Euroweb International Corp. Euroweb Internet Szolgaltato Kft.
445 Park Avenue H-1122 Budapest
New York NY 10022 Varosmajor u.13
Tel: (212) 758-9870 1535 Budapest
Fax: (212) 758-9896 Hungary
Tel: (+36 1) 22 44 000
Fax: +36 1 22 44 100
TO THE STOCKHOLDERS OF EUROWEB INTERNATIONAL CORP.
NOTICE IS HEREBY GIVEN that a special Meeting of Stockholders (the "Meeting")
of Euroweb International Corp., a Delaware corporation (the "Company"), will
be held at 10:00 A.M. (New York time), on January 12, 2000 at the offices of
Cohen & Cohen, 445 Park Avenue, New York, New York 10022:
1. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of shares of
common stock, par value $.001 per share ("Common Stock") that is
authorized for issuance by the Company from 20,000,000 shares of
Common Stock to 60,000,000 shares of Common Stock. The text of
Article Fourth of the Company's Certificate of Incorporation, as
amended by this proposed amendment, is attached as Appendix I to
the accompanying Proxy Statement.
2. To consider and vote upon a proposal for the issuance by the Company
to KPN TELECOM B.V., a Netherlands limited liability company ("KPN")
of: (1) such number of shares (the "Shares") of the Company's Common
Stock as will result in KPN's holding 51% of the issued and
outstanding shares of the Company's Common Stock; and (2) such
number of additional shares of the Company's Common Stock, pursuant
to an option ("Option Shares") that is exercisable simultaneously
with the exercise by any third party of any outstanding warrants,
options or other securities carrying rights to shares of the
Company's Common Stock, so as to preserve KPN's holding of 51% of
the issued and outstanding shares of the Company's Common Stock
after giving effect to the issuance of additional shares of Common
Stock upon exercise of such outstanding warrants, options or other
convertible securities. The Shares will be issued pursuant to, and
subject to the terms and conditions of, the Subscription Agreement,
dated as of November 19, 1999 (and amended by the Amended and
Restated
Agreement of December 13, 1999), by and among the Company, KPN and
Messrs. Frank R. Cohen and Csaba Toro (two of the five current
directors of the Company), as it may be amended from time to time
(the "Subscription Agreement"). The Option Shares will be issued
upon exercise of an option under the Option Agreement, dated
November 19, 1999 (and amended by the Amended and Restated Agreement
of December 13, 1999), by and between KPN and the Company, as it may
be amended from time to time (the "Option Agreement" and together with
the Subscription Agreement, the "KPN Agreements"). Based upon the
number of outstanding shares of the Company's Common Stock and
outstanding warrants, options or other securities carrying rights to
shares of the Company's Common Stock, all as of October 26, 1999
(the date of the original agreement between the Company and KPN):
<PAGE>
the number of Shares issuable under the Subscription Agreement will
be 10,286,742 shares of Common Stock at a purchase price of $1.58
per share for an aggregate purchase price for the Shares of
$16,253,052; and the number of Option Shares issuable under the
Option Agreement may be up to 4,822,194 shares of Common Stock at a
purchase price of $1.38 per share for an aggregate maximum purchase
price for the Option Shares of $6,654,628. Any shares of Common
Stock issued by the Company to KPN at the closing under the
Subscription Agreement in excess of 10,286,742 shares (with such
excess shares being subscribed under the Subscription Agreement in
such number as will be required to maintain KPN's holding of 51% of
the issued and outstanding shares of the Company's Common Stock as
a result of the issuance of additional shares of Common Stock upon
exercise by third parties of options or warrants between October 26,
1999 and the closing under the Subscription Agreement) will be
purchased at the purchase price of $1.38 per share. Copies of the
Subscription Agreement and the Option Agreement are attached as
Appendix II and Appendix III to the accompanying Proxy Statement.
The Subscription Agreement provides that at the closing thereunder,
the Company will be required to deliver the resignations of those
members of the Company's Board of Directors as agreed between KPN
and the Company. KPN and the Company have agreed that, effective as
of the closing, two out of the five current directors of the
Company, Messrs. Richard G. Maresca and Donald K. Robertson, will
resign from the Board and as and from the closing Mr. Martin
Pieters, an Executive Vice President of KPN, and Mr. Andre Burg, an
adviser to KPN, will become members of the Board of Directors of the
Company. Since KPN will have 51% of the Company's Common Stock,
representing voting control of the Company, following its purchase
of the Shares, KPN's purchase of the Shares will result in a change
in the control of the Company.
3. To transact such other business as may properly come before the
Meeting and any adjournment or postponement thereof. The Board of
Directors is not aware of any other business to come before the
Meeting.
The Board of Directors has fixed December 10, 1999 as the record date (the
"Record Date") for the determination of stockholders entitled to notice of, and
to vote at, the Meeting any adjournment or postponement thereof. Only holders
of record of the Company's Common Stock at the close of business on the Record
Date are entitled to vote on all matters coming before the Meeting or any
adjournment or postponement thereof. A complete list of stockholders of record
entitled to vote at the Meeting will be maintained in the Company's offices at
445 Park Avenue, New York, New York 10022, for ten days prior to the Meeting.
<PAGE>
Whether or not you plan to attend the Meeting in person, please mark,
execute, date and return the enclosed proxy in the envelope provided (which
requires no postage if mailed within the United States). Should you attend the
Meeting in person you may, if you wish, withdraw your proxy and vote your
shares in person.
By Order of the Board of Directors,
/s/FRANK R. COHEN
Frank R. Cohen
Chairman
New York, New York
December 14, 1999
The Board of Directors of Euroweb International Corp. has unanimously approved
the proposals and determined that the amendment to the Company's certificate
of incorporation and the KPN Transaction are advisable and in the best
interests of Euroweb International Corp. and its Stockholders.
After careful consideration, the Euroweb International Corp.
Board of Directors unanimously recommends
that Stockholders vote "FOR" approval
of the proposals.
<PAGE>
December 14, 1999
____________________
PROXY STATEMENT
____________________
Special Meeting of Stockholders
To Be Held January 12, 2000
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies from holders of the Company's Common Stock (the "Stockholders")
on behalf of the Board of Directors of Euroweb International Corp. (the
"Company") to be used at a Special Meeting of Stockholders of the Company
to be held at 10:00 a.m. New York time, on January 12, 2000, 1999 at the
offices of Cohen & Cohen, 445 Park Avenue, New York, New York 10022, or at
any adjournments or postponements thereof (the "Meeting").
This Proxy Statement and the accompanying Notice of Special Meeting
and form of proxy are first being sent or given to Stockholders on or about
December 14, 1999.
At the Meeting, the Stockholders of the Company are being asked to
consider and vote upon:
(i) a proposal to amend the Company's Certificate of Incorporation to
increase the number of shares of Common Stock, par value $.001 per share,
of the Company (the "Common Stock"), that is authorized for issuance by
the Company from 20,000,000 to 60,000,000 shares of Common Stock, and
(ii) a proposal for the issuance by the Company to KPN TELECOM
B.V., a Netherlands limited liability company ("KPN") of: (1) such number
of shares (the "Shares") of the Company's Common Stock as will result in
KPN's holding 51% of the issued and outstanding shares of the Company's
Common Stock; and (2) such number of additional shares of the Company's
Common Stock, pursuant to an option ("Option Shares") that is exercisable
simultaneously with the exercise by any third party of any outstanding
warrants, options or other securities carrying rights to shares of the
Company's Common Stock, so as to preserve KPN's holding of 51% of the
issued and outstanding shares of the Company's Common Stock after giving
effect to the issuance of additional shares of Common Stock upon exercise
of such outstanding warrants, options or other convertible securities.
The Shares will be issued pursuant to, and subject to the terms and
conditions of, the Subscription Agreement, dated as of November 19, 1999,
(and amended by the Amended and Restated Agreement of December 13, 1999),
by and among the Company, KPN and Messrs. Frank R. Cohen and Csaba Toro
(two of the five current directors of the Company), as it may be amended
from time to time (the "Subscription Agreement"). The Option Shares will
<PAGE>
be issued upon exercise of an option under the Option Agreement, dated
November 19, 1999 (and amended by the Amended and Restated Agreement of
December 13, 1999), by and between KPN and the Company, as it may be
amended from time to time (the "Option Agreement" and together with the
Subscription Agreement, the "KPN Agreements"). Based upon the number of
outstanding shares of the Company's Common Stock and outstanding warrants,
options or other securities carrying rights to shares of the Company's
Common Stock, all as of October 26, 1999 (the date of the original
agreement between the Company and KPN): the number of Shares issuable
under the Subscription Agreement will be 10,286,742 shares of Common Stock
at a purchase price of $1.58 per share for an aggregate purchase price for
the Shares of $16,253,052; and the number of Option Shares issuable under
the Subscription Agreement may be up to 4,822,194 shares of Common Stock
at a purchase price of $1.38 per share for an aggregate maximum purchase
price for the Option Shares of $6,654,628. Any shares of Common Stock
issued by the Company to KPN at the closing under the Subscription
Agreement in excess of 10,286,742 shares (with such excess shares being
subscribed under the Subscription Agreement in such number as will be
required to maintain KPN's holding of 51% of the issued and outstanding
shares of the Company's Common Stock as a result of the issuance of
additional shares of Common Stock upon exercise of options or warrants
between October 26, 1999 and the closing under the Subscription Agreement)
will be purchased at the purchase price of $1.38 per share. Copies of the
Subscription Agreement and the Option Agreement are attached as Appendix
II and Appendix III, respectively, to this Proxy Statement. The
Subscription Agreement provides that at the closing thereunder, the
Company will be required to deliver the resignations of those members of
the Company's Board of Directors as agreed between KPN and the Company.
KPN and the Company have agreed that, effective as of the closing, two out
of the five current directors of the Company, Messrs. Richard G. Maresca
and Donald K. Robertson, will resign from the Board and as and from the
closing, Mr. Martin Pieters, an Executive Vice President of KPN, and Mr.
Andre Burg, an adviser to KPN, will become members of the Board of
Directors of the Company. Since KPN will have 51% of the Company's Common
Stock, representing voting control of the Company, following its purchase
of the Shares, KPN's purchase of the Shares will result in a change in the
control of the Company.
Voting Rights and Proxy Information
All shares of Common Stock represented at the meeting by properly
executed proxies received prior to or at the Meeting, and not revoked,
will be voted at the Meeting in accordance with the instructions thereon.
If no instructions are indicated, properly executed proxies will be voted
(i) in favor of the proposal to amend the Company's Certificate of
Incorporation to increase the number of shares of Common Stock that is
authorized for issuance by the Company from 20,000,000 shares of Common
Stock to 60,000,000 shares of Common Stock and (ii) for the approval of
the issuance to KPN of the Shares and the Option Shares pursuant to the
Subscription Agreement and the Option Agreement, respectively
(collectively, the "KPN Transaction"). The Company does not know of any
matters, other than as described in the Notice of Special Meeting, that
are to come before the Meeting. If any other matters are properly
presented at the Meeting for action, the persons named in the enclosed
form of proxy and acting thereunder will have the discretion to vote on
<PAGE>
such matters in accordance with their best judgment. Proxies should not
be sent by the Stockholder to the Company, but to American Stock Transfer
and Trust Company, the Company's Registrar and Transfer Agent, at 40 Wall
Street, New York, New York 10005. A pre-addressed, postage-paid envelope
is provided for this purpose.
