by the Company other than those which are duly recorded in
the Closing Financial Statements.
(c) Since 315' December, 1998, the Company's business and activities have
been carried on in the ordinary and usual course without interruption,
there has been no adverse change in the financial or trading position
or prospects of the Company.
(d) The Company did not give nor offered to give any guarantee or any other
security in respect of any third person liabilities of any nature
whatsoever.
(e) The Company is not late in payment to any of its creditors any amount in
excess of SKK 100,000 for period longer than 30 days after the maturity
date.
5.2.3 Taxation
7
<PAGE>
(a) The Company submitted to the tax authorities all tax returns and tax
statements in accordance with relevant tax and accounting regulations
and to the Vendor's best knowledge all such tax returns and tax statements
are true, accurate and complete.
(b) The Company duly and timely paid all taxes and other payments due to state
related entities which they have become liable to pay and the Company is
not under any liability to pay any penalty, charge, incrementals on taxes
or any other payment obligations of similar nature in connection with any
tax in total ammount not in excess of SKK 400 000,
5.2.4 Assets
(a) All the Assets are owned exclusively by the Company and have been acquired
legally and in accordance with laws of the Slovak Republic.
(b) The Company did not create any Encumbrance over any of the Assets nor
allowed any Encumbrances to be created by operation of law or otherwise
in respect of the Assets as of the date of this Agreement.
(c) There are available to the Assets such services (including, without
limitation electricity, heating, gas and water supplies, sewerage and
telecommunication lines) as are necessary for the use of any of the Assets
and carrying out the business of the Company as is now conducted and no
limitations restrict the Companyis use of the Assets and carrying its
business .
(d) There are no lease agreements entered into in respect of any Assets
leasing the Assets or any part thereof to any third party. The Company
pays the rent under the lease agreements under which it is leasing any
assets used in connection with carrying on its business and all such
lease agreements are properly reflected in the 1998 Financial Statements
and in the Closing Financial Statements.
5.2.5 Intellectual Property Rights
(a) The Company does not infringe any third person Intellectual Property
Rights and there is not and has not been any dispute,action or claim
made or initiated or threatening by any third person inrelation thereto.
5.2.6 Environmental Matters
(a) The Company has obtained and maintains in full force and is in
compliance with the terms of, all environmental permits which it
may need for carrying on its business, if any) and is in full compliance
with all environmental legislation and labour safety legislation.
(b) Neither the operation of the business of the Company nor use of any of
the Assets involves either the use of, or discharge into the
environment of, or contains any dangerous, hazardous or toxic
substance or any substance which may be prohibited by any
environmental legislation.
8
<PAGE>
(c) The Company has never been under any liability to pay any penalty, charge,
or fines in connection with the environment, labour safety or legislation
related thereto.
5.2.7 Commercial Arrangements
(a) The Company is not a party to or has any liability under any material
long term or unusual agreement, arrangement or transaction, including
without limitation:
(i) any arrangement or agreement entered into otherwise than in the
ordinary and usual course of business or with the Vendor, other
Company's shareholders, members of the Board of Directors and the
Supervisory Board, employees or their immediate families;
(ii) any arrangement or agreement, which would make the Company liable
to do something or to abstain from doing something, without their
right to terminate such arrangement or agreement when reasonably
unsatisfied under any such arrangement or agreement, or any
arrangement or agreement termination of which would lead to
a liability to pay penalties or compensations of lost profits
or any other compensation claim;
(iii) any arrangement or agreement which restricts the freedom of the
Company to carry on the whole or any part of their ordinary course
of business as presently carried on, or to use any Asset;
(iv) any arrangement or agreement which cannot be fulfilled or
performed by the Company, or which can be fulfilled or performed
only with unusual expenditure of money or effort.
(b) Save for any warranty implied by mandatory provisions of law or standard
terms of business, no representation or warranty has been made by the
Company in respect of any goods or services supplied.
5.2.8 Licences
(a) The Company has obtained all licences, permits or authorisations required
for the proper carrying on of its business as presently carried on and
all such licences, permits or authorisations are valid and in full force.
(b) The Company is not in breach of any licences, permits or authorisations
required for the proper carrying on of its business. The Company has
taken all actions desirable or necessary for maintaining all its licences,
permits or authorisations, as may be required under applicable legislation
and there is no threat of any revocation of any of existing licences,
permits or authorisations.
5.2.9 Competition
(a) The Company has not received any communication from the Slovak
Anti-monopoly Office relating in any respect to the business of the
Company.
9
<PAGE>
(b) The Company is not in dominant position in any relevant market in the
meaning of the Competition Protection Act No. l 88/1994 Coll.
(c) The Company is not a party to any agreement or arrangement, that could be
interpreted as unfair trade practice or prohibited due to its restrictive
nature or any other conflict with competition protection legislation.
5.2.10 Litigation
(a) The Company is not involved in any civil, commercial, labour or other
litigation proceedings pending before any court (whether in the
Slovak Republic or elsewhere) or arbitration (whether regular or ad hoc
and whether in the Slovak Republic or elsewhere), whereby the claimed
amount against it would be higher than O SKK or its equivalent in other
currencies, or whereby such proceedings may be otherwise material in
respect of the Company's corporate existence or carrying on its business
or its financial position.
5.2.11 Execution Effects
The execution and performance of this Agreement and other documents and
transactions contemplated in connection therewith will not:
(a) result in the Company losing the benefit of any Asset, licence, right,
legal relation or privilege which it presently enjoys or relieve any
person from any obligation to the Company, or
(b) conflict with, or result in breach of, or institute any event of
default or potential event of default under any agreement or
arrangement to which the Company is a party.
6. UNDERTAKINGS
6.1 The Vendor hereby undertakes to procure that, after the signing of
this Agreement and before the Purchase Price Payment Date, the
Company shall not, without the prior written approval of the Purchaser:
(a) borrow, lend, or grant the guarantee of whatever nature, or undertake
to borrow, lend or grant the guarantee of whatever nature, or
otherwise bind financially the Company, if the aggregate amount of
such new obligations shall exceed SKK 400,000;
(b) transfer, sell, dispose or create any Encumbrance in respect of any
of the Assets or assets acquired after the date of this Agreement;
(c) create new working positions or employ new persons, change the
present organisational structure of employees, or amend the present
labour agreements;
(d) negotiate, directly or indirectly, or look for an opportunity, or
respond to any proposal of, merger, takeover, joint venture or any
other similar form of partnership with any third person; any such
approach to the Company by any third party shall be immediately
announced to the Purchaser,
10
<PAGE>
(e) adopt any decision on issue of any new shares.
6.2 The Vendor shall be personally liable and responsible for consequences of
any action taken by the Company referred to in Clause 6.1 without the
prior written approval of the Purchaser, and agrees to compensate the
Purchaser upon first demand for any damage, loss, costs and expenses
incurred by it or the Company by taking such an action.
6.3 The Vendor undertakes not to negotiate, directly or indirectly, or look
for an opportunity, or respond to any proposal of, merger, takeover,
joint venture or any other similar form of partnership with any third
person in respect of the Company.
6.4 The Vendor undertakes not to enter into any arrangement in respect of
the ownership, control, management of an Internet Services Provider
in the Slovak Republic for a period of three years from the date of
this Agreement without the approval of the Purchaser.
7. NOTICES
All communication between the parties in under or in connection with this
Agreement shall be in writing and all notices shall be sent to:
(i) if for the Vendor:
Slavia Capital, o.c.p., a.s.
Heydukova 6
SK-814 99 Bratislava
fax: +421 7 593 171 19
attention: Mr. Rudolf Cizik, Mr. Stanislav Stowasser
e-mail: [email protected], [email protected]
(ii) if for the Purchaser:
EuroWeb International Corp.
445 Park Avenue, 15th Floor
New York, NY 10022
USA
fax: +36 1 22 44 100
attention: Mr. Csaba Toro
or to any such address, telex, or telefax which may be specified by the
relevant addressee for such purpose in a written notice.
8. CONFIDENTIALITY
The parties agree that each information disclosed by each to the other under
or in connection with this Agreement (the "Confidential Information") shall
be treated so that each party shall:
11
<PAGE>
(a) not disclose any Confidential Information to any third party other than
that party's directors, officers, representatives, advisors or agents
who need to know such information for the purposes of this Agreement;
(b) examine and use the Confidential Information only for the purposes of
this Agreement and in connection herewith;
(c) ensure that a standard of strict confidentiality shall apply also to the
persons mentioned din (a) above.
Notwithstanding the foregoing:
(i) each part shall be entitled to disclose any Confidential Information if
required by law or decision of court or other sate or state related
authority, provided that it shall inform the other party on the scope
of and form of such disclosure;
(ii) n information shall be the Confidential Information, if it (1) has
been obtained on a nonconfidential basis from other party or
other source; (2) is in public domain otherwise than as a result of
breach of confidentiality undertakings under this Agreement.
9. FINAL PROVISIONS
9.1 This Agreement shall be governed by Slovak law
9.2 The parties hereby agreed that they will submit any dispute not settled
amicable way, to the jurisdiction of Slovak courts.
9.3 This Agreement has been made and executed in English language.
9.4 Any modification of this Agreement shall be made in writing and must
be accepted by all parties.
9.5 If any provision of this Agreement shall be determined to be invalid,
illegal or unenforceable in any jurisdiction, the validity and
enforceability of the remaining provisions shall not in any way be
affected thereby in such jurisdiction, nor the Agreement as a whole in
any other jurisdiction.
9.6 This Agreement has been made in 2 counterparts, one original for each of
the parties.
ANNEXES
ANNEX I 1998 Financial Statements
ANNEX 2 Purchase Price Adjustment Principles
ANNEX 3 Management
12
<PAGE>
ANNEX 1
1998 Financial Statements
13
<PAGE>
Name:
Balance Sheet (Assets - Liabilities )
Year: 1998 Month: December
<TABLE>
Date: 25.06.1999
Current period Last period
Name: Text of the form: Row: Brutto: Correction: Netto: Netto:
<S> <C> <C> <C> <C> <C> <C>
TOTAL ASSETS 1 27 480 729.00 4 898 968.00 22 581 761.00 20 447 308.00
A. Receivables for subscriptions
for own equity capital 2 0.00 0.00 0.00 0.00
B. FIXED ASSETS 3 13 380 504.00 3 898 968.00 9 481 536.00 5 685 843.00
B.I. INTANGIBLE FIXED ASSETS 4 5 575 014.00 344 915.00 5 230 099.00 464 073.00
B.I.1. Incorporation expenses 5 23 030.00 12 960.00 10 070.00 15 830.00
B.I.2. Research and development 6 0.00 0.00 0.00 0.00
B.I.3. Software 7 628 228.00 331 955.00 296 273.00 395 915.00
B.I.4. Valuable rights 8 0.00 0.00 0.00 0.00
B.I.5. Other intangible fixed assets 9 0.00 0.00 0.00 0.00
B.I.6. Acquisition of intangible fixed assets 10 4 923 756.00 0.00 4 923 756.00 52 328.00
B.I.7. Advance payments for intangible fixed assets 11 0.00 0.00 0.00 0.00
B.II. TANGIBLE FIXED ASSETS 12 7 805 490.00 3 554 053.00 4 251 437.00 5 221 770.00
B.II.1. Land 13 0.00 0.00 0.00 0.00
B.II.2. Buildings, halls and structures 14 0.00 0.00 0.00 0.00
B.II.3. Machines, tools, equipment, transportation 15 7 672 455.00 3 554 053.00 4 118 402.00 4 874 770.00
means, furniture and of fice equipment
B.II.4. Perrenial crops 16 0.00 0.00 0.00 0.00
B.II.5. Breeding & draught animals 17 0.00 0.00 0.00 0.00
B.II.6. Other tangible fixed assets 18 0.00 0.00 0.00 0.00
B.II.7. Acquisition of tangible fixed assets 19 0.00 0.00 0.00 347 000.00
B.II.8. Advance payments for tangible fixed assets 20 133 035.00 0.00 133 035.00 0.00
B.II.9. Adjustments to acquired assets 21 0.00 0.00 0.00 0.00
B.II.1. FINANCIAL INVESTMENTS 22 0.00 0.00 0.00 0.00
B.III.1. Shares & ownership interests with control 23 0.00 0.00 0.00 0.00
influence in enterprises
B.III.2. Shares & ownership interests with 24 0.00 0.00 0.00 0.00
substantial influence in enterprises
B.III.3. Other securities and ownership interests 25 0.00 0.00 0.00 0.00
B.III.4. Intercompany loans 26 0.00 0.00 0.00 0.00
B.III.5. Other financial investments 27 0.00 0.00 0.00 0.00
C. VARIABLE ASSETS 28 12 548 878.00 1 000 000.00 11 548 878.00 12 470 834.00
C.I. INVENTORY 29 2 371 017.00 0.00 2 371 017.00 1 351 678.00
C.I.l. Material 30 2 130 000.00 0.00 2 130 000.00 1 340 116.00
C.I.2. Work-in-progress 31 0.00 0.00 0.00 0.00
C.I.3. Finished goods 32 0.00 0.00 0.00 0.00
C.I.4. Animals 33 0.00 0.00 0.00 0.00
C.I.5. Merchandise 34 241 017.00 0.00 241 017.00 11 562.00
C.I.6. Advance payments for inventory 35 0.00 0.00 0.00 0.00
C.II. LONG-TERM RECEIVABLES 36 0.00 0.00 0.00 0.00
C.II.1. Customers 37 0.00 0.00 0.00 0.00
C.II.2. Receivables from partners and participants
in an association 38 0.00 0.00 0.00 0.00
C.II.3 Receivables in companies with control 39 0.00 0.00 0.00
influence
C.II.4 Receivables in companieswith substantial 40 0.00 0.00 0.00
influence
C.II.5. Other receivables 41 0.00 0.00 0.00 0.00
C.III. SHORT-TERM RECEIVABLES 42 9 399 861.00 1 000 000.00 8 399 861.00 9 958 160.00
C.III.1. Customers 43 7 651 213.00 1 000 000.00 6 651 213.00 9 633 011.00
C.III.2. Receivables from partners and participantsn 44 0.00 0.00 0.00 0.00
in an association
C.III.3. Due from social security institutions 45 0.00 0.00 0.00 0.00
C.III.4. Receivable taxes & subsidies 46 402 091.00 0.00 402 091.00 5 887.00
C.III.5. Deferred taxes & subsidies 47 0.00 0.00 0.00 0.00
Page: 1
<PAGE>
Current period Last period
Name: Text of the form: Row: Brutto: Correction: Netto: Netto:
C.III.6. Receivables in companies with control 48 0.00 0.00 0.00 0.00
influence
C.III.7. Receivables in companies with substantial 49 0.00 0.00 0.00 0.00
influence
C.III.8. Other receivables 50 1 346 557.00 0.00 1 346 557.00 319 262.00
C.IV. FINANCIAL ASSETS 51 778 000.00 0.00 778 000.00 1 160 996.00
C.IV.1 Cash 52 46 894.00 0.00 46 894.00 0.00
C.IV.2. Bank accounts 53 731 106.00 0.00 731 106.00 1 160 996.00
C.IV.3. Shon-term financial assets 54 0.00 0.00 0.00 0.00
D. TEMPORARY ACCOUNTS OF ASSETS 55 1 551 347.00 0.00 1 551 347.00 2 290 631.00
D.I. TEMPORARY ACCOUNTS OF ASSETS 56 1 551 347.00 0.00 1 551 347.00 2 290 631.00
D.I.1. Deferred expenses 57 1 529 413.00 0.00 1 529 413.00 2 285 484.00
D.I.2. Accrued revenues 58 0.00 0.00 0.00 0.00
D.I.3. Foreign currency exchange rate losses 59 21 934.00 0.00 21 934.00 5 147.00
D.II. Estimated receivables 60 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 61 22 581 761.00 0.00 22 581 761.00 20 447 308.00
A. EQUITY 62 -28 794 409.00 0.00 -28 794 409 00 -13 627 676.00
A.I. REGISTERED CAPITAL 63 1 000 000.00 0.00 1 000 000.00 1 000 000.00
A.I.1. Registered capital 64 1 000 000.00 0.00 1 000 000.00 1 000 000.00
A.I.2. Own shares 65 0.00 0.00 0.00 0.00
A.II. CAPITAL FUNDS 66 0.00 0.00 0.00 0.00
A.ll.1 Share premium 67 0.00 0.00 0.00 0.00
A.II.2. Othercapital funds 68 0.00 0.00 0.00 0.00
A.II.3. Gains or losses from revaluation of assets 69 0.00 0.00 0.00 0.00
A.II.4. Gains or losses from investments 70 0.00 0.00 0.00 0.00
A.III. FUNDS CREATED FROM NET PROFIT 71 100 000.00 0.00 100 000.00 100 000.00
A.III.1. Legalreservefund 72 100 000.00 0.00 100 000.00 100 000.00
A.III.2. Indivisible fund 73 0.00 0.00 0.00 0.00
A.III.3. Statutory and other funds 74 0.00 0.00 0.00 0.00
A.IV. NET PROFIT (LOSS) FROM PREVIOUS 75 -15 517 643.00 0.00 -15 517 643.00 -4 355 581.00
YEARS
A.IV.1 Retained earnigs from previous years 76 0.00 0.00 0.00 0.00
A.IV.2 Accumulated losses from previous years 77 -15 517 643.00 0.00 -15 517 643.00 -4 355 581.00
A.V. Net profit (loss) from current year 78 -14 376 766.00 0.00 -14 376 766.00 -10 372 095.00
B. FOREIGN CAPITAL 79 46 325 812.00 0.00 46 325 812.00 29 346 997.00
B.I. RESERVES 80 21 934.00 0.00 21 934.00 5 147.00
B.I.1. Legal reserves 81 0.00 0.00 0.00 0.00
B.I.2. Reserves for foreign exchange losses 82 21 934.00 0.00 21 934.00 5 147.00
B.I.3. Other reserves 83 0.00 0.00 0.00 0.00
B.II. LONG-TERM PAYABLES 84 1 267 801.00 0.00 1 267 801.00 1 080 352.00
B.II.1. Payables in companies with control influence 85 0.00 0.00 0.00 0.00
B.II.2. Payables in companies with substantial 86 0.00 0.00 0.00 0.00
influence
B.II.3. Long-term advances receive 87 0.00 0.00 0.00 0.00
B.II.4. Bonds issued 88 0.00 0.00 0.00 0.00
B.II.5. Long-term bills of exchange to be paid 89 0.00 0.00 0.00 0.00
B.II.6. Other long-term payables 90 1 267 801.00 0.00 1 267 801.00 1 080 352.00
B.III. SHORT-TERM PAYABLES 91 45 036 077.00 0.00 45 036 077.00 28 261 498.00
B.III.1. Payables 92 39 471 102.00 0.00 39 471 102.00 26 074 436.00
B.III.2. Payablesto partners and participants in an 93 0.00 0.00 0.00 0.00
association
B.III.3. Payables to employees 94 1 492 469.00 0.00 1 492 469.00 444 426.00
B.III.4. Due to social security institutions 95 3 986 773.00 0.00 3 986 773.00 711 917.00
B.III.5 Payable taxes & subsidies 96 0.00 0.00 0.00 0.00
B.III.6 Deferred taxes - liabiiity 97 0.00 0.00 0.00 0.00
B.III.7 Payables in companies with control influence 98 0.00 0.00 0.00 0.00
B.III.8 Payables in companies with substantial 99 0.00 0.00 0.00 0.00
influence
B.III.9. Other payables 100 85 733.00 0.00 85 733.00 30 719.00
B.IV. BANK LOANS AND BONDS 101 0.00 0.00 0.00 0.00
B.IV.1. Long-term bank loans 102 0.00 0.00 0.00 0.00
B.IV.2. Current bank loans 103 0.00 0.00 0.00 0.00
B.IV.3 Short-term bonds 104 0.00 0.00 0.00 0.00
C. TEMPORARY ACCOUNTS OF 105 5 050 358.00 0.00 5 050 358.00 4 727 987.00
LIABILITIES
Page: 2
</TABLE>
<PAGE>
Name:
Profit and Loss Statement
Year: 1998 Month: Close year
Date: 25.06.1999
<TABLE>
Name: Text of the form: Row: Current period Last period
<S> <C> <C> <C> <C>
I. Revenues from merchandise 1 0.00 1 069 144.00
A. Expenses for sold merchandise 2 0.00 959 257.00
+ PROFIT FROM MERCHANDISE 3 0.00 109 887.00
II. PRODUCTION 4 0.00 28 662 938.00
II.1. Revenues from own products and services 5 0.00 23 739 062.00
II.2. Change in inventory 6 0.00 0.00
II.3. Capitalization 7 0.00 4 923 876.00
B. CONSUMED PURCHASES AND SERVICES 8 0.00 21 094 821.00
B.1. Material & energy consumption 9 0.00 619 350.00
B.2. Services 10 0.00 20 475 471.00
+ ADDED VALUE 11 0.00 7 678 004.00
C. PERSONNEL EXPENSES 12 0.00 8 267 099.00
C.1. Wages and salaries 13 0.00 5 995 786.00
C.2. Remuneration of board members 14 0.00 0.00
C.3. Sociai insurance expenses 15 0.00 2 048 546.00
C.4. Social security expenses 16 0.00 222 767.00
D. Taxes and fees 17 0.00 20 255.00
E. Depreciation expense of intangible
and tangible fixed assets 18 0.00 2 048 869.00
III. Revenues from sales of fixed assets
and materials 19 0.00 14 634.00
F. Net book value of fixed assets and
materials sold 20 0.00 22 544.00
IV. Accounting for reserves to operating
revenues 21 0.00 0.00
G. Additions the reserves to operating expenses 22 0.00 0.00
V. Accounting for depreciation and provisions
to operating revenues 23 0.00 0.00
H. Accounting the depreciation and provisions
to operating expenses 24 0.00 1 000 000.00
VI. Other operating revenues 25 0.00 548 954.00
I. Other operating expenses 26 0.00 6 883 887.00
VII. Transfer of operating revenues 27 0.00 0.00
J. Transfer of operating expenses 28 0.00 0.00
* OPERATING NET PROFIT (LOSS) 29 0.00 -10 001 062.00
VIII. Revenues from sales of shares and ownership 30 0.00 0.00
K. Shares and ownership interest sold 31 0.00 0.00
IX. NET PROFIT (LOSS) FROM FINANCIAL INVESTMENTS 32 0.00 0.00
IX.1. Revenues from shares and ownerships from
related companies 33 0.00 0.00
IX.2. Revenues from other shares and ownerships 34 0.00 0.00
IX.3. Revenues from otherfinancial investments 35 0.00 0.00
X. Revenues from short-term financial assets 36 0.00 0.00
XI. Accounting for reserves to financial revenues 37 0.00 5 147.00
L. Addition the reserves to financial expenses 38 0.00 21 934.00
XII. Accounting for provisions to financial revenues39 0.00 0.00
M. Addition the provisions to financial expenses 40 0.00 0.00
XIII. Interest revenues 41 0.00 37 624.00
N. Interest expenses 42 0.00 4 681 301.00
XIV. Other financial revenues 43 0.00 9 070.00
O. Other financial expenses 44 0.00 192 688.00
XV. Transfer of financial revenues 45 0.00 0.00
P. Transfer of financial expenses 46 0.00 0.00
* NET PROFIT (LOSS) FROM FINANCIAL TRANSACTIONS 47 0.00 -4 844 082.00
R. INCOME TAX FROM ORDINARY ACTIVITIES 48 0.00 0.00
R.1. -payable 49 0.00 0.00
R.2. -deferred 50 0.00 0.00
INCOME TAX FROM ORDINARY ACTIVITIES 51 0.00 0.00
** NET PROFIT (LOSS) FROM ORDINARY ACTIVITIES 52 0.00 -14 845 144.00
XVI. Extraordinary revenues 53 0.00 812 886.00
S. Extraordinary expenses 54 0.00 344 511.00
T. INCOME TAX FROM EXTRAORDINARY ACTIVITIES 55 0.00 0.00
T.1. -payable 56 0.00 0.00
T.2. -deferred 57 0.00 0.00
Page: 1
<PAGE>
Name: Text of the form: Row: Current period Last period
* NET PROFIT FROM EXTRAORDINARY ACTIVITIES 58 0.00 468 375.00
U. Transfer of profit or loss to partners 59 0.00 0.00
*** NET PROFIT (LOSS) FOR CURRENT PERIOD 60 0.00 -14 376 769.00
Page: 2
</TABLE>
<PAGE>
ANNEX 2
Purchase Price Adjustment Principles
(a) The Purchase Price shall be reduced by the amount equal to an aggregate
of (a) amount of loss (if any) shown in the Closing Financial Statements, and
(b) amount of the Company's due but unpaid receivables as of the date of Closing
Financial Statements.