A proxy delivered pursuant to this solicitation may be revoked at
any time before it is voted. Proxies may be revoked by (i) filing with
the Chairman of the Company at or before the Meeting a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the
Chairman of the Company at or before the Meeting, or (iii) attending the
Meeting and voting in person (although attendance at the Meeting will not
in and of itself constitute revocation of a proxy). Any written notice
revoking a proxy should be delivered to Frank R. Cohen, Chairman of the
Board, Euroweb International Corp., 445 Park Avenue, New York, New York
10022.
Vote Required for Approval
The Company is submitting the proposal to amend the Company's
Certificate of Incorporation to Stockholders for approval in accordance
with applicable Delaware law and the terms of the Company's Certificate of
Incorporation.
The Company is submitting the proposed issuance of additional shares
of the Company's Common Stock in the proposed KPN Transaction to
Stockholders for approval in accordance with the rules of the National
Association of Securities Dealers, Inc. ("NASD") since the KPN Transaction
will result in a change in control of the Company.
In addition, under the rules of the NASD, the KPN Transaction would
also be subject to the approval by Stockholders if the KPN Transaction
would result in the issuance of 20% or more of the Company's Common Stock
outstanding before the issuance to KPN at a price per share less than the
greater of: (i) the book value per share of the Company's Common Stock;
or (ii) the market value per share of the Company's Common Stock. Although
the KPN Transaction will clearly result in the issuance of more than 20%
of the Company's Common Stock outstanding before the issuance to KPN, the
Company does not believe that the prices per share for the shares of the
Company's Common Stock to be issued to KPN in the KPN Transaction were
less than either the book value per share of the Company's Common Stock or
the market value per share of the Company's Common Stock in effect at the
time of the negotiation of, and agreement on, the terms of the KPN
Transaction. However, since the KPN Transaction will result in a change
in control of the Company and therefore requires Stockholder approval in
any case, the Company is supplying the following information regarding a
comparison of the prices per share of Common Stock to be paid by KPN in
the KPN Transaction with the Company's determination of the book value and
market value per share of the Common Stock in effect at the time of the
negotiation of, and agreement on, the terms of the KPN Transaction. The
<PAGE>
Company is supplying this information so that it will be available for
Stockholders to consider in deciding whether or not to vote in favor of
the proposals described in this Proxy Statement. The prices per share for
the shares of Common Stock to be issued to KPN are: $1.58 per share for
the 10,286,742 Shares issuable under the Subscription Agreement; and $1.38
per share for up to 4,822,194 Option Shares issuable under the Option
Agreement. As of September 30, 1999, the book value per share of the
Company's Common Stock was $0.56 per share. (See "CAPITALIZATION Effect
of Book Value Per Share" below.) Accordingly, the prices per share of the
shares of Common Stock to be issued to KPN in the KPN Transaction are in
excess of the book value per share in effect at the time of the
negotiation of, and agreement on, the KPN Transaction. During the period
of negotiations with KPN from September 1, 1999 through October 26, 1999,
the prices at which shares of the Company's Common Stock were quoted on
The Nasdaq Small Cap Market ranged as follows: the High/Ask Prices ranged
from $1.344 to $1.688 and the Low/Bid Prices ranged from $1.25 to $1.563.
On October 22, 1999, the day on which the Company and KPN reached
agreement (after the close of Nasdaq) on the terms of the KPN Transaction
(which agreement was later evidenced by the original agreement dated
October 26, 1999) the prices quoted were: the High/Ask Price was $1.469,
the Low/Bid Price was $1.375 and the Closing Bid Price was $1.375. (See
"MARKET PRICES PER SHARE" and "PROPOSAL TO ISSUE SHARES Discussions
Leading To KPN Transaction" below.) The Company believes that the prices
per share of the Company's Common Stock payable by KPN in the KPN
Transaction reflect the market price for the Company's Common Stock in
effect at the time of the negotiation of, and agreement on, the terms of
the KPN Transaction.
The presence, in person or by proxy, of a majority of the shares of
Common Stock entitled to vote is required to constitute a quorum for the
transaction of business at the Meeting. The affirmative vote of a
majority of the shares of Common Stock outstanding and entitled to vote on
such matters at the Meeting is required for approval of the proposals to
amend the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock thereunder. The affirmative vote of a
majority of the total votes cast, in person or by proxy, is required for
approval of the proposal for the issuance of shares of Common Stock in the
KPN Transaction. Accordingly, abstentions will have the same effect as a
vote against such matter. Under applicable Delaware law, proxies returned
by brokers as "non-votes" will not be counted for determining the votes
cast on a proposal. Proxies submitted which contain abstentions or broker
"non-votes" will be deemed present at the Meeting in determining the
presence of a quorum.
Your Board of Directors has unanimously approved each of the
proposals set forth herein. Accordingly, the Board recommends a vote FOR
the proposal to amend the Company's Certificate of Incorporation and FOR
the proposal to issue the shares of its Common Stock pursuant to the KPN
Transaction.
Voting Securities
December 10, 1999 has been set as the record date (the "Record
Date") for determining Stockholders entitled to notice of, and to vote at,
the Meeting. As of the Record Date, there were outstanding 10,338,552
shares of Common Stock. Each holder thereof is entitled to one vote per
share.
<PAGE>
Costs of Solicitation of Proxies
This solicitation of proxies is made by the Board of Directors of
the Company and the Company will bear the costs of this solicitation
(which the Company estimates will be approximately $10,000), including the
expense of preparing, assembling, printing and mailing this Proxy
Statement and the material used in this solicitation of proxies. It is
contemplated that proxies will be solicited principally through the mails,
but directors, officers and regular employees of the Company may solicit
proxies personally or by telephone. Although there is no formal agreement
to do so, the Company may reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in
forwarding these proxy materials to their principals. The Company may
also pay for and use the services of other companies or individuals not
regularly employed by the Company in connection with the solicitation of
proxies if the Board of Directors of the Company determines that it is
advisable.
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of the Common Stock as of December 10, 1999 by
(i) each person known by the Company to own beneficially more than 5% of
the outstanding Common Stock; (ii) each director of the Company; and (iii)
all executive officers and directors as a group. Except as otherwise
indicated below, each of the entities or persons named in the table has
sole voting and investment powers with respect to all shares of Common
Stock beneficially owned by it or him as set forth opposite its or his
name.
<PAGE>
Shares
Beneficially
Name and Address Owned (1) Percent Owned (1)
Frank R. Cohen
445 Park Avenue
New York, NY 10022 525,000 (2) 4.84%
Robert Genova
227 Route 206, Unit 11
Flanders, NJ 07836 638,000 (3) 5.89%
Donald K. Roberton
3350 Charles MacDonald Drive
Sarasota, FL 34240 100,000(4) 0.96%
Richard Maresca
1111 Wyoming Drive
Mountainside, NJ 07082 110,200(5) 1.06%
Csaba Toro
1122 Budapest
Varosmajor utca 13
Hungary 465,000(6) 4.30%
All Officers and Directors
as a Group (5 Persons) 1,838,200 15.30%
Deutsche Bank A.G.
Taunusanlage 12
D-60325, Frankfurt am Main
Federal Republic of Germany 880,000(7) 8.51%
____________________________
(1) Unless otherwise indicated, each person has sole investment and
voting power with respect to the shares indicated, subject to
community property laws, where applicable. For purposes of this
table, a person or group of persons is deemed to have "beneficial
ownership" of any shares which such person has the right to acquire
within 60 days after December 10, 1999. For purposes of computing
the percentage of outstanding shares held by each person or group of
persons named above on December 10, 1999, any security which such
person or group of persons has the right to acquire within 60 days
after such date is deemed to be outstanding for the purpose of
computing the percentage ownership for such person or persons, but
is not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Includes 515,000 shares of Common Stock issuable upon exercise of
currently exercisable options: 100,000 shares at $1.00 per share
pursuant to Mr. Cohen's September 1998 employment contract; 315,000
shares at $1.625 per share pursuant to an April 1999 modification to
his employment contract; and 70,000 shares at $1.25 per share and
30,000 shares at $1.625 per share pursuant to the Company's 1993
Stock Option Plan.
<PAGE>
(3) Includes 500,000 shares of Common Stock issuable upon exercise of
currently exercisable options: 100,000 shares at $1.00 per share
pursuant to Mr. Genova's September 1998 employment contract; 370,000
shares at $1.625 per share pursuant to an April 1999 modification to
his employment contract; and 30,000 shares at $1.625 pursuant to the
Company's 1993 Stock Option Plan.
(4) Includes 100,000 shares of Common Stock issuable upon exercise of
currently exercisable options: 50,000 shares at $2.094 per share,
10,000 shares at $1.625 per share, and 40,000 shares at $1.25 per
share, in each case pursuant to the Company's 1993 Stock Option
Plan.
(5) Includes 100,000 shares of Common Stock issuable upon exercise of
currently exercisable options: 10,000 shares at $1.25 per share,
10,000 shares at $1.625 per share, and 80,000 shares at $2.094 per
share, in each case pursuant to the Company's 1993 Stock Option
Plan.
(6) Includes 465,000 shares of Common Stock issuable upon exercise of
currently exercisable options: 100,000 shares at $1.00 per share
pursuant to Mr. Toro's September 1998 employment agreement; 315,000
shares at $1.625 per share pursuant to an April 1999 modification to
his employment agreement; and 50,000 shares at $2.00 per share
granted pursuant to a prior consulting agreement. In addition, Mr.
Toro holds 60,000 shares of record for the beneficial ownership of
five individuals who received such shares as partial consideration
paid by the Company for the acquisition of Enet Hungary in 1996.
Mr. Toro disclaims any beneficial ownership of such 60,000 shares.
(7) Information included within a Schedule 13G dated November 5, 1999
and filed with the Securities and Exchange Commission, in which
Schedule 13G, Deutsche Bank A.G., the Reporting Person under the
Schedule 13G, states that Deutsche Bank A.G. shares voting and
dispositive power as to said 880,000 shares and such shares are held
by subsidiaries of the Reporting Person that manage mutual funds,
the shareholders of which have the ultimate right to dividends from
such shares and to the proceeds from any sale of such shares.
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company:
(i) at September 30, 1999, (ii) pro forma at September 30, 1999, after
giving effect to the issuance of 10,286,742 shares of Common Stock to KPN
as a result of the consummation of the transactions contemplated by the
Subscription Agreement; (iii) pro forma as adjusted for the issuance of
4,822,194 shares of Common Stock upon exercise by third parties of the
options and warrants to purchase shares of the Company's Common Stock
outstanding on October 26, 1999; and (iv) pro forma as adjusted for the
issuance of an additional 4,822,194 shares of Common Stock upon exercise
by KPN of its right to purchase Option Shares under the Option Agreement
upon exercise by third parties of options and warrants outstanding as of
October 26, 1999.