(b) The Purchase Price shall be reduced by the amount equal to an aggregate
amount of the Company's debt [other than regular commercial payables before
their maturity] as of the date of the Closing Financial Statements.
14
<PAGE>
ANNEX 3
Management
Stanislav Stowasser
15
<PAGE>
IN WITNESS WHEREOF, the parties have signed the Agreement.
Dated 7/2/99 Dated 7/2/99
Slavia Capital, oc.p., a.s. EuroWeb International Corp.
Name :
Title:
16
<PAGE>
EXHIBIT (ll)
<PAGE>
CONTRACT
ON TRANSFER OF INTEREST SHARES
PARTS
MADE BY AND BETWEEN THE PARTIES:
Peter Babinec,
Peter Krajci,
Karol Tesai,
Gejza Buchler,
Fridrich Gorner,
Juraj Kabat,
Peter Pronay,
Vojtech Kovacs,
Ivan Lescak
As Sellers
And
EuroWeb International Corporation
As Purchaser
<PAGE>
CONTRACT
ON TRANSFER OF INTEREST SHARES PARTS
(THE "CONTRACT")
MADE BY AND BETWEEN THE PARTIES
1. Peter Babinec, birth number: 500804/222,
residing at Smolenicka 8, 85101 Bratislava, marital status: married,
2. Peter Krajci, birth number: 560807/7343,
residing at Bagarova 3, 84101 Bratislava, marital status: married,
3. Karol Tesai', birth number: 550426/6790,
residing at Zavodnikova 8/A, 83103 Bratislava, maritai status: married
4. Gejza Buchler, birth number.: 500227/256,
residing at Guothova 15, 83101 Bratislava, marital status: married,
5. Fridrich Gorner, birth number: 531115/080,
residing at Budatinska 47, 85103 Bratislava marital status: married,
6. Juraj Kabat, birth number: 610815/6406,
residing at Adamiho 6, 84105 Bratislava, marital status: single,
7. Peter Pronay, birth number: 511209/119,
residing at Partizanska 27, 90021 Svaty Jur, marital status: married,
8. Vojtech Kovacs, birth number: 610124/6140,
residing at Tomankova 2, 84105 Bratislava, marital status: married,
9. Ivan Lescak, birth number: 680307/6786,
residing at Ladzianskeho 10, 83101 Bratislava, marital status: singie,
(hereinafter the "Sellers"); and
1. EuroWeb International Corp., a corporation organised under the laws of
Delaware, USA, having its registered office at 445 Park Avenue, 15th
Floor, New York, NY 10022, USA (hereinafter the "Purchaser")
WHEREAS
each of the Sellers has agreed to sell all parts of his interest shares in the
company EUnet Slovakia s r.o., identification number: 00 588 458, having its
registered office at MFF UK, Mlynska dolina, 842 15 Bratislava, Slovak Republic
and its principal place of business at the address Kutlikova 17, 850 00
Bratislava, Slovak Republic (the "Company") and the Purchaser has agreed to
purchase all parts of the Sellers' interest shares in the Company under the
terms and conditions set forth hereinafter,
NOW, IT IS AGREED as follows
1. INTERPRETATION
1.1 Definitions
The terms used in this Contract shall have the following meanings
"1998 Financial Statements" means the Company's Balance Sheet and Profit & Loss
Statement as of 31st December, 1998, audited and confirmed by the Company
BDO - SK, s r.o.
"Assets" means the assets included in the Closing Financial Statements
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"Closing Financial Statements" means the audited Company's Profit & Loss
Statements and Balance Sheet as of 30th April, 1999;
"Commercial Code" means the Slovak Law No. 513/1991 Zb., as later amended
"lnformation Letter" means the letter dated as of the date of signing this
Contract from the Sellers, signed specifically by the Company's executive
managers (in the event that they are at the same time Sellers, also in their
capacity of the Company's executive managers) addressed to the Purchaser in
relation to the Warranties and receipt of which shall be countersigned by the
Purchaser;
"Encumbrance" means any pledge, retention right, option, pre-emption right,
right of first refusal, restriction, fiduciary assignment or transfer of any
right, easement or any third person's right or security interest, or any
agreement or arrangement that may result in an obligation to establish any of
the above rights;
"Intellectual Property Rights" mean any right patents, trademarks, registered
designs and applications for any of the foregoing, trade names, copyrights and
unregistered or de facto rights of similar nature;
"Liabilities" mean the liabilities included in the Closing Financial Statements;
" Interest Share" has the meaning given to it in Section 114 of the Commercial
Code,
"Purchase Price" means the amount of US$ 800,000.00 to be paid for the
Transferred Interest Shares Parts in accordance with Clause 3.;
"Close Relatives" mean own brothers and sisters, parents and full-aged children
of a person to whom this denomination appiles.
"Purchase Price Payment Date" means the 5th business date following after the
date when the last of the parties signed this Contract.
"Transferred Interest Shares Parts" means each and all of the parts of the
Sellers interest shares specified as transferred parts in ANNEX 1 to this
Contract;
"Warranties" mean the representations and warranties contained in Clause 5.
(Warranties );
1.2 Interpretation
Uniess the context requires otherwise, in this Contract
(a) headings are for convenience only and do not affect the interpretation of
this Contract;
(b) a reference to a person includes any of its successors and permitted
assignees;
(c) any words in singular shall include plural and vice versa;
(d) all references to clauses, sections and annexes shall mean the Clauses,
Sections and Annexes of this Contract.
<PAGE>
2. TRANSFER OF THE TRANSFERRED INTEREST SHARES PARTS
2.1 The Sellers hold jointly all the interest shares in the Company as it was
evidenced during the Company's General Meeting held on 14th July, 1999.
The General Meeting of the Company approved the transfer of all transferred
interest shares parts from the Sellers to the Purchaser. Each of the
Sellers hereby sells and transfers his respective Transferred Interest
Shares Part to the Purchaser according to the ANNEX 1 of this Contract.
2.2 The Purchaser hereby purchases the Transferred Interest Shares Parts from
each of the Sellers and he acquires the Transferred Interest Shares Parts,
relying on the Warranties and the Information Letter.
2.3 The Purchaser hereby acknowledges that he accepts the Memorandum of
Association of the Company.
3. PURCHASE PRICE
Purchaser shall pay the Sellers the Purchase Price as follows
(a) cash component of the Purchase Price in the aggregate amount of
US$ 400,000.00 (fourhundredthousand American Dollars) to be distributed
to the Sellers' bank accounts in accordance with ANNEX 1 to this
Contract on the Purchase Price Payment Date;
(b) a share component of the Purchase Price in aggregate number corresponding
to the amount of 400,000.00 USD (fourhundredthousand American Dollars) of
the ordinary shares of the Company EuroWeb International Corp.,
negotiated at the NASDAQ market, in the nominal value equal to the
closing rate of such shares on the day of signing this Contract by
the last Party. Such share component shall be distributed among the
Sellers in accordance with ANNEX 1 hereto on the Purchase Price
Payment Date or gradually on such later dates, when all individual
Sellers obtain a permission from the National Bank of Slovakia to
acquire the shares representing the shares component of the Purchase
Price in foreign currency;
3.2 It is the sole responsibility of each of the Sellers to obtain the
permission from the National Bank of Slovakia to acquire the shares
representing his part of the share component of th~e Purchase Price. In
the event that any of the Sellers fails to obtains a decision of the
National Bank of Slovakia refusing the application for acquiring shares,
the Purchaser shail pay the Seller the amount equal to the share
component of the of the Purchase Price. In the event that any of the
Sellers obtains no decision within one year of the Purchase Price
Payment Date, in spite of having taken his best efforts to obtain
it, the Purchaser shall pay such Seiler the amount equal to the share
component of the purchase price.
4. LIABILITIES
4.1 The Sellers undertake jointly and severally in favour of the Purchaserr
the following:
(a) (in case of the Sellers who are either married or divorced without
final property settlement), to deliver to the Purchaser confirmations
in the form attached as ANNEX No. 2 hereto from their respective
spouses within 20 working days of signing this Contract,
(b) within 30 working days of signing this Contract, to deliver
a letter of undertaking from each of their close relatives older
than 18 years with permanent residence in the Slovak Republic to
abstain from joining the business or being employed in the management
position by a company whose 10 % or more revenues originate from a
business of
<PAGE>
"Internet Provider" (other than the Company) for the period of
three years of signing this Contract, unless they get a written
permission from Euroweb International Corp. for such activity.;
(c) to provide for a confirmation from the Ministry of Transport, Posts
and Telecommunications of the Slovak Republic that it has been
informed about the transaction under this Contract;
(d) upon request of the Purchaser, to give the Purchaser all necessary
assistance in approving the transaction by the Anti-Monopoly Office
of the Slovak without any conditions which would be unacceptable
for the Purchaser or in issuing a decision by the Anti-Monopoly
Office of the Slovak Republic saying that the transactions hereunder
are not subject to supervision of any authorities.
4.2 In the event that:
a) the Sellers fail to fulfil their obligations according to sections (a)
and (b) of Article 4.1, or
b) the Anti-Monopoly Offfice of the Slovak Republic issues a decision
refusing the transaction or specifying conditions which are unacceptable
to the Purchaserr,
the Purchaser will have the right to terminate this Contract by a written notice
delivered to each of the Sellers effective on delivery of the notice to the last
of the Sellers whereby the Sellers undertake to pay to the Purchaser all
components of the purchase price received before the notice becomes effective
and the Purchaser undertakes to bring the Company's assets to the original
state.
5. WARRANTIES
5.1 General
(a) Each Seller represents, warrants and undertakes to the Purchaser that
each of the Warranties contained in this Contract is true and accurate
in all respects, and not misleading as of the date of this Contract.
(b) Each Seller acknowledges that the Purchaser is entering into this
Contract and into any agreements or arrangements in connection
herewith in reiiance upon each of the Warranties.
5. 2 Specific
5.2.1 Corporate
(a) The Company is a company duly incorporated and validly existing under
Slovak laws and all basic corporate acts taken since the Company's
incorporation (including, but not limited to any amendments of its
corporate documents) have been done validly and legally in accordance with
applicable laws;
(b) Each Seller has the legal right and full power and authority to enter into
this Contract, to exercise his rights and perform his obligations under
this Contract or any documents referred to herein or to be executed in
connection herewith;
(c) The Company has the legal right and full power and authority to carry on
its business and activities as currently being carried on;
(d) All internal corporate actions required by the Company's constitutional or
internal documents have been duly taken to enable each Seller to enter
into this Contract and to exercise his rights and to perform his obligations
under this Contract or any documents referred to herein or to be executed
in
<PAGE>
connection herewith and there is no approval, consent, standpoint or
permission required by any authority or any other person for each Seller
to enter into this Contract and to exercise his rights and perform his
obligations under this Contract or any documents referred to herein or to
be executed in connection herewith;
(e) Each Seller's title to his respective part in the Transferred Interest
Shares Parts is good and legally perfect and there are no encumbrances
existing whatsoever (other than pre-emption rights under the Memorandum
of Association which has been in each case duly, legally and validly waived)
in respect of the Transferred Interest Shares Parts;
(f) This Contract and all the documents referred to herein or to be executed
in connection herewith will constitute valid and binding agreements and
obligations of each Seller, enforceable in accordance with their respective
terms and conditions;
(g) All capital contributions to the Company have been duly and fully paid-up
by the Sellers;
(h) The Company has no subsidiaries and holds no investment in any other
company.
(i) The Company has not agreed or undertaken to acquire any shares or interests
in any other company;
(j) All claims, rights and receivables of each Seller towards the Company are
fully and unconditionally satisfied as of the date of this Contract and
therefore the Purchaser has unrestricted and unconditional right freely
to exercise all rights arising from the Transferred Interest Shares Parts.
5.2.2 Accounts
(a) The 1998 Financial Statements and the Closing Financial Statements have
been prepared in accordance with law and on a proper basis in accordance
with generaily accepted accounting standards as outlined by the regulations
of the Ministry of Finance and/or applied in practice by major accounting
firms in the Slovak Republic at the time of their preparation, consistently
applied.
(b) Exceptas duly shown in the Closing Financial Statements, no material Assets
were acquired or approved to be acquired, or received and no material
Liabilities (whether actual or contingent) were assumed or approved to be
assumed by the Company;
(c) Since 315t December, 1998, the Company's business and activities have been
carried on in the ordinary and usual course without interruption, there
has been no adverse change in the financial or trading position or prospects
of the Company.
(d) The Company did not give nor offered to give any guarantee or any other
security in respect of any third person's liabilities of any nature
whatsoever.
(e) The Company is not in delay with payment of any amount in exceeding
SKK 5,000.00 to any of its creditors for a period longer than 10 days
after due term, with exception of the payments stated in the Information
Letter.
5.2.3 Taxation
(a) The Company submitted to the tax authorities all tax returns and tax
statements in accordance with relevant tax and accounting regulations and
to each Sellers' best knowledge, all such tax returns and tax statements
are true, accurate and complete.
(b) The Company has paid all taxes and other payments to the governmental
agencies that it is liable to pay duly and in time and the Company is
not under any liability to pay any penalty, charge, incrementals on taxes
or any other payment obligations of similar nature in connection with any
tax.
5.2.4 Assets
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(a) All the Assets are owned exclusively by the Company and have been acquired
legally and in accordance with laws of the Slovak Republic.
(b) The Company has not established any Encumbrance over any of its Assets.
(c) In connection with the Assets, such services are available (including, but
not limited to electricity, heating, gas and water supplies, sewerage and
telecommunication lines) as are necessary for using any of the Assets and
carrying out the business of the Company as it is now conducted and no
limitations restricting the Company's use of the Assets and carrying its
business exist.
(d) No lease agreements have been entered into with respect to any Assets
leasing the Assets or any part thereof to any third party. The Company
pays rent on basis of lease contracts under which it leases the assets
used in connection with carrying out its business and all such lease
contracts are properly reflected in the 1998 Financial Statements and in
the Closing Financiai Statements.
5.2.5 Intellectual Property Rights
(a) The Company does not infringe any third persons Intellectual Property Rights
and there is or has been any dispute, action or claim made or threatening by
any third person in relation thereto.
5.2.6 Licences
(a) The Company has obtained all licences, permits or approvals required for the
proper carrying out of its business as presently carried on and all such
licences, permits or approvals are valid and in full force.
(b) The Company is not in breach of any licences, permits or approvals required
for proper carrying out of its business. The Company has taken all actions
desirable cr necessary for maintaining all its licences, permits and
approvals, as may be required under applicable legislation and there is no
threat of any revocation of any of existing licences, permits or
authorisations.
5.2.7 Competition
(a) The Company has not received any communication from the Slovak Anti-Monopoly
Office relating in any respect to its the business.
(b) The Company has not the dominant position in any relevant market in the
meaning of the Competition Protection Law No. 188/1994 Zb.
(c) The Company is not a party to any agreement or arrangement that could be
interpreted as an unfair trade practice or prohibited due to restricting
competition or otherwise in conflict with competition protection
legislation.
5.2.8 Litigation
(a) The Company is not involved in any civil, commercial, labour or other
litigation proceedings pending before any court (whether in the Slovak
Republic or elsewhere) or arbitration (whether regular or ad hoc and
whether in the Slovak Republic or elsewhere), whereby the claimed amount
against it would be higher than 100,000 SKK or its equivalent in other
currencies, or whereby such proceedings may otherwise have material
impact in respect of the Company's corporate existence or carrying on its
business or its financial position.
5.2.9 Execution Effects
The execution and performance of this Contract and other documents and
transactions contemplated in connection therewith wili not:
<PAGE>
a) result in the Company losing the benefit of any Asset, licence, right, legal
relation or privilege which it presently enjoys or relieve any person from any
obligation towards the Company, or
b) conflict with, or result in breach of, or institute any event of default or
potential event of default under any agreement or arrangement to which the
Company is a party.
6. FINAL PROVISIONS
6.1 This Contract shall be governed by Slovak law.
6.2 The Parties hereby agree to submit any dispute not settied amicably to the
jurisdiction of Slovak courts.
6.3 This Contract has been made and executed in Slovak and English language,
both versions being equal. The Slovak version will be presented to the
Register of Companies for registration.
6.4 This Contract becomes effective between the Parties on the date of signing
by each of the Parties and shall become effective towards the Company on
the date of delivering the same to the Company. The Party that signs as
the last agrees to deliver this Contract to the Company after signing
without undue delay.
6.5 In the event that any provision of this Contract becomes invalid, illegal
or unenforceable under any jurisdiction, the validity and enforceability
of the remaining provisions shall not be affected thereby in any way
under such jurisdiction, nor the Contract as a whole in any other
jurisdiction.
6.6 This Contract has been made in 12 counterparts, one original for each of
the parties, one for the Company and one for the purposes of registration
of transfers hereunder.
6.7 This Contract includes 3 (three) Annexes, namely Annex No. 1 - Transfers of
Interest Shares Parts, ANNEX No. 2 - Form of a Spouse's Confirmation, ANNEX
No. 3 - Form of a Close Relative's Confirmation. ANNEX No. 1 is an
inseparable part hereof. ANNEXES No. 2 and 3 have a recommendation
character.
<PAGE>
The Parties hereby declare that they have entered into this Contract on their
own free will and seriously, after due consideration, not acting under
influence of an error or distress, not under obviously unfavourable conditions
or under pressure of other persons.
IN WITNESS THEREOF, THEY ATTACH THEIR SIGNATURES:
Made in Bratislava, onJuly 14, 1999
THE SELLERS:
Peter Babinec
Peter Krajci
Karol Tesar
Gejza Buchler
Fridrich Gorner
Juraj Kabat
Peter Pronay
Vojtech Kovacs
Ivan Lescak
THE PURCHASER:
EuroWeb International Corp
<PAGE>
ANNEX No. 1
TO THE CONTRACT ON TRANSFER OF INTEREST SHARES PARTS
TRANSFERS OF INTEREST SHARES PARTS
Peter Babinec
Present contribution into the registered capital: 30 000.- SKK
Present interest share: 10 %
The relevant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0 %
Peter Krajci
Present contribution into the registered capital: 30 000.- SKK
Present interest share: 10 %
The reievant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0%
Karol Tesar
Present contribution into the registered capital: 30 000.- SKK
Present interest share: 10 %
The relevant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0 %
Gejza Buchler
Present contribution into the registered capital: 30 000.- SKK
Present interest share: 10 %
The relevant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0 %
Fridrich Gorner
Present contribution into the registered capital: 30 000.- SKK
Present interest share: 10 %
The relevant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0%
Juraj Kabat
Present contribution into the registered capital 30 000.- SKK
<PAGE>
Present interest share: 10 %
The relevant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0 %
Peter Pronay
Present contribution into the registered capital: 30 000.- SKK
Present interest share: 10 %
The relevant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0%
Vojtech Kovacs
Present contribution into the registered capital: 30 000.- SKK
Present interest share: 10 %
The relevant Part of the Transferred Interest Shares Parts: 10 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 30 000,. SKK
Monetary component of the Purchase Price: 40 000.- USD
Share component of the Purchase Price: 50 000,- USD
Interest share after transfer 0%
Ivan Lescak
Present contribution into the registered capital: 60 000.- SKK
Present interest share: 20 %
The relevant Part of the Transferred Interest Shares Parts: 20 %
The contribution coming to the relevant Part of the Transferred
Parts of the Interest Shares: 60 000,. SKK
Monetary component of the Purchase Price: 80 000.- USD
Share component of the Purchase Price: 0,- USD
Interest share after transfer 0%
<PAGE>
ANNEX No. 2
TO THE CONTRACT ON TRANSFER OF INTEREST SHARES PARTS
FORM OF A SPOUSE'S CONFIRMATION
DECLARATION OF A WIFE
I, the undersigned, birth number: , residing at
hereby declare the following:
I agree that my husband signs the Contract on Transfer of
Interest Shares Parts and any related document under which he will
undertake to transfer all parts of this interest share in the Company EUnet
Slovakia s.r.o., ID No.: 00 588 458 to the Company EuroWeb International
Corp. under the terms and conditions he deems appropriate, *
or,
the interest share of my husband in the Company EUnet Slovakia s.r.o.,
ID Bo. 00588 458 is not and has never been a part of our common ownership
or spouses*
* delete if inappropriate
In on 1999
<PAGE>
ANNEX No. 3
TO THE CONTRACT ON TRANSFER OF INTEREST SHARES PARTS
FORM OF A CLOSE RELATIVE'S CONFIRMATION
DECLARATION
I, the undersigned *, birth number residing at hereby
declare that
after my (son, brother, father)* signes the Contract on Transfer of
Interest Shares Parts and any related document under which he will undertake
to transfer all parts of this interest share in the Company EUnet Slovakia
s.r.o., ID No.: 00 588 458 to the Company EuroWeb International Corp.