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma
Adjusted for
Issuance of Pro Forma
Shares on Adjusted For
Pro Forma for Exercise by Issuance of
Issuance of third Option Shares
Shares to KPN parties of to KPN under
under outstanding the Option
Subscription Options and Agreement
Actual Agreement Warrants
Total debt $1,281,123 $1,281,123 $1,281,123 $1,281,123
Minority interests 10,013 10,013 10,013 10,013
Shareholders Equity
Preferred Stock - - - -
Common Stock 9,884 20,171 24,995 29,815
Additional paid-in capital 26,017,597 42,260,362 50,737,254 57,387,060
Accumulated deficit and
other comprehensive losses: (16,338,794) (16,338,794) (16,338,794) (16,338,794)
Total shareholders equity 9,688,687 25,941,739 34,623,353 41,078,081
Total capitalization $10,979,823 $27,232,875 $35,714,589 $42,369,217
</TABLE>
<PAGE>
Effect on Book Value Per Share
Set forth below is information concerning the Company's net book
value (excluding goodwill), net book value per share of Common Stock, net
book value per share of fully-diluted Common Stock and shares of Common
Stock outstanding and fully-diluted Common Stock outstanding (i) at
September 30, 1999, (ii) pro forma at September 30, 1999, after giving
effect to the issuance of 10,286,742 shares of Common Stock to KPN as a
result of the consummation of the transactions contemplated by the
Subscription Agreement; (iii) pro forma as adjusted for the issuance of
4,822,194 shares of Common Stock upon exercise of the options and warrants
to purchase shares of the Company's Common Stock outstanding on October
26, 1999; and (iv) pro forma as adjusted for the issuance of an additional
4,822,194 shares of Common Stock upon exercise by KPN of its right to
purchase Option Shares under the Option Agreement upon exercise by third
parties of options and warrants outstanding as of October 26, 1999.
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma
Adjusted for
Issuance of Pro Forma
Pro Forma for Shares on Adjusted for
Issuance of Exercise by Issuance of
Shares to KPN third parties of Option Shares
under outstanding to KPN under
Subscription Options and the Option
Actual Agreement Warrants Agreement
Net book value of $5,554,027 $21,807,079 $30,288,843 $36,943,421
Common Stock (excluding
Goodwill)(1)
Net book value per $.56 $1.08 $1.21 $1.24
share of Common Stock
(excluding Goodwill)
Net book value per $.56 $.73 $1.02 $1.24
share of fully-diluted Common
Stock (excluding Goodwill)
Shares of Common Stock 9,883,340 20,170,082 24,992,276 29,814,470
outstanding
Fully-diluted Common Stock 9,883,340 (2) 29,814,470 (3) 29,814,470 (3) 29,814,470
outstanding
</TABLE>
(1) Net book value excludes goodwill of $4,134,660.
(2) Excludes: all shares of Common Stock issuable upon exercise of all
outstanding third party options and warrants; and the KPN Option
Shares.
(3) Includes: all shares of Common Stock issuable upon exercise of
all outstanding third party options and warrants; and the KPN Option
Shares.
<PAGE>
Dilution to Current Stockholders as a Result of KPN Transaction
Completion of the KPN Transaction will substantially reduce the
current Stockholders' percentage ownership in the Company and will allow
KPN to designate all members of the Board of Directors. In addition, KPN
will be able to effect certain transactions, including mergers,
consolidations and sales of substantially all of the assets of the
Company, without the consent of any of the Company's minority
Stockholders. Following consummation of the KPN Transaction, KPN also
will be able to effect a change in control of the Company or to prevent
such a change in control. Furthermore, if KPN were to sell a substantial
portion of its Common Stock, whether pursuant to Rule 144 under the
Securities Act, registration under the Securities Act or otherwise, such
sale could adversely affect the market price of the Common Stock.
The table below indicates certain dilutive effects of the KPN Transaction.
Percentage of Total
Number Number of Shares
of Shares Issuable
Shares outstanding at October 26, 1999 9,883,340 33.15%
Shares issuable upon exercise of warrants
and options outstanding at October 26,
1999 4,822,194 16.17%
Shares issuable to KPN under
Subscription Agreement 10,286,742 34.51%
Option Agreement 4,822,194 16.17%
Subtotal of shares issuable to KPN 15,108,936 50.68%
Total 29,814,470 100%
<PAGE>
MARKET PRICES PER SHARE
The Company's Common Stock is traded in the over-the-counter market
on the National Association of Securities Dealers' Automated Quotation
System ("NASDAQ") under the symbol "EWEB".
The following table sets forth the high and low bid prices for the
Common Stock during the periods indicated as reported by NASDAQ. The
prices reported reflect inter-dealer quotations, and may not represent
actual transactions and do not include retail mark-ups, mark-downs or
commissions.
High Low
Quarter Ending
1997
March 31, 1997 2.500 1.125
June 30, 1997 1.312 .625
September 30, 1997 1.000 .625
December 31, 1997 .875 .375
1998
March 31, 1998 .500 .250
June 30, 1998 3.250 .375
September 30, 1998 2.750 .750
December 31, 1998 3.000 1.375
1999
March 31, 1999 3.188 1.594
June 30, 1999 2.750 1.344
September 30, 1999 1.688 1.250
Thru December 10, 1999 8.625 1.250
CONTROL OF THE COMPANY BY KPN
As a result of the KPN Transaction, KPN will hold 51% of the
outstanding shares of Common Stock of the Company and, as a result, will
have the power to control the management and direction of the Company,
including the election of all directors and the appointment of all
officers. (See "Voting and Other Rights of Stockholders After KPN
Transaction" below).
<PAGE>
The Board of Directors of the Company is currently comprised of five
members: Frank R. Cohen (Chairman), Robert Genova, Csaba Toro, Richard G.
Maresca and Donald K. Roberton, all of whom were elected at the Company's
Annual Meeting of Stockholders on May 21, 1999.
If the issuance of the shares of the Company's Common Stock in the
KPN Transaction is approved by Stockholders and the other conditions to
closing under the Subscription Agreement are satisfied, Messrs. Maresca
and Roberton will resign from the Board immediately prior to the closing
of the KPN Transaction and they will be replaced by Messrs. Marten Pieters
and Andre Burg. Messrs. Frank R. Cohen, Robert Genova and Csaba Toro will
continue to serve as Directors, subject to the right of KPN, as owner of
51% of the shares of the Company's Common Stock to elect all directors of
the Company. Neither Delaware law nor the Company's by-laws require that
Stockholders vote at the Special Meeting on the election of Messrs. Marten
Pieters and Andre Burg as members of the Company's Board of Directors, and
the Company is not soliciting proxies from Stockholders for their
election. Article III, Section 12 of the Company's By-laws permits
members of the Company's Board of Directors to resign effective at a
future date, and Article III, Section 11 thereof gives a majority of the
Board of Directors then in office the power to fill such vacancies
effective with the resignation of those members of the Company's Board of
Directors who have resigned. Messrs. Frank R. Cohen, Robert Genova and
Csaba Toro and each of the new members of the Company's Board of Directors
will continue to serve as members of the Company's Board of Directors
until his successor is duly elected and qualified following the next
Annual Meeting of Stockholders or his earlier resignation.
The KPN Agreements do not require as a condition for the
consummation of the KPN Transaction that there be any changes in the
persons holding positions as officers of the Company and KPN
representatives have stated that they have no current intention of making
any such change. Accordingly, following the consummation of the KPN
Transaction until a change is decided by the Board of Directors, the
officers of the Company will continue to be:
Name Title
Frank R. Cohen Chairman of the Board
Secretary, Treasurer (CFO)
Robert Genova President, Chief Executive Officer
Csaba Toro Vice President-International,
Managing Director (CEO) of all
European Operations
<PAGE>
Messrs. Marten Pieters and Andre Burg have consented to be named in
this Proxy Statement and to serve as Members of the Board Directors of the
Company if the issuance of shares of the Company's Common Stock pursuant
to the KPN Transaction is approved by Stockholders. Information with
respect Messrs. Marten Pieters and Andre Burg is set forth below.
NAME AGE PRINCIPAL OCCUPATION AND
RELATED INFORMATION
Marten Pieters 46 Vice-President, KPN
Andre Burg 52 Advisor, KPN
Mr. Pieters. Mr. Pieters is an Executive Vice President of
Koninklijke KPN N.V., the parent entity that owns 100% of the capital of
KPN ("KPN Parent"). He is responsible for KPN Parent's international
activities in Europe and the United States, and currently holds seats on
the boards of various incumbent operators including Eircom in Ireland and
SPT in the Czech Republic and also of new telco's such as Pantel in
Hungary. In 1995, he was appointed Vice President of International
Operations responsible for KPN Parent's affiliated companies, including
Eircom, SPT and Pannon GSM. Prior to that, he held positions first as
Commercial Director and later as Managing Director of a telcom district.
He joined KPN Parent in 1989 as Secretary to the Board of Management,
after spending more than ten years working in the food industry. During
this period, he was employed as Financial Director at an international
company for five years (1984 to 1988). Marten Pieters is a graduate in
Dutch law and completed a postgraduate course in Economics in 1997.
Mr. Burg. At present, Mr. Burg is a consultant to KPN. Previously
Mr. Burg held the position of Executive Vice-President, Business
Development at KPN Parent. In this position he arranged the acquisitions
of KPN in Central and Eastern Europe and Ireland. Mr. Burg joined KPN in
1991. Prior to that he held positions as Chief Executive Officer of a
food processing company and as managing director of the largest
stevedoring company in Europe and a public transportation company. Andre
Burg has a degree in civil engineering and gained experience in the civil
engineering industry for more than 9 years.
Voting and Other Rights of Stockholders After KPN Transaction
The number of shares of Common Stock issuable to KPN pursuant to the
Subscription Agreement will vest total voting control of the Company in
KPN. Accordingly, KPN will be able effectively to elect all directors and
appoint all officers of the Company, and only furnish existing
Stockholders with Information Statements pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended, regarding such actions.
Additionally, KPN will have the voting power necessary to take the Company
<PAGE>
"private" or merge it with another entity without having to consult with
the other Stockholders, or prevent the sale of the Company to other
interested parties at a point in time that minority Stockholders might
deem a sale to be advantageous to their interests.
Although the foregoing represents possible actions that could be
taken by any stockholder having control of the Company, KPN has stated to
the Company that it has not historically interfered with the management of
companies that it has acquired; however, there can be no assurance that
there will be no changes in the Company management in the future. In
addition, it may be advantageous for KPN to maintain the Company as a
public company so as to obtain access to U.S. securities markets for
additional funding of the Company's future operations and growth, but KPN
is not obligated to do so.