I will abstain from joining the business or being employed in the management
position by a company in the Slovak Republic whose 10 % or more revenues
originate from a business of "Internet Provider (other than the Company
EUnet Slovakia s.r.o. and its assignees ) for the period of three years of
signing the above Contract, unless I get a written permission from Euroweb
International Corp. for such activity.
* delete if inappropriate
In , on 1999
I, PhDr. Beata Horna, an official Slovak translator listed in Register of
the Regional Court in Bratislava under the number 01050, appointed by the
decision of the Municipal Court in Bratislava dated September 27, 1990,
No. 3832/90 hereby certify that the foregoing is a true transiation of the
document hereto annexed.
In Bratislava, 14-07-1999
<PAGE>
Spinomocnenie
Ja, dolupodpisany Peter Babinec, r.c. 500804/222, bytom Bratislava,
Smolenicka 8, tymto spinomocnujem, Ing. Fridricha Gomera, r.c. 531115/080,
bytom Bratislava, Budatinska 47 na podpisanie zmluvy o prevode casti obchodneno
podielu v spolocnosti EUnet Slovakia sr.o., ICO 00 588 458 na spolocnost
EuroWeb International Corp.
V Bratislave, dna 24.6.1999
<PAGE>
EXHIBIT (mm)
<PAGE>
SHARE PURCHASE AGREEMENT
between
EUROWEB INTERNATIONAL CORP.
as Purchaser
and
DATAC SPOL. S R.O.
as Seller
dated July 29, 1999
<PAGE>
THIS SHARE PURCHASE: AGREEMENT (the "Agreement") dated July 29, 1999 is
made between:
1. EuroWeb International Corp., a company incorporated under the laws of
the state of Delaware, having its registered seat at 445 Park Avenue,
15th Floor, New York, NY 10022, USA, duly represented by Mr. Cscaba
Toro, Vice President and Director (the "Purchaser");
and
2. Datac spol. s r.o., a company incorporated under the laws of Czech
Republic, having its registered seat at Praha 7, Za papirnou 5, Czech
Republic, ICO (Identification No.) 00550001, duly represented by
Mr. Jiri Lorman, Executive (the "Seller").
RECITALS
The Seller owns shares representing the entire registered capital
of Bohemia.Net, a.s., ICO (ID No.) 25670026, a Czech joint-stock company
with its registered seat at Praha 7, Za papirnou 5, Czech Republic (the
"Company").
The Seller wishes to transfer shares representing 80% of the
registered capital of the Company to the Purchaser and the Purchaser
wishes to purchase such shares from the Seller on the terms set out in
this Agreement.
NOW, THEREFORE, in reliance on the representations, warranties and covenants
contained herein, the parties hereto agree as follows:
I. DEFINITIONS
In this Agreement:
"Call Option Agreement" means the Call Option Agreement between the Purchaser
and the Seller relating to the Escrow Shares and dated as of even date
herewith;
"Closing" shall mean the completion of the matters described in clause 7;
"Escrow Agent" shall mean Credit Lyonnais Bank Praha, a.s., with its seat at
Ovocny trh 8, Prague 1;
"Escrow Agreement" shall mean the Escrow Agreement made between the Seller,
the Purchaser and the Escrow Agent and dated as of even date herewith;
<PAGE>
"Escrow Shares" shall mean the shares in the Company deposited in
escrow with the Escrow Agent in accordance with the terms and
conditions of the Escrow Agreement as set out in clause 3.1 (c);
"EW Put Option Shares" shall mean the EW Shares which may be issued and
delivered to the Seller in accordance with clause 6.1;
"EW Shares" shall mean ordinary voting shares of common stock in the
Purchaser;
"Disclosure Letter" means the letter, in a form satisfactory to the
Purchaser, from the Seller to the Purchaser to be delivered at Closing
addressed to the Purchaser and qualifying the representations and
warranties in clause IX;
"Financial Statements" shall have the meaning ascribed to that term in
clause 5.1;
"First Cash Payment" shall have the meaning ascribed to that term in
clause 2.2 (a);
"Final Closing Date" shall have the meaning ascribed to that term in
clause 7.3 of this Agreement;
"Further EW Shares" shall mean additional EW Shares constituting part
of the Purchase Price as described in clause 2.2(e) and which may be
issued and delivered to the Seller in accordance with clause 4.1;
"New EW Shares" shall mean the EW Shares which may be issued and
delivered to the Seller in accordance with clause 2.2(c);
"Notional Value" means USD 55O,000.-- (five hundred and fifty thousand
United States Dollars in respect of the New EW Shares and USD 410,000.
- -- (four hundred and ten thousand United States Dollars) in respect of
the EW Put Option Shares;
"Purchase Price" shall have the meaning ascribed to that term in clause 2.2;
"Purchased Shares" shall have the meaning ascribed to that term in clause 2.1;
"Put Option" shall have the meaning ascribed to that term in clause 2.2(d);
"Remaining Shares" shall have the meaning ascribed to that term in clause 6.1;
"Second Cash Payment" shall have the meaning ascribed to that term in clause
2.2(b).
II. PURCHASE AND SALE
2.1 Purchase. Subject to the terms and conditions of this Agreement,
the Seller hereby undertakes to sell and transfer 160 registered shares of
the Company, Nos. B0021-B0180, with a nominal value of CZK 100,000.-- each,
representing 80% (to wit: eighty percent) of the registered capital of the
Company (the "Purchased Shares") and the Purchaser hereby undertakes to
purchase and acquire such shares.
<PAGE>
2.2 Purchase Price. Subject to adjustment according to clause V.,
the aggregate purchase price for the Purchased Shares (the "Purchase
Price") shall consist of:
(a) USD 200,000.-- (to wit: two hundred thousand United States
Dollars) payable on the date of signing of this Agreement
(the "First Cash Payment");
(b) USD 330,000.-- (to wit: three hundred and thirty thousand
United States Dollars) payable on Closing (the "Second Cash
Payment");
(c) USD 550,000.-- (to wit: five hundred and fifty thousand United
States Dollars) worth of EW Shares issued by the Purchaser to
the Seller on Closing (the "New EW Shares");
(d) the put option granted by the Purchaser to the Seller with
effect on Closing as set out in clause 6.1 (the "Put Option");
(e) additional EW Shares (if any) issued to the Seller by the
Purchaser in accordance with clause 8.1 ("Further EW Shares").
III. STEPS TO BE TAKEN ON SIGNING
3.1 On the date of signing of this Agreement:
(a) the Purchaser shall pay the First Cash Payment to the Seller
to its bank account with the Escrow Agent No. 01 002555 001 02 0.
If the First Cash Payment shall not have been credited to the
above-mentioned bank account of the Seller within five (5) days
of the signing of this Agreement or such extended period of time
as may be agreed by the Purchaser and the Seller in writing and
notified to the Escrow Agent in accordance with the Escrow
Agreement, the Escrow Agent shall return the First Cash Payment
to the Purchaser upon its receipt in the above-mentioned bank
account of the Seller in accordance with the Escrow Agreement
and lit. (ii) and (iii) of the first sentence of clause 4.3
shall apply;
(b) the Purchaser shall deposit the Second Cash Payment with the
Escrow Agent in accordance with the terms of the Escrow
Agreement; and
(c) the Seller shall deliver 68 Purchased Shares with a nominal
value of CZK 100.000.-- each, Nos. B0021-B0088, representing
34% of the registered capital of the Company and duly endorsed
in favour of the Purchaser ("Escrow Shares") to the Escrow Agent
in accordance with the terms of the Escrow Agreement.
<PAGE>
IV. CONDITIONS PRECEDENT
4.1 The transfer of the Purchased Shares to the Purchaser and the
obligation to pay the balance of the Purchase Price consisting of the Second
Cash Payment, the New EW Shares, the Put Option and Further EW Shares (if any)
are conditional on:
(a) the completion of the due diligence process investigating the
Company to the satisfaction of the Purchaser;
(b) the Purchaser obtaining all necessary approvals and authorisations
for the issuing of the New EW Shares to the Seller;
(c) the conclusion of management agreements between Messrs. Jiri
Lorman and Josef Ptacnik and the Company in the form attached
hereto as Annexes I and 2;
(d) the resolution to the satisfaction of the Purchaser of the
legal issues relating to the sale of the enterprise of LUKO
Czech-Net, spol. s r.o to the Company as anticipated in
clause 7.2(d);
(e) the conclusion of an amendment to the lease agreement ("Smlouva
of najmu nebytoveho prostoru") between the Seller and the Company
dated 1 July 1998 amending, among others, the term of the
agreement as set out in section 3 thereof so that such lease
agreement shall become a lease agreement for an indefinite period
of time with a 2 months termination notice. Such amendment shall
be satisfactory to the Seller and the Purchaser;
(f) the Seller acting in his capacity as 100% shareholder of the
Company shall adopt new Articles of Association of the Company
in form and substance satisfactory to the Purchaser.
4.2 The Purchaser and the Seller shall use all reasonable endeavours to
procure that the conditions in clause 4.1 are fulfilled on or before the date
falling 21 days after the date of the execution of this Agreement.
4.3 If the conditions in clause 4.1 are not fulfilled on or before the
date specified in clause 4.2, (i) the Seller shall refund the First Cash
Payment to the Purchaser within ten (10) business days of the Final Closing
Date, (ii) the Escrow Agent shall release the Second Cash Payment to the
Purchaser and (iii) the Escrow Agent shall release the Escrow Shares to the
Seller. In the event that the Seller should default on its obligation to
refund the First Cash Payment within ten (10) business days of the Final
Closing Date, the Purchaser shall be entitled to exercise the call option
established in its favour over the Escrow Shares in the Call Option Agreement
and instruct the Escrow Agent to deliver the Escrow Shares to it on the terms
set out in the Escrow Agreement.
V. PRICE ADJUSTMENT
5.1 If the due diligence process conducted by the Purchaser discloses,
in the opinion of the Purchaser, a material adverse difference in the value
of the Company from that set out in the profit and loss statement and balance
sheet of the
<PAGE>
Company for 1998 and the first five months of 1999 in the form supplied to
the Purchaser by the Seller on 23 June 1999 (the "Financial Statements"), the
First Cash Payment, the Second Cash Payment, the Notional Value and New EW
Shares, and therefore the Purchase Price, shall be adjusted in accordance
with clause 5.2.
5.2 The First Cash Payment, the Second Cash Payment and the Notional
Value shall be multiplied by the lesser of:
(a) the revenue figure at the date of 31 May 1999 (the "Accounts
Date") as disclosed by the due diligence repo~4 prepared by
the firm of accountants appointed by the Purchaser for the
purposes of this Agreement evaluating the accuracy of the
Financial Statements and prepared in accordance with generally
accepted principles of accounting practice in the Czech republic
(the "BDO Report") divided by the revenue figure at the Accounts
Date set out in the Financial Statements; and
(b) the total net assets figure at the Accounts Date as disclosed by
the BDO Report divided by the total net assets figure at the
Accounts Date set out in the Financial Statements.
5.3 If, in the Purchaser's opinion, the matters disclosed in the due
diligence are such that the Purchase Price, as adjusted in accordance with
clause 5.2, nonetheless represents an over-payment for the Company the
Purchaser shall give written notice of this opinion to the Seller and the
provisions in clause 4.3 shall apply.
VI. PUT OPTION AND RIGHT OF FIRST REFUSAL
6.1 The Seller hereby sells to the Purchaser 20 registered shares of
the Company Nos. B001-B0020 with a nominal value of CZK 100,000. -- each and
200 registered shares of the Company Nos. A001-A0200 with a nominal value of
CZK 10,000.-- each, representing 20% (to wit: twenty percent) of the registered
capital of the Company (the "Remaining Shares") at a price (the "Guaranteed
Price") consisting of, subject to deduction of any owed Damages as defined
in clause 12.1, (i) a cash payment in the amount of USD 410,000.-- (to wit:
four hundred and ten thousand United States Dollars) and (ii) USD 410,000.--
worth of EW Shares to be issued and delivered by the Purchaser to the Seller
(the "EW Put Option Shares") conditional upon delivery by the Seller to the
Purchaser of a written notice confirming the Seller's intention to sell the
Remaining Shares (the "Exercise Notice"). The Seller may deliver the Exercise
Notice to the Purchaser at the latest nine (9) months after the date of
signing of this Agreement. In case the Seller delivers the Exercise Notice
to the Purchaser within the deadline set out in the preceding sentence, the
Purchaser shall pay the Guaranteed Price to the Seller against delivery of
the Remaining Shares and due endorsement thereof in favour of the Purchaser
(payment versus delivery) on the date which is twelve (12) months after the
date of this Agreement. The Put Option set out in this clause 6.1 shall
become effective on Closing and its exercise shall be subject to no Breach
(as defined in clause 12.1) occuring and continuing.
<PAGE>
6.2 In the event that the Seller should wish to sell the Remaining Shares
or part thereof to a third party (the "Offered Shares"), the Seller shall
notify the Purchaser in writing (the "Offeror Notice") of the identity of the
proposed purchaser (the "Proposed Purchaser"), the price and other terms
offered (the "Offered Terms") and financial information with respect to the
Proposed Purchaser demonstrating its ability to finance the acquisition of
the Offered Shares. Following receipt of any such Offeror Notice, the Purchaser
may exercise its right to purchase the Offered Shares in the manner set forth
below. For purposes of this clause 6.2, the terrn "Offered Terms or Better"
shall mean a cash price on terrns equal to, or more favourable for the Seller
than, the Offered Terms.
The Purchaser shall by written notice (the "Offeree Notice") elect to
purchase the Offered Shares (or any portion thereof) at Offered Terms or Better,
or decline to exercise its right of first refusal, in writing within twenty (20)
days after the date of receipt of the Offeror Notice. If the Purchaser or its
successor elects to purchase the Offered Shares (or any part thereof), the
Seller shall sell and the Purchaser shall purchase such Offered Interest on the
Offered Terrns or Better within thirty (30) days (or such longer period as may
have been part of the Offered Terms or may be necessary to perrnit compliance
with applicable laws) after the date of the Seller's receipt of the Offeree
Notice. If the Purchaser fails to respond or declines to exercise its right of
first refusal to purchase the Offered Shares or any portion thereof, the Seller
shall be entitled, for a period of three (3) months from the date of receipt of
the Offeror Notice, to transfer the Offered Shares (but not only a part thereof)
to the Proposed Purchaser at Offered Terms; provided, however, that in the event
the Seller shall fail to transfer the Offered Shares within such three (3) month
period, such Offered Shares shall again be subject to the provisions of this
clause 6.2.
The right of first refusal described in this clause 6.2 shall not
apply to transfers of the Remaining Shares among the Seller and Messrs. Jiri
Lorman and Josef Ptacnik. The right of first refusal described in this clause
6.2 shall survive the expiry of the Put Option by reason of its non-exercise
by the Seller within the deadline stipulated in clause 6.1. The Seller shall
not pledge or otherwise encumber the Remaining Shares or rights pertaining
thereto (or assign such rights).
VII. CLOSING
7.1 Closing shall take place at the offices of [the Purchaser's
lawyers] within five business days after the Purchaser has notified the Seller
of satisfaction of the conditions precedent under clause 4.
7.2 At Closing:
(a) the Purchaser shall issue and deliver the New Shares to the
Seller;
(b) the Seller shall:
(i) deliver 92 Purchased Shares, Nos. B0089-B0180, with a
nominal value of CZK 100.000.-- each, representing 46%
<PAGE>
of the registered capital of the Company to the Purchaser
duly endorsed in favour of the Purchaser;
(ii) deliver to the Purchaser the list of shareholders of the
Company duly endorsed by the Company's directors showing
the registration of the Purchaser as the owner of the
Purchased Shares and of the Seller as the owner of the
Remaining Shares;
(iii) deliver to the Purchaser a decision of the Board of
Directors of the Company approving the terms and conditions
of this Agreement and the transfer of the Purchased Shares
and the Remaining Shares from the Seller to the Purchaser;
and
(iv) deliver the Disclosure Letter to the Purchaser;
(c) the Seller and the Purchaser shall jointly instruct the Escrow
Agent in accordance with the Escrow Agreement to:
(i) release and pay to the Seller the Second Cash Payrnent, or
such portion thereof as may result from the adjustment made
in accordance with clause V of this Agreement, and thereupon
release and pay to the Purchaser the balance of the Second
Cash Payment, if any;
(ii) deliver the Escrow Shares to the Purchaser duly endorsed
in favour of the Purchaser;
(d) the Seller and the Purchaser shall jointly cause the Company and
the Purchaser shall cause LUKO Czech-Net, spol. s r.o., ID
No.48591319, with its registered seat at Argentinska 38, 170 05
Praha 7, Czech Republic, to enter into an agreement on the sale
of an enterprise in a form and substance satisfactory to the
Purchaser and transferring the entire enterprise of LUKO
Czech-Net, spol. s.r.o. to the Company.
7.3 If for any reason the provisions of clause7.2 above are not fully
complied with or Closing may not occur on the date which is twenty one (21)
days after the signing of this Agreement or such extended deadline as the
Purchaser and the Seller may agree on in writing (the "Final Closing Date"),
the Purchaser and the Seller may (in addition and without prejudice to all
other rights or remedies available to them) (i) agree on a new date for
Closing or (ii) either of them may rescind this Agreement. In case the
Purchaser or the Seller elects to rescind this Agreement, clause 4.3 shall
apply.
VIII. CONTINUING OBLIGATIONS
8.1 The Purchaser undertakes to the Seller that, if on the date when the
new EW Shares, respectively EW Put Option Shares, become registrered (known as
the "Trade
<PAGE>
Date"), the Market Value of the New EW Shares, respectively EW Put Option
Shares, is less than the Notional Value, it will issue and deliver additional
EW Shares to the Seller calculated in the following way:
A = (B-C)/D
where
A is the number of additional EW Shares to be issued to the Seller;
B is the Notional Value;
C is the Market Value at the Trade Date of all of the New EW Shares,
respectively EW Put Option Shares; and
D is the Market Value at the Trade Date of one EW Share
For the purposes of this Agreement
(a) the term "registered," when used in connection with the
New EW Shares, respectively EW Put Option Shares, shall
mean that such New EW Shares, respectively EW Put Option
Shares, have been duly registered with the Securities
Exchange Commission of the United States under the US
Securities Act of 1933 and such registration is in full
force and effect; and
(b) the term "Market Value" means in relation to an EW Share
and a date, the arithmetical mean of the closing price
quoted for an EW Share on the NASDAQ stock exchange on the
preceding ten business days
8.2 The Purchaser hereby agrees to use best efforts to:
(a) make an application for the registration of the New EW Shares
within sixty days of the date of Closing; and
(b) make an application for any additional shares to be registered
as soon as is reasonably practical after their issue.
8.3 The Purchaser undertakes to the Seller to make an investment in the
Company in an amount equal to USD 200,000.-- (two hundred thousand United
States Dollars).
8.4 The Seller undertakes that, for so long as he owns EW Shares, in
the event that he is notified of a general meeting of the Purchaser being
called in order to increase the authorised share capital of the Purchaser,
he will attend such general meeting either in person or by proxy.
<PAGE>
IX. REPRESENTATIONS AND WARRANTIES OF THE SELLER
In order to induce the Purchaser to enter into this Agreement, the Seller
represents, warrants and covenants, which representations, warranties and
covenants shall survive the execution and delivery of this Agreement, as
follows:
9.1 Organisation and Standing of the Company. As of the date hereof,
the Company (i) is a joint-stock company duly organised and existing under
the laws of the Czech Republic, (ii) has all requisite power and authority,
including, but not limited to, all licences and permits, to conduct its
business in accordance with its Articles of Association attached hereto
as Annex 3. Such Articles of Association arc up-to-date and complete.
9.2 No Linuidation. Division Mereer or Consolidation. There has been
no proposal made or resolution adopted by the competent bodies within the
corporate organisation of the Company or the relevant court for the liquidation
or division of the Company or merger or consolidation of the same with a third
party.
9.3 No Bankruptcy. The Company has not (i) been declared bankrupt,
(ii) become insolvent or declared a moratorium, (iii) been unable to, or
admitted in writing its inability to, pay its debts as they become due or
(iv) entered into any voluntary or involuntary bankruptcy or settlement
proceedings;
9.4 Authorisation; Due Execution. The Seller has the power to execute
this Agreement, to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement constitutes
binding, legal and valid obligations of the Seller enforceable against the
Seller in accordance with its terms;
9.5 No violation. Neither the execution nor consummation of the
transactions contemplated in this Agreement will (i) violate any agreement,
commitment, judgement or order to which the Company or the Seller is party
or subject, (ii) contravene any law or regulation, (iii) violate any property
rights of third parties, or (iv) constitute an event of default (however
defined) or grounds for early termination under any agreement to which the
Company is a party.