INTEREST OF CERTAIN PERSONS IN THE KPN TRANSACTION
Change in Mr. Genova's Employment Contract
Prior to the signing of the Subscription Agreement, the Company
changed the position of Mr. Robert Genova to that of Chief Executive
Officer, President and Director of the Company. At the same time the term
of Mr. Genova's employment was extended until December 31, 2005. As a
result of this, Mr. Genova's annual salary was fixed at $350,000. These
modifications were reflected in a restated Employment Contract dated
October 18, 1999 that was approved by the Board of Directors. KPN has
been informed of these modifications and has no objections to them.
Payments to Resigning Directors and Continuation of Options
At a meeting of the Board of Directors on October 1, 1999, in
response to the assumption that in connection with the consummation of a
transaction with any of the then considered strategic partner-investors,
the Company would be required to reduce the size of its Board of
Directors, the Board authorized the payment by the Company to any director
resigning in response to a request of a strategic partner-investor of
$50,000 at the time of such resignation. As a result of such action,
Messrs. Donald K. Roberton and Richard G. Maresca will each receive a
payment of $50,000 at the closing of the Subscription Agreement when their
resignations from the Board will become effective.
If in the future, KPN should ask Messrs. Frank R. Cohen, Robert
Genova or Csaba Toro to resign, a similar $50,000 payment would also be
made to them upon the effectiveness of their resignation unless the
parties agree on other terms of resignation.
In addition, the Board has determined that any director who resigns
in response to a request by KPN may continue to hold any options such
Director may then have for the duration of the term of such option. If
such determination by the Board of Directors had not been made, the option
of any resigning Director would be exercisable for a period of six months
following his resignation and then would expire.
<PAGE>
Change in Mr. Cohen's Contract
At a meeting of the Board of Directors on October 1, 1999, in
anticipation of an agreement with, and in response to requests made by,
the then considered strategic partner-investors, the Board of Directors
modified the Company's Employment Contract with Frank R. Cohen to
eliminate the requirement under said contract that the Company furnish Mr.
Cohen a split dollar insurance policy. Such policy would have cost the
Company $160,000 per year. In exchange for this change, the salary of Mr.
Cohen was increased from $150,000 per year to $200,000 per year. In
addition, Mr. Cohen would no longer serve as Chief Executive Officer of
the Company but would serve as Chief Financial Officer of the Company.
These changes were reflected in a restated Employment Contract dated as of
October 1, 1999 that was approved by the Board of Directors.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK THEREUNDER
FROM 20,000,000 TO 60,000,000 SHARES
(ITEM 1 ON THE PROXY CARD)
On October 26, 1999, the Board of Directors unanimously approved the
KPN Transaction recognizing that it would be necessary to amend the
Company's Certificate of Incorporation to increase the number of shares of
Common Stock that the Company is authorized to issue. On November 19,
1999 the Board of Directors of the Company unanimously approved the KPN
Agreements and unanimously adopted a resolution approving, and
recommending to the Company's Stockholders for their approval, an
amendment to the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 20,000,000 to 60,000,000
shares in order to have a sufficient number of shares of Common Stock
authorized to consummate the KPN Transaction and so that the Company might
have flexibility to affect additional acquisitions in the future. The
text of Article Fourth of the Certificate of Incorporation, as amended by
this proposed amendment is attached hereto as Appendix I hereto and the
description thereof set forth below is qualified in its entirety by
reference to such text. The proposed amendment to the Certificate of
Incorporation would replace the existing Article Fourth in its entirety.
As of December 10, 1999, 10,338,552 shares of Common Stock were
issued and outstanding; 2,512,194 shares were reserved for issuance
pursuant to certain warrants; 480,000 shares are reserved for issuance
pursuant to unexercised options granted under the Company's 1993 Incentive
Stock Option Plan; 1,350,000 shares were reserved for issuance pursuant to
options granted pursuant to certain employment contracts, consulting
arrangements or acquisitions. Thus, the Company only has a balance of
5,319,254 authorized shares of Common Stock available for other purposes.
<PAGE>
The KPN Transaction requires the issuance of (1) the Shares,
constituting such number of shares of the Company's Common Stock as will
result in KPN's holding 51% of the issued and outstanding shares of the
Company's Common Stock; and (2) the Option Shares, constituting such
number of shares of the Company's Common Stock pursuant to the Option
Agreement that is exercisable simultaneously with the exercise by any
third party of any outstanding warrants, options or other securities
carrying rights to shares of the Company's Common Stock so as to preserve
KPN's holding of 51% of the issued and outstanding shares of the Company's
Common Stock after giving effect to the issuance of additional shares of
Common Stock upon exercise of such outstanding warrants, options or other
convertible securities. Based upon the number of outstanding shares of
Company Common Stock and outstanding warrants, options or other securities
carrying rights to shares of the Company's Common Stock, all as of October
26, 1999 (the date of the original agreement between the Company and KPN):
the number Shares issuable under the Subscription Agreement will be
10,286,742 shares of Common Stock at a purchase price of $1.58 per share
for an aggregate purchase price for the Shares of $16,253,052; and the
number of Option Shares issuable under the Option Agreement may be up to
4,822,194 shares of Common Stock at a purchase price of $1.38 per share
for an aggregate maximum purchase price for the Option Shares of
$6,654,628. Any shares of Common Stock issued by the Company to KPN at the
closing under the Subscription Agreement in excess of 10,286,742 shares
(with such excess shares being subscribed under the Subscription Agreement
in such number as will be required to maintain KPN's holding of 51% of the
issued and outstanding shares of the Company's Common Stock as a result of
the issuance of additional shares of Common Stock upon exercise by third
parties of the options or warrants between October 26, 1999 and the
closing under the Subscription Agreement) will be purchased at the
purchase price of $1.38 per share. Under the Option Agreement, the number
of Option Shares and the exercise price are subject to adjustment to take
into account any adjustment to the Company's share capital.
While it is not presently contemplated that any shares of Common
Stock will be issued by the Company other than in connection with the KPN
Transaction, the Board of Directors believes that the increase in the
authorized shares of Common Stock beyond the number necessary for the KPN
Transaction is in the best interests of the Company and its Stockholders.
The Board of Directors believes that the proposed increase in the
authorized shares of Common Stock beyond the number necessary for the KPN
Transaction would provide the Company with more financial flexibility and
the Company would be able to issue shares of Common Stock, including debt
securities or shares of preferred stock convertible into Common Stock,
without the expense and delay of a Stockholder's meeting. Some of the
purposes for which the additional shares of Common Stock could be used are
raising additional capital, future acquisitions of other businesses, stock
dividends and stock splits, management incentive and employee benefit
plans, sales to employee savings plans, stock purchase plans,
extraordinary corporate transactions, and for general corporate purposes
from time to time. If the proposed amendment is approved, the Board would
be able to authorize the issuance of Common Stock in future transactions
for any of the foregoing purposes, at any time, without obtaining further
authorization from the Company's Stockholders, unless such authorization
is required by applicable law or the rules of any regulatory authorities
to which the Company or its Common Stock may be subject.
<PAGE>
The Board of Directors recommends that stockholders vote "FOR"
approval of the proposal to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
Common Stock thereunder from 20,000,000 to 60,000,000 shares.
PROPOSAL TO ISSUE SHARES
(ITEM 2 ON THE PROXY CARD)
Background Reasons for the KPN Transaction
To implement the Company's strategic plan of becoming an Internet
Service Provider ("ISP") consolidator for Central Europe, the Company has
needed and will continue to need substantial capital to develop its
business and/or to acquire existing companies. In the past, the Company
has been forced to issue new shares of its Common Stock either to raise
cash to be used in its expansion or to deliver such shares as
consideration for the acquisition of businesses. Often, the Company has
been forced to issue shares of its Common Stock for such purposes at
prices representing a discount from the market quotations for its Common
Stock, resulting in dilution to its Stockholders.
In order to be able to compete in the ISP business without resorting
to constant dilution of the interests of its Stockholders, the Company
determined that it needed to partner with a large, financially viable and
technological leader in the business. In exploring various arrangements
with such types of potential strategic partners investors, the Company
determined that KPN, among all of the potential strategic partners-investors,
was the only one that was willing to acquire a portion only of
the Company's equity, thereby permitting the current Stockholders to
continue to participate in the equity ownership of the Company although
on a diluted basis.
Discussions Leading to the KPN Transaction
The Company has had an indirect relationship with KPN since November
1998 when the Company sold a 51% ownership interest in its Hungarian ISP
operation, EuroWeb RT, to Pantel Tavkozlesi es Kommunikacios Rt which is
49% owned by KPN.
During August 1999, the Company, through an intermediary, tried to
reacquire 2% of EuroWeb RT so as to be able to consolidate its operations.
Shortly after contact had been made with KPN exploring such possibility in
early September 1999, Mr. Andre Burg, a consultant to KPN, approached Mr.
Csaba Toro in person to discuss a proposal for the acquisition of a stake
in the Company by KPN. Immediately following this approach, Mr. Csaba
Toro informed the other members of the Board of Directors of the Company.
<PAGE>
The Company immediately commenced further preliminary internal
discussions of this proposal.
Following these internal discussions, Mr. Robert Genova, Mr. Richard
Maresca and Mr. Csaba Toro visited The Hague for further discussions with
Mr. Andre Burg and other representatives of KPN during which KPN and the
Company discussed the terms on which KPN would invest in the Company.
On Friday, October 22, 1999, representatives of the Company and KPN
met to agree upon the terms of the KPN Transaction, including the prices
per share at which KPN would agree to purchase the Shares and the Option
Shares. Consistent with the understanding between the Company and KPN
developed during the negotiations, that the prices per share of the
Company's Common Stock to be paid by KPN would be fixed at a small premium
over the market price for the Company's Common Stock, the parties waited
until the closing of the Nasdaq market and agreed upon the price per share
of $1.58 per share for the Shares and $1.38 per share for the Option
Shares. On October 22, 1999, the prices quoted for the Company's Common
Stock were: the High/Ask Price was $1.469, the Low/Bid Price was $1.375
and the Closing Bid Price was $1.375.
On October 26, 1999, Mr. Andre Burg and Mr. Csaba Toro met in
Budapest, after getting the necessary internal approvals from their
respective boards for the terms of the KPN Transaction, and signed an
Agreement Relating to the Subscription of New Shares and Share Options in
the Company between the Company and KPN. That Agreement reflected the
agreement on prices reached the previous Friday, October 22, 1999.
On October 27, 1999, the Company made a public announcement that it
had signed a letter of intent to sell new shares of its Common Stock to an
unnamed West European based international telephone company in a
transaction that would result in the buyer's ownership of 51% of the then
outstanding shares of the Company's Common Stock. The basic terms of the
KPN Transaction were disclosed but the name of the buyer was not disclosed
until the conclusion of the buyer's due diligence.
From September 1, 1999, the time when KPN first approached the
Company, through October 26, 1999, the Company's shares traded on Nasdaq
between a low of $1.25 on September 29, 1999 and a high of $1.688 on
September 17, 1999.
From October 26, 1999 through November 12, 1999, KPN undertook a
diligence review of the Company. Based on the results of its review, KPN
negotiated the Subscription Agreement and the Option Agreement with the
Company, each of which the parties signed on 19th November, 1999.
During the period from October 26, 1999 through November 19, 1999,
the Company's shares traded at prices between a low of $1.344 on October
26, 1999, and a high of $8.625 on November 16, 1999, which the Company
attributes to the announcement that the Company had signed the Agreement
Relating to the Subscription of New Shares and Share Options with KPN.
<PAGE>
Subsequent to November 19, 1999 through December 10, 1999, the
Company's shares closed at prices from a low of $3.625 on November 24,
1999 to a high of $5.188 on November 29, 1999. On December 10, 1999, the
Company's share price closed at $4.50.
See also "MARKET PRICES PER SHARE" above.
Recommendation of the Board of Directors
On November 19, 1999, the Board by unanimous vote approved the issue
and sale of the Shares and the Option Shares to KPN and the form of the
Subscription Agreement and the Option Agreement. In evaluating the
proposed KPN Transaction the Board considered the following material
factors.
The favorable factors considered by the Board were as follows:
- The KPN Transaction would provide the Company with an
immediate cash infusion of $16,253,052 to continue
operations and development activities.
- Through the KPN Transaction and the representation on
the Board of Messrs. Marten Pieters and Andre Burg, the
Company would establish a strategic alliance with KPN
and gain a more favorable basis to obtain access to the
financial, marketing and technical resources of KPN.
- The potential future capital infusion of up to
$6,970,052 available to the Company through the exercise
of the Option Agreement and issuance of the Option
Shares.
- Absence of viable alternatives. During the second and
third quarters of 1999, the Company pursued strategic
relationships, including mergers, with other prospective
parties. The Company did not receive any substantive
proposals or definitive offers from these or any other
sources, and the Board did not believe that any of these
sources was prepared to move quickly at that time toward
negotiation and consummation of an alternative
transaction. In addition, alternative strategic
partner-investors with whom the Company had discussions all
expressed a desire to acquire 100% of the Company's
equity. KPN, among all of the potential strategic
partners-investors, was the only one that was willing to
acquire a portion only of the Company's equity, thereby
permitting the current Stockholders to continue to
participate in the equity ownership of the Company --
although on a diluted basis. Management of the Company
believes that the KPN Transaction, which permits such
continued equity ownership and such participation in the
future growth, if any, of the Company, is in the best
interests of the Stockholders.
<PAGE>
- Without the equity infusion by KPN, the Company would
have to consider financial alternatives available to it,
including reducing operations, deferring research and
development projects and reducing staffing. See
"Consequences of Failure to Approve the Sale" below.
- Despite the change in control of the Company and the
dilution resulting from the KPN Transaction, existing
Stockholders would be able to participate in any future
growth and profitability of the Company and the
Company's efforts to realize long-term value.
- Full disclosure of the KPN Transaction would be made to
Stockholders, and the consummation of the KPN
Transaction would be subject to the approval of the
Stockholders.
The negative factors considered by the Board were as follows:
- The KPN Transaction would cause substantial dilution in
the percentage ownership of existing Stockholders.
- The issuance of 10,286,742 shares of the Company Common
Stock at a price of $1.58 per share could have a
depressive effect on the market price of the Common
Stock.
- KPN will have the right to vote more than 51% of the
outstanding Common Stock, and, accordingly, KPN would be
able to effect certain transactions, including mergers,
consolidations and sales of substantially all of the
assets of the Company, without the consent of the
Company's other Stockholders. KPN also will be able to
effect a change in control of the Board of Directors or
prevent such a change in control.
- The sale of a substantial portion of KPN's shares of
Common Stock (or the possibility that such a sale may
occur) could adversely affect the market price of the
Common Stock.
The Board of Directors unanimously recommends that Stockholders
approve the KPN Transaction. The Board of Directors believes that the
terms of the equity investment represented by the Shares and the Option
Shares are in the best interests of the Company and the Stockholders and
are fair to Stockholders. The Board believes that it is necessary to give
KPN control of the Company as a condition of the KPN Transaction in
response to KPN's assertion that such control is a condition of its
investment in the Company so that KPN can implement its business
objectives. Messrs. Marten Pieters and Andre Burg are more experienced
<PAGE>
than the current Board of Directors in doing business in Europe,
particularly in Central and Eastern Europe, and their presence on the
Board of Directors will assist the Company to establish a better European
identity. Their business relationships, as well as those of KPN, with
financial intermediaries may be helpful to the Company in developing
acquisition prospects for the Company. Furthermore, the Company expects
to benefit from the investments of KPN in the telecommunications industry,
especially in Europe and, more specifically, in Central and Eastern
Europe. The Company believes that these relationships will increase sales
opportunities for the Company's products and services in the European
market and, with the assistance of KPN, facilitate the development of a
client base for the Company's products in Central and Eastern Europe.
<PAGE>
Consequences of Failure to Approve the Sale
If the proposed sale to KPN is not approved by Stockholders, or the
Company is unable to obtain alternative financing before the end of 1999,
it may have to reduce its operations, defer research and development
projects and reduce staffing. No alternative financings are under
consideration at this time and there can be no assurance that alternative
financing will be available on terms acceptable to the Company or its
Stockholders. Furthermore, if the KPN Transaction is not approved by
Stockholders and alternative financing is not available, in the absence of
disclosure of positive business developments concerning the Company, the
market price of the Common Stock could decline. If the bid price of the
Common Stock declines below $1.00 for 30 consecutive days, the Common
Stock will be subject to the delisting procedures of the Nasdaq SmallCap
Market.
No Dissenter's Appraisal Rights
Under Delaware law, stockholders who vote against the issuance of
shares of the Company's Common Stock in the KPN Transaction will not have
appraisal rights.
Description of Subscription Agreement
Following the above-described period of negotiations, the Company
and KPN entered into the Agreement Relating to the Subscription of New
Shares and Share Options in the Company (described therein as Euroweb
Inc.) dated as of October 26, 1999. This Agreement, which sets forth the
basic terms of the KPN Transaction, has been replaced by the Subscription
Agreement which was entered into following the due diligence review of the
Company by KPN. The text of the Subscription Agreement is attached hereto
as Appendix II and the description thereof set forth below is qualified in
its entirety by reference to such text.
General. The Subscription Agreement provides for the issuance to
KPN, and the subscription and purchase by KPN, of such number of shares of
the Company's Common Stock (the "Shares") as will result in KPN's holding
51% of the issued and outstanding shares of the Company's Common Stock at
the closing of the transactions contemplated by the Subscription Agreement
(the "Closing"). KPN, in reliance on the representations, warranties and
covenants of the Company in the Subscription Agreement, has agreed to pay:
(i) $1.58 per share for the number of shares necessary
for KPN's holding of 51% based on the number of shares of Common
Stock outstanding as of October 26, 1999, or 9,883,340 shares of
Common Stock. To hold 51% of the Company's Common Stock on such
basis, KPN will purchase 10,286,742 shares of Common Stock at $1.58
per share for a payment to the Company of $16,253,052.
<PAGE>
(ii) $1.38 per share for the additional number of
shares necessary to maintain KPN's holding of 51% of the shares of
the Company's Common Stock after giving effect to the issuance of
additional shares of Common Stock as a result of the exercise by
third parties of options or warrants during the period October 26,
1999 and the Closing. Based upon information as of the record date
of December 10, 1999, 455,212 shares of the Company's Common Stock
were issued as a result of the exercise of options and warrants by
third parties during the period October 26, 1999 and the record
date. This will result in the payment of an additional $628,193 at
the closing under the Subscription Agreement and could, subject to
the exercise of additional third party options and warrants, result
in a total additional payment of $6,654,628.
Messrs. Frank F. Cohen and Csaba Toro, current directors of the
Company and parties to the Subscription Agreement, in their capacities as
directors of the Company, and the Company, have agreed to cause the
transactions contemplated by the Closing to take place and to cause the
Company to conduct its business in the ordinary course (in accordance with
the specific requirements of the Subscription Agreement) prior to the
Closing.
Conditions. KPN's purchase of the Shares is conditional upon: (i)
the adoption by the Stockholders of the resolutions proposed in this Proxy
Statement; (ii) compliance with the Antitrust laws described below and the
expiration or termination of any waiting periods prescribed under such
Antitrust laws; and (iii) the Option Agreement's being entered into by the
Company and KPN. If the Closing does not take place on or prior to March
31, 2000, if there is a material breach of the warranties or covenants of
the Company set forth in the Subscription Agreement or if certain
specified events should occur, KPN may elect, without any liability to the
Company, not to complete the transactions contemplated by the Subscription
Agreement.
Registration Rights. The Company is obligated, subject to certain
conditions being met as to timing and contemplated number of shares to be
sold and aggregate proceeds to be realized upon such sales, to file a
registration statement covering the shares of Common Stock to be issued to
KPN in the KPN Transaction upon the receipt of requests for registration
from KPN. Additionally, should the Company proceed with a further public
offering of its shares for the benefit of the Company, KPN has the right
to "piggy-back" its shares on any such registration statement. All
expenses, other than underwriting discounts and commissions incurred in
connection with such registrations, are to be borne by the Company.
Antitrust. Pursuant to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), on
December 3, 1999, KPN and the Company each filed a Notification and
Report Form for review under the HSR Act with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division"). [The waiting period under the HSR Act with respect
to such filing was terminated by governmental action on December 13,
<PAGE>
1999.] Even though the HSR Act waiting period has expired, the FTC or the
Antitrust Division could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking
divestiture of substantial assets of the Company. The Company does not
believe that such consummation of the Transaction will result in a
violation of any applicable antitrust laws. However, there can be no
assurance that a challenge to the Transaction on antitrust grounds will
not be made or, if such a challenge is made, of the result.
Description of Option Agreement
The text of the Option Agreement is attached hereto as Appendix III
and the description thereof set forth below is qualified in its entirety
by reference to such text.
The Option Agreement provides for the grant to KPN of options to
purchase such number of shares of the Company's Common Stock as are
issuable upon exercise of options and warrants to third parties
outstanding as of November 19, 1999 (with the Company having agreed in the
Subscription Agreement not to issue any additional options or warrants
prior to the Closing under the Subscription Agreement) on such terms as
may be necessary to ensure that KPN may maintain its ownership of 51% of
the issued and outstanding shares of the Company's Common Stock. KPN has
agreed to pay $1.38 per share for each share purchased by it upon exercise
of its rights to purchase shares of Common Stock under the Option
Agreement. Based on the 4,822,194 shares of the Company's Common Stock
issuable upon exercise of options and warrants that are outstanding on
November 19, 1999, KPN would have the right to purchase an additional
4,822,194 shares at $1.38 per share. Under the Option Agreement, the
number of Option Shares and the exercise price per share will be adjusted
to take account of any adjustment to the Company's share capital.
INCORPORATION BY REFERENCE
The following documents are incorporated herein by this reference to
satisfy the requirements of Item 13(a) of Schedule 14A under the
Securities Exchange Act of 1934, as amended:
(1) The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended September 30, 1999.
(2) The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1999.
(3) The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended March 31, 1999.