9.6 Title to Purchased Shares and Remaining Shares. The Seller is the
sole and absolute owner, free and clear of any encumbrances, of the Purchased
Shares and Remaining Shares (as well as any rights pertaining thereto) sold
by it pursuant to this Agreement. Upon delivery of the Purchase Shares,
respectively Remaining Shares, the Purchaser shall obtain valid title to the
Purchased Shares, respectively Remaining Shares, free and clear of any adverse
claims, disputes, legal actions or other governmental or judicial proceedings
of any kind whatsoever and on Closing shall become a shareholder of the Company
entitled to exercise 80% of votes at the General Meeting of the Company and to
a 80% share in profits (including the right to the payment of the profit
generated by the Company from January 1, 1999 to the date hereof) and to
other benefits and rights of the Company's shareholders. The Purchased and
Remaining Shares are duly issued and valid shares of the Company.
9.7 Registered CaPital. As of the date hereof the registered capital of
the Company amounts to CZK 20,000,000.-- and has been fully paid up. No
rights,
<PAGE>
including options, have been granted with respect to an increase of the
registered capital of the Company.
9.8 Material Movables of the Companv. The Company is the sole owner,
free and clear of encumbrances, of the movable things listed in the Financial
Statements (the "Movables"). The Company has complied with all terrns of the
purchase agreements based on which the Movables were acquired and no seller
under such purchase agreement has given notice of its intention to rescind
such agreements.
9.9 Intellectual Property of the Company. The Company is the sole owner,
free and clear of any encumbrances, of the trademarks described in Annex 4
hereto. The trademarks are not, and there is no reason why it should become,
the subject of a claim by a third party.
9.10 Accounts. The Financial Statements present fairly the financial
condition of the Company at the date of such Financial Statements, have been
prepared in accordance with Czech accounting principles, and reflect fully
and correctly all liabilities, debts and claims against the Company,
distributions, payments and other benefits to the Seller on the date of such
Financial Statements. Subject to the matters set out in the Disclosure
Letter, there has been no material adverse change in the business, operations,
property, assets or financial condition of the Company since 31 May 1999.
9.11 Liabilities of the Comnanv. The Company has no outstanding claims,
liabilities or indebtedness other than liabilities set forth in the Financial
Statements or incurred subsequent to the Financial Statements' date in the
ordinary course of business.
9.12 Taxes. The Company has timely and correctly filed all declarations,
tax returns and information required by applicable law and has duly paid its
taxes and fulfilled its tax related obligations when due.
9.13 Payments with respect to Employees. The Company has timely and
correctly filed all declarations and information required by applicable law
and has duly paid any and all amounts due under social security and health
insurance legislation and fulfilled its obligations under such legislation
when due.
9.14 Litigation. There is no material claim, action, suit, proceeding,
arbitration, investigation or hearing, pending or, to the knowledge of the
Seller, threatened by or before any court, governmental or administrative
agency or authority, or private arbitration tribunal against the Seller or
the Company involving the transactions contemplated in this Agreement or
which could adversely affect the condition, whether financial or otherwise,
of the Company.
9.15 Material Contracts. Annex 5 contains a complete list of agreements
to which the Company is a party with a value equal to or in excess of CZK
100,000.-and which are material to the operation of the Company (the "Material
Contracts"). The Material Contracts constitute binding, legal and valid
obligations of the Company and the respective counterparties, enforceable
against such counterparties in accordance with the terms thereof. No party
with whom the Company has entered into
<PAGE>
a Material Contract has given notice of its intention to terrninate such
contract and no party (including the Company) is in material breach of a
Material Contract.
9.16 Joint-Venture Agreements. Except NIX.CZ, z.s.p.o, the Company
is not a member and/or shareholder of any entity and is not a party to a
joint venture agreement of whatever nature (including, without limitation,
any agreement entered into pursuant to Section 829 and ff. of the Civil
Code).
9.17 Customers. In the 4 months prior to the date hereof, no customers
(representing in aggregate more than 5% of turnover of the Company) have
indicatcd an intention to stop or substantially reduce trading with the
Company or to change substantially the terms on which they are prepared to
trade with the Company.
9.18 Emplovees. The Company has no employees other than those listed
in Annex 6 hereto (the "Employees"). Annex 6 accurately describes the position
and salary of each of the Employees.
9.19 Compliance. The Company has always complied with all applicable
laws and regulations, including, without limitation, any environmental
and/or competition laws and regulations of any relevant jurisdiction.
9.20 Computer Svstem. The computer system of the Company is year
2000 compliant and there is no reason why such system might fail to
smoothly operate in the year 2000 or thereafter.
X. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
In order to induce the Seller to enter into this Agreement, the Purchaser
represents, warrants and covenants to the Seller, which representations,
warranties and covenants shall survive the execution and delivery of this
Agreement, as follows:
10.1 Organisation and Standing. The Purchaser is a public company
duly organised and existing under the laws of the state of Delaware.
10.2 Authorisation: Due Execution. The Purchaser has the power to
execute this Agreement, to perform its obligations under this Agreement and
to consummate the transactions contemplated hereby. This Agreement
constitutes binding, legal and valid obligations of the Purchaser
enforceable against the same in accordance with its terrns.
10.3 No violation. Neither the execution nor consummation of the
transactions contemplated in this Agreement will (i) violate any material
agreement, commitment, judgement or order to which the Purchaser is party
or subject, (ii) contravene any law or regulation applicable to the
Purchaser or (iii) violate any property rights of third parties.
10.4 Litigation. There is no material claim, action, suit, proceeding,
arbitration, investigation or hearing, pending or, to the knowledge of the
Purchaser, threatened bv or before anv court, governmental or administrative
agency or authority,
<PAGE>
or private arbitration tribunal against the Purchaser involving the
transactions contemplated in this Agreement.
XI. ADDITIONAL OBLIGATIONS OF THE SELLEIt
The Seller hereby assumes the following obligations:
11.1 Non-Competition. In this clause 11.1
References to the business of the Conipany include the business of any
subsidiary of the Company or joint venture entered into by the Company;
References to the Company include any legal successors to it; and
"Relevant Area" means any part of the Czech Republie
(a) The Seller covenants that it will not for a period of 2 (two)
years from the signing of this Agreement be concerned, directly
or indirectly, in any business which is carried on in the
Relevant Area and which is competitive or likely to be
competitive with any business of the Company.
(b) The Seller covenants that it will not on its own account or on
behalf of or in conjunction with any third person for a period
of 2 (two) years from the signing of this Agreement: (i) canvass
or solicit business or custom for services of similar type to
those provided by the Company and with which services the Company
is or was actively involved, from any person with whom the
Company is or was actively involved or who has been at any time
a customer or client of the Company; or (ii) deal with any such
person save in a purely social (i.e. not business) capacity.
(c) The Seller covenants that it shall not on its own account or on
behalf of or in conjunction with any third person for a period
of 2 (two) years from the signing of this Agreement induce or
attempt to induce any supplier of the Company with whom the
Company is or was actively involved, to eease to supply, or to
restrict or vary in an adverse manner the terms of supply to,
the Company or otherwise interfere with the relationship between
such a supplier and the Company.
(d) The Seller eovenants that it shall not on its own account or on
behalf of or in conjunetion with any third person for a period
of 2 (two) years from the signing of this Agreement induee or
attempt to induce any director or senior/key employee to leave the
employment with the Company.
<PAGE>
(e) The Seller covenants to keep in secrecy all confidential and
secret information which it has learnt in the course of or in
connection with its shareholdering in the Company and, in
particular, the facts which are the subject of commercial
secrecy. This obligation:
(i) shall continue for an indefinite period;
(ii) does not apply to infonnation which is used or disclosed
with the prior written consent of the General Meeting of
the Company; or is ordered to be disclosed by a court of
competent jurisdiction; or is otherwise required to be
disclosed by law; or is or comes to be in the public
domain (except as a result of a breach of this paragraph).
(f) If the Seller breaches its obligations set out in this clause,
it shall pay the Purchaser a contractual penalty of 100,000 USD.
Payment of this contractual penalty will not give the Seller the
right to persist in any such breach or to make any further
breach of the obligations set out in this clause. In addition to
the payment of the contractual penalty, the Purchaser may demand
from the Seller the difference between the contractual penalty
paid and damage incurred as a result of the breach of a
contractual obligation.
(g) For the purposes of this clause the Seller is concen1ed in a
business if it carries it on as principal or agent or if:
(i) it is a partner, director, secondee, consultant or agent in,
of or to any person who carries on the business; or
(ii) it has any direct or indirect financial interest (as
shareholder or otherwise) in any person who carries on the
business; or
(iii) it is a partner, director, secondee, consultant or agent
in, of or to any person who has a direct or indirect
financial interest (as shareholder or othervvise) in any
person who carries on the business,
except where the Seller holds securities for investment purposes
and his interest and interests held by other persons acting in
concert with the Seller (the "Investors") carry together less than
five per cent of the voting rights and provided that none of the
Investors is involved in the management of the business of the
issuer of the securities or of any person connected with it other
than by the exercise of voting rights attaching to the securities.
11.2. Emplovees. The Seller shall not persuade or attempt to persuade
any of the Employees to terminate his or her employment relationship with the
Company.
<PAGE>
XII. PURCHASER'S REMEDIES
12.1 Breach of this Agreement. In the case that any of the
representations of the Seller made in this Agreement proves to be incorrect,
inaccurate or misleading or if the Seller breaches any of his obligations
hereunder ("Breach"), the Purchaser shall have the right to request the
Seller to indemnify and hold the Purchaser and the Company harmless, and
the Seller hereby agrees to do so, from and against all damages, losses
or expenses (including reasonable legal fees and expenses) suffered or paid
by the Purchaser or the Company as a result of the Breach, including, but not
limited to, any damages, losses or expenses incurred by the Purchaser or the
Company in cotmection with liabilities of the Company existing prior to the
execution hereof but not disclosed to the Purchaser, regardless of whether
the Purchaser has or could have been aware of such liabilities ("Damages").
12.2 Notice of Exercise. If the Purchaser wishes to assert a remedy
under Section 12.1 hereof, the Purchaser shall, within thirty (30) days of
discovering a Breach, give to the Seller notice (the "Notice") describing
the Breach in question and indicating the amount of Damages. The Seller shall
pay the amount of Damages to the Purchaser's or Company's account as
indicated in the Notice within fifteen (15) days of delivery of the Notice.
XIII. MISCELLANEOUS
13.1 Fees and Expenses. Each party shall bear its own costs and
expenses and the fees of its counsel and consultants and accountants and
other representatives incurred in connection with the transactions
contemplated by this Agreement.
13.2 Entire Acreement. This Agreement and the Annexes related hereto
supersedes and replaces any and all agreements, understandings and
declarations of intent among the parties hereto, including, but not limited
to, the Term-Sheet between the parties dated 29 June 1999 and Letter of
Intent between the parties dated I July 1999 as amended on 8 July 1999,
15 July 1999 and 22 July 1999 and embody all of the agreements of the parties
hereto with respect to the subject matter of this agreement.