(4) The Company's Annual Report on Form 10KSB for the fiscal year
ended December 31, 1998, including, but not limited to, the information
appearing under the caption "ELECTION OF DIRECTORS" in the Company's Proxy
Statement, dated April 23, 1999, for the 1999 Annual Meeting of the
Stockholders held May 21, 1999.
<PAGE>
In addition, all reports and other documents filed by the Company
prior to the date of the Special Meeting pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act and after the date of this Proxy
Statement, shall be deemed to be incorporated by reference herein and
shall be deemed to a part hereof from the date of the filing of each such
report or document.
The financial information in the above referenced reports is set
forth under the captions "Management's Discussion and Analysis of Results
of Operations and Financial Condition," and "Consolidated Financial
Statements" as applicable to the particular report.
The Company undertakes to provide, without charge, to each person to
whom a Proxy Statement is delivered, upon written or oral request of such
person and by first class mail or other equally prompt means within one
business day of receipt of such request, a copy of any and all of the
information that has been incorporated by reference in this Proxy
Statement (exclusive of exhibits). These documents are available from the
Company.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the SEC at 450
Fifth Street N.W., Washington, D.C. 20549, and at the following Regional
Offices of the SEC: New York Regional Office, 7 World Trade Center, New
York, New York 10048 and Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the SEC, 450 Fifth Street
N.W., Washington, D.C. 20549, at the SEC's prescribed rates. Such
material can also be inspected and copied at the offices of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006-1506.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT IN CONNECTION WITH
THE MATTERS SUBJECT HEREOF, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES. THE DELIVERY OF THIS PROXY STATEMENT AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
<PAGE>
OTHER BUSINESS
The Board of Directors is not aware of any matters other than the
matters described above to be presented for action at the Meeting.
However, if any other proper items of business should come before the
Meeting, it is the intention of the person or person acting under the
enclosed form of proxy to vote in accordance with their best judgment on
such matters.
By order of the Board of Directors
/s/ FRANK R. COHEN
Frank R. Cohen
Chairman of the Board
Dated: December 14, 1999
New York, New York
<PAGE>
APPENDIX I
PROPOSED ARTICLE FOURTH OF THE COMPANY'S CERTIFICATE
OF INCORPORATION, AS AMENDED
FOURTH: The total number of shares of all classes of stock which
this corporation is authorized to issue is sixty-five million
(65,000,000), consisting of five million (5,000,000) shares of Preferred
Stock, par value one-tenth of one cent ($.001) per share (the "Preferred
Stock"), and sixty million (60,000,000) shares of common stock, par value
one-tenth of one cent ($.001) per share (the "Common Stock").
Each issued and outstanding share of Common 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 dates from which dividends on shares of the series issued on
different dates will cumulate, if cumulative. 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 such series the voting powers,
the designations, preferences, and the relative, participating, optional
or mandatory rights to redemption, conversion or exchange or other special
qualifications, limitations or restrictions of such series, and the number
of shares in each series, all to the full extent now or hereafter
permitted by law.
The redemption or acquisition by this corporation of any shares of
its Preferred Stock, shall not be deemed to reduce the authorized number
of shares of Preferred Stock of this corporation. Any shares of this
corporation'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>
EUROWEB INTERNATIONAL CORP.
445 Park Avenue
New York, N.Y. 10022
PROXY
The undersigned, a holder of Common Stock of EUROWEB INTERNATIONAL CORP.,
a Delaware corporation (the "Company"), hereby appoints FRANK R. COHEN, ESQ. and
ROBERT GENOVA, and each of them, the proxy of the undersigned, with full power
of substitution, to attend, represent and vote for the undersigned, all of the
shares of the Company's Common Stock which the undersigned would be entitled to
vote, at the Special Meeting of the Stockholders of the Company to be held at
10:00 A.M. (New York time), on January 12, 2000, and any adjournments thereof,
at the offices of Cohen & Cohen, 445 Park Avenue, New York, New York 10022, as
follows:
1. The approval of the proposed amendment of the Company's Certificate of
Incorporation to increase the number of shares of common stock, par value $.001
per share ("Common Stock") that is authorized for issuance by the Company from
20,000,000 shares of Common Stock to 60,000,000 shares of Common Stock.
FOR AGAINST ABSTAIN
2. The approval of the proposed issuance and sale by the Company to KPN
TELECOM B.V., a Netherlands limited liability company ("KPN"), of such number
of shares of Common Stock that would give KPN 51% of the Company's issued and
outstanding shares of Common Stock; and the issuance and sale of such number of
additional shares of the Company's Common Stock so as to preserve KPN's holding
of 51% of the issued and outstanding shares of the Company's Common Stock after
giving effect to the issuance of additional shares of Common Stock upon
exercise by third parties of outstanding warrants, options or other securities
carrying rights to shares of Common Stock.
FOR AGAINST ABSTAIN
3. The transaction of such business as may properly come before the Special
Meeting and any adjournments thereof.
The undersigned hereby revokes any other proxy to vote at such Special
Meeting, and hereby ratifies and confirms all that said attorneys and proxies,
and each of them, may lawfully do by virtue hereof. With respect to matters not
known at the time of the solicitations hereby, said proxies are authorized to
vote in accordance with their best judgment.
(continued, and to be signed, on other side)
<PAGE>
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ADOPTION OF PROPOSALS 1. AND 2. ABOVE.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF A COPY OF THE NOTICE OF SPECIAL
MEETING DATED DECEMBER 14, 1999 RELATING TO THE SPECIAL MEETING.
Date: _______________________
__________________________________________
__________________________________________
__________________________________________
SIGNATURE(S) OF STOCKHOLDERS
The signatures hereon should correspond exactly with the name(s) of the
Stockholder(s) appearing on the Stock Certificate. If the stock is jointly
held, all joint owners should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such. If the
signer is a corporation, please sign the full corporate name, and give title of
signing officer.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF EUROWEB INTERNATIONAL
CORP. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
APPENDIX II
<PAGE>
APPENDIX II
Dated as of 19th November, 1999
EUROWEB INTERNATIONAL CORP.
KPN TELECOM B.V.
and
CERTAIN DIRECTORS OF EUROWEB INTERNATIONAL CORP.
__________________________________________
AMENDED AND RESTATED
SHARE SUBSCRIPTION AGREEMENT
___________________________________________
Signed on 19th November, 1999
and amended and restated on 13th December, 1999
ALLEN & OVERY
<PAGE>
CONTENTS
Clause Page
1. Interpretation 1
2. issue of Shares and Terms of Payment 3
3. Conditions Precedent 4
4. Warranties 4
5. Covenants up to Closing 6
6. Recission 8
7. The Closing 8
8. Securities Act; Legends 9
9. Registration Rights 10
10. Confidentiality 19
11. Announcements 19
12. consents and filings 19
13. FUrTHER ASSURANCES 19
14. Costs 20
15. Notices 20
16. General 20
17. Whole Agreement 21
18. Governing Law and Jurisdiction 21
SCHEDULES
1. Particulars of the Subsidiaries 23
2. Warranties of the Company 28
Schedule 4 38
<PAGE>
SHARE SUBSCRIPTION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is dated as of 19th November, 1999 BETWEEN:
(1) EUROWEB INTERNATIONAL CORP., a Delaware corporation whose principal
place of business is at 445 Park Avenue, 15th Floor, New York, NY
10022 (the "Company");
(2) KPN TELECOM B.V., a Netherlands limited liability company
incorporated in the Netherlands whose registered office is at
Maanplein 5, The Hague, The Netherlands (the "Subscriber"); and
(3) FRANK COHEN and CSABA TORO, both being directors of the Company (the
"Directors").
WHEREAS:
(A) The Company is a Delaware corporation having an authorised share
capital of 20,000,000 ordinary shares with par value of $.001 of
which 9,883,340 have been issued fully paid or credited as fully
paid. Further details of the Company are set out in Schedule 1.
(B) The Company is the beneficial owner of the majority of the issued
share capital of each of those companies short details of which are
set out in Schedule 2.
(C) The Subscriber proposes to subscribe for such number of ordinary
shares as will result in the Subscriber holding 51 per cent. of the
issued and outstanding share capital of the Company and, under a
separate agreement, to be issued such number of share options as will
entitle it, if it so exercises such options to remain as a 51 per
cent. shareholder in the Company.
(D) The Directors agree to procure (so far as they are able to do so)
that the Company complies with certain covenants prior to the
Closing.
(E) The parties have amended and restated the subscription agreement
executed by the parties on 19th November, 1999 to correct certain
inaccuracies in Schedule 4 thereto. This amended and restated
agreement, including the correct Schedule 4, sets out the agreement
between the parties as of 19th November 1999.
IT IS AGREED as follows:
1. Interpretation
(1) In this Agreement:
"affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act;
"Agreed Form" means, in relation to any document, the form of that
document which has been initialled for the purpose of identification
by the Subscriber and the Company;
<PAGE>
"Business Day" means a day (other than a Saturday or Sunday) on which
banks generally are open in New York for normal business;
"Companies" means the Company and the Subsidiaries and "Company"
means any of them;
"Closing" means the implementation of the matters described in clause 7;
"Disclosure Letter" means the letter of the same date as this
Agreement from the Company to the Subscriber;
"Effective Date" means the date on which the Closing actually occurs;
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended;
"Existing Shares" means the existing shares of the Company as
described in Recital A;
"Further Subscription" means the subscription for Shares,
representing such further number of Shares equal to the number of
third party options and warrants exercised between 26th October, 1999
and the date of Closing;
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended;
"Initial Subscription" means the subscription for 10,286,742 Shares,
representing 51 per cent. of the Company's capital if such Shares had
been issued on 26th October, 1999;
"Intellectual Property Rights" means trade marks, service marks,
trade and business names, rights in designs, patents, copyright,
database rights, moral rights and rights in know-how and other
intellectual property rights in each case whether registered or
unregistered and including applications for the grant of any of the
foregoing and all rights or forms of protection having equivalent or
similar effect to any of the foregoing which may subsist anywhere in
the world;
"Option Agreement" means the option agreement to be entered into by
the parties on the date of this Agreement under which the Company
grants the Subscriber an option to subscribe for Shares in the
Company to allow the Subscriber to maintain a 51 per cent. interest
in the Company on an ongoing basis;
"Resolution" means a shareholders' resolution of the Company
approving the matters contemplated by this agreement, authorising the
Board of Directors of the Company to issue the Shares and, if
necessary, increasing the Company's authorised share capital such
that the Company may issue the Shares under this Agreement;
<PAGE>
"Securities Act" means the United States Securities Act of 1933, as
amended;
"SEC" means the United States Securities and Exchange Commission
"Shares" means the new shares to be issued to the Subscriber as
described in clause 2(1);
"Subscription Price" means the consideration to be paid by the
Subscriber for the Shares as defined in clause 2(2);
"subsidiary", when used in reference to any other person, means any
corporation of which outstanding securities having ordinary voting
power to elect a majority of the board of directors of such
corporation are owned directly or indirectly by such other person;
"Subsidiaries" means all the companies mentioned in Schedule 2 and
"Subsidiary" means any of them; and
"Warranties" means the representations and warranties on the part of
the Company contained in clause 4(1) and Schedule 3.
(2) Any reference, express or implied, to an enactment includes
references to:
(a) that enactment as re-enacted, amended, extended or applied
by or under any other enactment (before or after the signature of
this Agreement);
(b)) any enactment which that enactment re-enacts (with or
without modification);
(c) any subordinate legislation made (before or after the
signature of this Agreement) under that enactment, as re-enacted,
amended, extended or applied as described in paragraph (a) above, or
under any enactment referred to in paragraph (b) above
and "enactment" includes any legislation in any jurisdiction.
(d) Where any statement is qualified by the expression "so far as the
Company is aware" or "to the best of the Company's' knowledge, information and
belief" or any similar expression that statement shall be deemed to include
an additional statement that it has been made after due and careful enquiry.
(iv) The term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organisation and a governmental entity or any department or agency thereof.
<PAGE>
(v) Words denoting persons shall include bodies corporate and
unincorporated associations of persons and, unless otherwise stated, shall
include successors or assigns of such persons.
(vi) References to parties, Schedules or clauses are references to
parties and Schedules to, and clauses of, this Agreement.
(vii) Mentioning anything after "include", "includes" or "including"
does not limit what else might be included.
(viii) Subclauses (1) to (7) apply unless the contrary intention appears.
(ix) The headings in this Agreement do not affect its interpretation.
5. issue of Shares and Terms of Payment
(i) Upon the terms and subject to the conditions contained in this
Agreement, on the Effective Date the Company will issue to the Subscriber, and
the Subscriber will subscribe for, 10,286,742 shares of common stock, par
value $.001 per share, of the Company plus the Further Subscription (the
"Shares").
(ii) In reliance upon the representations, warranties and agreements
of the Company contained in this Agreement, and in consideration of the issue
of the Shares, the Subscriber will pay or cause to be paid to the Company an
amount (the "Subscription Price"), which is equal to:
(i) $1.58 per Share in respect of the Initial Subscription; and
(ii) $1.38 per Share in respect of the Further Subscription.
(iii) At the Closing, the Subscriber will pay the Subscription Price to
the Company by delivery of immediately available funds equal in amount to the
Subscription Price to the Company.
6. Conditions Precedent
(i) Without prejudice to clause 6 the subscription and allotment of
the Shares is conditional on:
(i) the Resolution being duly passed by the shareholders of the
Company;
(ii) the Company, the Subscriber and any other "person" (as
defined in the HSR Act) so required by the HSR Act, having filed a
Notification and Report Form for Certain Mergers and Acquisitions with
the Department of Justice and the Federal Trade Commission pursuant to
(and as those terms are defined in) the HSR Act in connection with the
transactions contemplated hereby, and all applicable waiting periods
with respect to each such filing (including any extensions thereof)
shall have expired or been terminated; and
<PAGE>
(iii) the entry by the parties into the Option Agreement.
(ii) The parties shall use all reasonable endeavours to procure that
the conditions in subclause (1) are fulfilled on or before 31st March, 2000.
(iii) If all the conditions in subclause (1) are not fulfilled or waived
on or before the date specified in subclause (2) no party shall have any
rights or obligations under this Agreement (except in respect of a prior
breach).
7. Warranties
(i) The Company represents and warrants to the Subscriber that:
(i) except as fully and fairly disclosed in the Disclosure
Letter, each of the statements set out in Schedule 3 is true and
accurate; and
(ii) all information contained or referred to in the Disclosure
Letter is true and accurate and fairly presented and nothing has been
omitted from the Disclosure Letter which renders any of that
information incomplete or misleading.
(ii) Each of the Warranties set out in the several paragraphs of
Schedule 3 is separate and independent and except as expressly provided to the
contrary in this Agreement is not limited:
(i) by reference to any other paragraph of Schedule 3; or
(ii) by anything in the Disclosure Letter which is not expressly
referenced to the Warranty concerned;
and none of the Warranties shall be treated as qualified by any
actual or constructive knowledge on the part of the Subscriber or any
of its agents.
(iii) In the absence of fraud, dishonesty or wilful concealment on the
part of the Company or its agents or advisers, the liability of the Company
in respect of the Warranties:
(i) shall not (i) arise unless the amount of all claims against
the Company made in respect of the Warranties (or which would have been
made but for the operation of this paragraph exceeds $50,000 or (ii)
exceed the sum of $15,000,000; and
(ii) shall terminate:
(1) on the seventh anniversary of Closing in respect of those matters set
out in Part 26 (Taxation) of Schedule 3 and any other matters so far as they
relate to taxation; and
(2) on the second anniversary of Closing in respect of all other matters
contained in Schedule 3,
<PAGE>
except in respect of any claim of which notice in writing is
given to the Company before that date,
but in relation to those Warranties set out in paragraphs 4
(share capital), 10 (assets), 11 (financial statements) and the
limitations set out in paragraphs (a) and (b) above shall not
apply; and nothing in the Disclosure Letter shall qualify or
limit their scope.
(iv) The Subscriber represents and warrants to the Company that:
(i) it is a corporation validly existing under the laws of the
state of its incorporation with requisite power and authority to enter
into and perform, and has taken all necessary corporate action (which
shall include resolutions of its shareholders, if applicable) to
authorise the execution and performance of its obligations under this
Agreement;
(ii) this Agreement will, when executed, constitute its valid
and binding obligation enforceable against it in accordance with its
terms; and
(iii) other than as contemplated by this Agreement, no
announcements, consultations, notices, reports or filings are required
to be made by it in connection with the transactions contemplated by
this Agreement nor are any consents, approvals, registrations,
authorisations or permits required to be obtained by it in connection
with the execution and performance of this Agreement the failure to
make or obtain any of which would:
(i) prevent or delay completion of this Agreement; or
(ii) subject the Company to any liability.
(iv) In the absence of fraud, dishonesty or wilful concealment
on the part of the Subscriber or its agents or advisers the liability
of the Subscriber in respect of the warranties given by it in this
subclause shall terminate on the second anniversary of Closing except
in respect of any claim of which notice in writing is given to it
before that date.
8. Covenants up to Closing
(i) The Company shall procure that without the written consent of the
Subscriber no Company shall before Closing:
(i) declare, make or pay any dividend or other distribution or
do or allow to be done anything which renders its financial position
less favourable than at the date of this Agreement; or
(ii) create, issue, purchase or redeem any shares, grant any
option or rights over or in respect of any shares or new shares or
enter into or create any obligations convertible into shares, or issue
or create any loan capital; or
<PAGE>
(iii) dispose of any interest in any shares in any of the
Companies or grant or create any liens, charges or encumbrances over or
in respect of any shares in any of the Companies; or
(iv) agree, conditionally or otherwise, to do any of the
foregoing; or
(v) in any other way depart from the ordinary course of its
day-to-day trading.
(ii) The Company shall further procure that before Closing without the
written consent of the Subscriber:
(i) no resolution (other than the Resolution) is passed in
general meeting;
(b) no Company will:
(1) incur any capital expenditure exceeding in the individual case
$10,000, or in the aggregate $50,000 or make any disposal of assets, exceeding
in the individual case $10,000, or in the aggregate $50,000;
(2) incur any indebtedness (excluding, for the avoidance of doubt, trade
liabilities in the ordinary course of business);
(3) enter into any contract or commitment outside of the ordinary course
of business;
(4) mortgage, pledge or encumber any part of its assets (except for liens
arising in the normal course of business by operation of law);
(5) materially amend, or terminate or allow to lapse without renewal any
contract which is material for the operation of its business;
(6) make any material changes in the terms and conditions of employment
of any of its management level employees or employ, or terminate (except for
good cause and in accordance with applicable law) the employment, of any such
person;
(7) permit any of its insurances to lapse or knowingly do anything which
would make any policy of insurance void or voidable or materially increase the
cost and level of cover provided under such insurance policies;
(8) give any guarantee or indemnity other than in the ordinary course of
business;
(9) acquire any shares of any other company or participate in any
partnership or joint venture or agree to do so;
(10) permit the appointment of any person as a director or other
management level employee of the Company; or
(11) do or omit to do or cause or allow to be done or omitted to be
done any act or thing which would result in a breach of the obligations under
this clause 5 or under any of the Warranties if the Warranties were repeated
at Completion.
<PAGE>
(iii) Insofar as it is within its power and the Company's reasonable
commercial interests to do so, the Company will:
(i) preserve its business organisation intact; and
(ii) preserve its business relations with suppliers and customers.
(iv) The Directors shall each procure so far as it is within his power
that the Company complies with its obligations under this clause.
(v) Until Closing the Company shall give the Subscriber, its agents
and representatives full access to the Properties and to the books and records
of the Companies and shall provide such information regarding the businesses
and affairs of the Companies as the Subscriber may require.
(vi) The Company and each Director shall immediately notify the
Subscriber in writing of any matter or thing which arises or becomes known to
him before Closing which:
(i) constitutes (or would after the lapse of time constitute)
a misrepresentation or a breach of any of the Warranties or the
undertakings or other provisions set out in this Agreement; or
(ii) which has, or would be likely to have after Closing, a
material adverse effect on the business of any Company (as presently
carried on).
(vii) The Company will furnish the Subscriber with copies of all
reports required to be filed after the date hereof by the Company and its
subsidiaries with the SEC pursuant to the Securities Act or the Exchange Act
and the rules and regulations of the SEC under each of them. All of such
reports will comply as to form in all material respects with such Acts and the
rules and regulations of the SEC thereunder, and all financial statements
contained therein will be prepared in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
statements of the Company referred to in Schedule 2, paragraph 11. None of
such documents will at the time it is filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
9. Rescission
(i) If before Completion:
(i) any material breach of the Warranties comes to the notice
of the Subscriber; or
<PAGE>
(ii) the Company is in material breach of any obligation on its
or his part under this Agreement or any related agreement and, where
that breach is capable of remedy, it is not remedied to the
Subscriber's satisfaction; or
(iii) anything occurs which, had it occurred on or before the
date of this Agreement, would have constituted a material breach of the
Warranties; or
(iv) anything occurs (except something arising from an act or
omission of the Subscriber) which has, or would be likely to have after
Completion, a material adverse effect on the business of any Company
(as presently carried on) including but not limited to any of the
following:
(1) a strike, lock-out or other significant industrial dispute arising
or being threatened;
(2) any litigation or arbitration proceedings or any order, decree or
injunction of a court of competent jurisdiction being instituted or threatened
by or against a Company; or
(3) any significant fixed asset of the Company being destroyed or
damaged;
then, but without prejudice to any other rights or remedies available
to the Subscriber, the Subscriber may without any liability to the
Company elect not to complete the subscription of the Shares by
giving notice in writing to the Company.
(ii) If the Subscriber elects not to complete the subscription of the
Shares in any of the circumstances mentioned in paragraphs (a), (b) and (c)
of subclause (1), or if the Subscriber rescinds this Agreement under the
general law, then (but without prejudice to any other rights or remedies
available to the Subscriber) the Company shall indemnify the Subscriber
against all costs, charges and expenses incurred by it in connection with the
negotiation, preparation and rescission of this Agreement.