13.3 Lancuage Versions and Counterparts. This Agreement is executed in
three (3) counterparts in the English language. One (1) counterpart is for
each party and one (1) counterpart is for the Company.
13.4 Severabilitv. The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of the
balance of this Agreement. In the event that any such provision should be or
become invalid for any reason, the parties hereto will consult and agree on
a legally acceptable manner of giving effect to the commercial objectives of
such provision.
13.5 Amendments. No amendment or other modification hereof shall be
effective unless the same shall be in writing and signed by the parties
hereto.
<PAGE>
13.6 Notices. Any notice, application or other communication to be
given or made under this Agreement shall be in writing. Such notice,
application or other communication shall be duly given or made when it shall
be delivered by hand, airmail, telex or telefax to the party to which it is
required or permitted to be given or made at such party's address specified
in this Agreement or at such other address as such party shall have
designated by notice to the party giving or making sucll notice, application
or other communication.
13.7 Governing Law: Arbitration.
(a) This Agreement and any amendments thereto shall be governed
by and interpreted and construed in accordance with the laws
of the Czech Republic.
(b) The parties hereto agree to use their best efforts to settle
any dispute, controversy or difference which may arise between
them in connection with this Agreement, including the breach,
termination or invalidity thereof, by arnicable discussions.
If any party fails or refuses to agree to or participate in
the discussions or if in any event the dispute, controversy
or difference is not resolved to the satisfaction of all
parties within 30 days after it has arisen, the disputes,
controversies, or differences shall be finally settled under
the Rules of the Arbitration Court attached to the Economic
Chamber of the Czech Republic and Agricultural Chamber of
the Czech Republic by arbitrator(s) appointed in accordance
with such Rules. Any such arbitration shall be conducted in
the English language and shall be held in Prague. Unless the
parties agree to appoint a single arbitrator the number of
arbitrators shall be three.
<PAGE>
IN WITNESS WHEREOF, this agreement has been signed by or on behalf
of each of the parties hereto on July 29, 1999.
EuroWeb International Corp.
By: Csaba Toro
Name: Csaba Toro
Title: Vice-President and Director,
acting based on a power of attomey
Datac spol. s.r.o.
By: Jiri Lorman
Name: Jiri Lorman
Title: Executive
<PAGE>
EXHIBIT (nn)
<PAGE>
Contract on transaction of part of business share in
compliance with Sec. 115 of law No. 513/1993 of Collection
I. Contract parties
1/ INFIS, s.r.o., company based according to laws of Slovak Republic
Identification number: 31 704 646
Residence: 040 01 Kosice, Kovacska street No. 17, Slovak Republic
further referred to as seller
2/ EuroWeb International Corp., company based according to laws of state
Delaware, USA
Residence: 445 Park Avenue, 15th stock New York, NY 10022 USA
further referred to as buyer
II. Contract subject
1. Seller sells and buyer buys part of business share in trade company Dodo,
s.r o. Kosice totaling to 70% of its value under the conditions stated
further in this contract.
2. Seller is the sole partner and owner of business share in company Dodo,
s.r.o., Kosice Business share of seller in company Dodo, s r.o., Kosice
amounts to 100%, its share on shareholder's equity of the company amounts
to 200.000 SK, in words two hundred thousand SK. Following the resolution
of extraordinary general assembly in notary entry dated......... this
business share was divided to two parts:
1st part... 140.000SK(70%)
2nd part... 60.000SK(30%)
3. Following the approval of extraordinary annual meeting seller sells into
exclusive property of buyer 1st part or business share in company Dodo,
s.r.o., Kosice totaling to 70% of its value.
4. Based on this contract buyer buys and takes over into his property 1st
part of business part in the company Dodo, s.r.o., Kosice totaling to 70%
of its value.
5. Transaction of business share from seller to buyer represents the net assets
of Dodo as of the date of the transfer are described in the financial
statement attached hereto. The liabilities and obligations of Dodo as of
the date of the transfer are described in the list of obligations and
liabilities attached hereto.
6. Transaction date is July 31st, 1999.
<PAGE>
III. Purchase price
1. Transaction of business share between seller and buyer is performed on
recompense basis for agreed purchase price 550.000 USD, in words
five hundred and fifty thousand USD. Buyer obliges himself to pay the
agreed purchase price to seller in two payments as follows:
A/sum of 350.000 USD, in word three hundred and fifty thousand USD,
buyer pays on account of seller within five days since signing of this
contract.
B/the rest of the purchase price equal to 200.000 USD (two hundred thousand
US dollars) will be paid up by the buyer through the transfer of shares of
the buyer to the seller in the amount whose total value will be at the date
of signature of the relevant share purchase agreement 200.000 USD. If for
whatsoever reason the authorisation to such acquisition, transfer and trading
in such shares is not obtained, the buyer shall pay to the seller the rest
of the agreed purchase price equal to 200.000 USD (two hundred thousand US
dollars) within 10 days from the expiration of one year since signing of
this contract.
IV. Obligations of seller
1. When signing this purchase contract seller obliges himself to the advantage
of buyer:
to refrain from participating or acquiring direct or indirect ownership
or taking part in managing the company acting as "Internet Provider" and
on management of any other company active as "Internet Provider" during
time period of three years from closing this contract, if contract parties
do not have other agreements
to inform in written form Department of Transport, Post and
Telecommunication of Slovak Republic within 5 days after the signature of
this agreement on this transactions
to submit application for entry of changes into business register of
District Court Kosice I, that reflect acceding of new partner and
transaction of business share in the company Dodo, s.r.o., Kosice
within 10 days from payment of down payment of agreed purchase price
and attach all documents necessary for entry
2. When required by buyer to grant all necessary participation so that the
transaction is approved by Anti-monopoly Office of Slovak Republic.
3. If seller does not fulfil his obligations according to preceding paragraph,
buyer is entitled to withdraw from this contract by written notice
delivered to seller entering into force as at date of submitting this
notice. In such case seller obliges himself to pay back to buyer the
purchase price paid so far.
<PAGE>
4. The parties have agreed that the buyer has the call option with respect
to the participation interest of the seller which will be 30% after
completion of this transaction.
5. The buyer is entitled to apply its call option at any time withing two
years after the signature of this agreement. When doing so, the seller
will be obliged to enter into agreement on transfer of its total
participation interest within 10 days from the notice by the buyer of
intention to apply the call option. The price for the transfer of the
remaining participation interest is agreed hereby to be 350 000.--USD
payable within 10 days after signature of the relevant agreement on
transfer of the participation interest.
6. the call option of the buyer and corresponding obligation of the seller
pursuant to paragraphs 4 and 5. will be included in the Memorandum of
Association of Dodo s.r.o.
V. Obligations of buyer
1. When signing this contract buyer obliges himself to the advantage of
seller:
to develop business and entrepreneur activities of the company Dodo,
s.r.o. Kosice in range of its activities subject within one year
not to weaken the present state of the company Dodo, s.r.o., Kosice on
trade market, not to cause the bankruptcy or liquidation of the company
within one year
not to compete to the company Dodo, s.r.o., Kosice by its daughter
companies in sphere of internet services, nor by other business activities
in eastern Slovakia, respectively in District of Kosice and Presov.
accounting services of the company Dodo, s.r.o., Kosice will be delivered
by seller on basis of mutual contracts and agreements
relation of representatives in management will be given by relation of
business share minimally one member on part of seller
to invest into development and settlement of liabilities of the company
Dodo, s.r.o., Kosice the sum of 75.000 USD, in words seventy five
thousand USD not later than within 30 days from this contract siging
without change of proprietary relations in the company, as stated in
point II
to notify Anti-monopoly Office about transaction of business share
within 15 days
VI. Basic state of the company
1. The company is a company orderly based with valid existence according
to legal regulations of Slovak Republic and all basic activities of the
company since its foundation including its changes were performed
according to valid corresponding directives
2. All rights, as they are specified in this Agreement, are obtained by
buyer after following conditions are fulfilled:
<PAGE>
- -- sum 350 000 USD (Three hundred and fifty thousand US dollars) has been
transferred to seller's bank account.
- -- sum 75 000 USD (Seventy five thousand US dollars) has been transferred
to the bank account of Dodo s.r.o.
- -- seller receives the Share Certificate that proves holding the shares in
amount 200 000 USD (Two hundred thousand US dollars) or this sum or money
has been transferred to seller's bank account.
VII. Booking records, taxes
1. Closing account as at date of transaction was prepared in compliance with
law and on orderly bases in compliance with generally obliging booking
directives, approved by Department of Finances of Slovak Republic.
2. The company submitted to tax bodies all statements and sheets in
compliance with corresponding tax and booking directives and according
to best awareness of seller these tax statements and sheets were truthful,
correct and complete.
3. The company pays orderly and on time all taxes and other payments to state
bodies. As at date of transaction it is not obliged to pay any fines,
penalties or fees resulting from tax delay, neither it has other payment
duties of similar nature.
VIII. Property of the company
1. All property of the company is owned exclusively by the company and it was
acquired legally in compliance with legal directives of Slovak Republic.
2. The company pays the rent based on mutual contracts, whereas all these
contracts are orderly recorded and kept in closing account as at date of
transaction.
IX. Industrial ownership and protection of environment
1. The company does not interfere into industrial ownership of third parties.
2. The company has never had the duty to pay a penalty, fee or fine with
respect to environment and labor safety.
X. Business matters, licenses
1. The company is not a contract party, neither it has any duties resulting
from long term or extraordinary contract that as at date of transaction
would not be recorded in trade books or in booking evidence of the company.
2. The company owns all licenses, permissions and approvals in order to carry
out properly its business activity in such a way as it is carried out at
present and all these permission and approvals are valid and in force.
<PAGE>
3. Seller and buyer agreed on business name of the company
Dodo s.r.o., member of EWEB group.
XI. Competition
1. The company has not a dominant state on the corresponding market in
compliance with law No. 188/1994 of Collection on protection of
competition.
XII. Final provisions
1. This contract is governed by Slovak law.
2. This contract enters into force by contract signing by each of contract
parties.
3. This contract is made in English and Slovak language. In case of
controversy, the English version shall be always prevailing.
In Kosice, dated 5-8-1999 In dated 8/9/1999
s/ s/Csaba Toro
Infis, spol. s.r.o., Kosice EuroWeb international Corp.
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,303,986
<SECURITIES> 1,088,420
<RECEIVABLES> 282,886
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,790,744
<PP&E> 50,666
<DEPRECIATION> 3,889
<TOTAL-ASSETS> 9,065,648
<CURRENT-LIABILITIES> 259,274
<BONDS> 0
0
0
<COMMON> 109,069
<OTHER-SE> 8,697,305
<TOTAL-LIABILITY-AND-EQUITY> 9,065,648
<SALES> 0
<TOTAL-REVENUES> 71,528
<CGS> 0
<TOTAL-COSTS> 269,211
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (197,683)
<INCOME-TAX> 2,139
<INCOME-CONTINUING> (199,822)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (199,822)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
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