10. The Closing
(i) The Closing will take place at the offices of the Company in New
York, at 10.00 a.m. (New York time) on the first Business Day following the
date on which the conditions precedent to each party's obligations under this
Agreement have been satisfied, or at such other place or time as the parties
may agree.
(ii) At the Closing, the Company and the Directors shall procure that
a board meeting of the Company is held at which it is resolved that subject
only to receipt of the subscription monies for the Shares the Company shall
allot and issue the Shares to the Subscriber for the Subscription Price and
shall enter the Subscriber in the register of members of the Company as the
holder of the Shares.
(iii) At the Closing, the Company will deliver (or cause to be
delivered) the following to the Subscriber:
(i) stock certificates representing the Shares, and any other
documents that are necessary to transfer to the Subscriber good title
to the Shares;
<PAGE>
(ii) resignations of the members of the Board of Directors of
the Company as agreed between the parties;
(iii) statements from each of the current members of the Board of
Directors of the Company, including those to resign pursuant to
paragraph (b) above, that they have no claims against the Company
whether for loss of office or otherwise; and
(iv) all other documents, instruments and writings required to
be delivered by the Company on or before the Effective Date under or
otherwise required in connection with this Agreement.
(iv) At the Closing, the Subscriber will deliver the following to the
Company or its designee:
(i) the Subscription Price by (i) interbank transfer of
immediately available funds) to such bank account as the Company shall
notify to the Subscriber prior to Closing:
(ii) all other documents, instruments and writings required to
be delivered by the Subscriber on or before the Effective Date under or
otherwise required in connection with this Agreement.
(v) If for any reason the provisions of subclause (3) are not fully
complied with the Subscriber may elect (in addition and without prejudice to
all other rights or remedies available to it) to rescind this Agreement or to
fix a new date for Completion.
11. Securities Act; Legends
(i) General Restriction.
The Subscriber may sell or otherwise transfer any of the Shares or
any interest therein, provided that such sale or other transfer is in
compliance with the Securities Act.
(ii) Legends on Certificates.
(i) The Subscriber shall hold in certificate form all of the
Shares. Each certificate evidencing the Shares issued to or
beneficially owned by the Subscriber shall bear the following legend:
"The securities evidenced by this certificate are subject to
certain restrictions on transfer as set forth in a Share
Subscription Agreement, dated as of 19th November, 1999, as it
may be amended from time to time, a copy of which is on file at
the principal executive offices of the issuer. No registration
of transfer of such securities will be made on the books of the
issuer unless and until such restrictions shall have been
complied with. In addition, the securities evidenced by this
certificate have not been registered under the Securities Act.
No registration of transfer of such securities will be made on
the books of the issuer unless such transfer is made in
connection with an effective registration statement under such
Act or pursuant to an exemption from the registration
requirements of such Act."
<PAGE>
(ii) In the event that the Subscriber requests that the legend
in clause 8(2)(a) be removed, the Company shall, upon the written
request of the Subscriber, issue to the Subscriber a new certificate
evidencing such Shares without the legend required by clause 8(2)(a)
endorsed thereon; provided; however, that the Subscriber shall furnish
the Company or its transfer agent such certificates, legal opinions or
other information as the Company or its transfer agent may reasonably
require to confirm that the legend is not required on such certificate.
(iii) In the event that any of the Shares shall cease to be
subject to the restrictions on transfer set forth in this Agreement,
the Company shall, upon the written request of the holder thereof,
issue to the Subscriber a new certificate evidencing such Shares
without the legend required by clause 8(2)(a).
12. Registration Rights
(i) "Piggy-Back" Registration
(i) If the Company at any time proposes to register any of its
securities under the Securities Act for sale to the public, whether for
its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4, S-8 or
another form not available for registering Shares for sale to the
public), each such time it will give written notice to the Subscriber
of its intention so to do.
(ii) Upon the written request of the Subscriber, received by the
Company within 20 days after the giving of any such notice by the
Company, to register any of the Shares, the Company will, subject as
provided below, cause the Shares as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the
extent requisite to permit the sale or other disposition by the holder
of such Shares so registered.
(iii) In the event that any registration pursuant to this clause
9(1) shall be, in whole or in part, an underwritten public offering of
common stock, the number of Shares to be included in such an
underwriting may be reduced (pro rata among the requesting holders
based upon the number of Shares owned by such holders) if and to the
extent that the managing underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that such number of
Shares shall not be reduced if any shares are to be included in such
underwriting for the account of any person other than the Company or
requesting holders of Shares.
(iv) Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement referred to in this clause 9(1)
without thereby incurring any liability to the holders of Shares.
There shall be no limit to the number of registrations of Shares which
may be effected under this clause 9(1).
<PAGE>
(ii) Demand Registration
(i) The Subscriber may at any time request the Company to
register under the Securities Act all or portion of the Shares held by
it for sale in the manner and pursuant to the Form specified in such
notice; provided, that:
(1) the reasonably anticipated aggregate net proceeds to the sellers from
such public offering would exceed $5,000,000;
(2) such request covers at least 25% of the voting securities of the
Company then outstanding; and
(3) no such request may be made by the Subscriber more than once every
nine months.
Notwithstanding anything to the contrary contained herein, no
request may be made under this clause 9(2) within 90 days after
the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering
in which the Subscriber shall have been entitled to join
pursuant to clause 9(1) or 9.3 and in which there shall have
been effectively registered all of the Shares as to which
registration shall have been requested.
(ii) Following receipt of any notice under this clause 9.2, the
Company shall immediately notify the Subscriber and shall use its best
efforts to register under the Securities Act, for public sale in
accordance with the method of disposition specified in such notice from
requesting holders, the number of Shares specified in such notice (and
in all notices received by the Company from other holders within 20
days after the giving of such notice by the Company). If such method
of disposition shall be an underwritten public offering, the Subscriber
may designate the managing underwriter of such offering, subject to the
approval of the Company, which approval shall not be unreasonably
withheld or delayed. the Company shall be obliged to register Shares
pursuant to clause 9.2(a) on three occasions only, provided, however,
that such obligations shall be deemed satisfied only when a
registration statement covering all of the Shares specified in notices
received as aforesaid, for sale in accordance with the method of
disposition specified by the requesting holders, shall have become
effective and, if such method of disposition is a firm commitment
underwritten public offering, all such shares shall have been sold
pursuant thereto unless:
(1) any such registration statement does not become effective due to the
withdrawal thereof by or on the request of the Subscriber; or
(2) the reason all of the Shares specified in notices pursuant to this
clause 9.2 are not registered is due to a limitation on the registration of
shares by the managing underwriter (which limitation shall be applied pro
rata) and no more than 50 per cent. of the Shares so specified are not
registered as a result of the limitation imposed by such managing underwriter
or the voluntary withdrawal of any such shares from registration by the holder
thereof.
<PAGE>
(iii) the Company shall be entitled to include in any
registration statement referred to in this clause 9.2, for sale in
accordance with the method of disposition specified by the requesting
holders, shares of its common stock to be sold by the Company for its
own account, except as and to the extent that, in the opinion of the
managing underwriter (if such method of disposition shall be an
underwritten public offering), such inclusion would adversely affect
the marketing of the Shares to be sold. Except for registration
statements on Forms S-4, S-8 or any successor thereto, the Company will
not file with the Commission any other registration statement with
respect to its common stock, whether for its own account or that of
other stockholders, from the date of receipt of a notice from
requesting holders pursuant to this clause 9(2) 90 days after the
commencement of the public offering of the Shares covered by the
registration statement requested pursuant to this clause 9(2).
(iii) Registration on Form S-3
If at any time:
(i) the Subscriber requests that the Company file a
registration statement on Form S-3 or any successor thereto for a
public offering of all or any portion of the Shares held by the
Subscriber, the reasonably anticipated aggregate price to the public of
which would exceed $5,000,000; and
(b) the Company is a registrant entitled to use Form S-3 or any
successor thereto to register such shares,
then the Company shall use its best efforts to register under the
Securities Act on Form S-3 or any successor thereto, for public sale
in accordance with the method of disposition specified in such
notice, the number of Shares specified in such notice. Whenever the
Company is required by this clause 9(3) to use its best efforts to
effect the registration of Shares, each of the procedures and
requirements of clause 9(2) and 9(4) shall apply to such required to
effect more than seven registrations on Form S-3 which may be
requested and obtained under this clause 9(3).
(iv) Registration Procedures
If and whenever the Company is required by the provisions of clause
9(1), 9(2) or 9(3) to use its best efforts to effect the registration
of any Shares under the Securities Act, the Company will, as
expeditiously as possible:
(i) prepare and file with the Commission a registration
statement with respect to such securities;
<PAGE>
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (i) below and
comply with the provisions of the Securities Act with respect to the
disposition of all Shares covered by such registration statement in
accordance with the Subscriber's intended method of disposition set
forth in such registration statement for such period;
(iii) furnish to the Subscriber and to each underwriter such
number of copies of the registration statement and the prospectus
included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale
or other disposition of the Shares covered by such registration
statement;
(iv) use its best efforts to register or qualify the Shares
covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Subscriber or, in the case of an
underwritten public offering, the managing underwriter reasonably shall
request; provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or
to consent to general service of process in any such jurisdiction;
(v) use its best efforts to list the Shares covered by such
registration statement with any securities exchange or market on which
the common stock of the Company, if applicable, is then listed or
quoted;
(vi) immediately notify the Subscriber and each underwriter
under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(vii) at the request of the Subscriber, use its best efforts
to furnish on the date that Shares are delivered to the underwriters
for sale pursuant to such registration:
(1) an opinion dated such date of counsel representing the Company for
the purposes of such registration, addressed to the underwriters and to the
Subscriber, stating that such registration statement has become effective
under the Securities Act and that:
to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act;
the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements contained therein); and
<PAGE>
(C) to such other effect as reasonably may be requested
by counsel for the underwriters or by the
Subscriber or its counsel; and
(2) a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters and to the Subscriber,
stating that they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of the Company included in the registration statement or the
prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other financial
matters (including information as to the period ending no more than five
business days prior to the date of such letter) with respect to such
registration as such underwriters reasonably may request;
(viii) (i) make available for inspection by the Subscriber, any
underwriter participating in any distribution pursuant to
such registration statement, and any attorney, accountant
or other agent retained by the Subscriber or underwriter,
all financial and other records, pertinent corporate
documents and properties of the Company;
(ii) cause the Company's officers, Directors and employees to
supply all information reasonably requested by the
Subscriber, underwriter, attorney, accountant or agent in
connection with such registration statement; and
(iii)provide the Subscriber and its counsel with the
opportunity to participate in the preparation of such
registration statement;
(ix) with respect to any registration statement pursuant to
which Shares are to be sold pursuant to clause 9(1), 9(2) or 9(3), the
Company shall use its best efforts to cause such registration statement
to become and remain effective for 180 days; and
(x) enter into such agreements and take such other actions as
the Subscriber and the underwriters reasonably requested in order to
expedite or facilitate the disposition of such Shares including
preparing for and participating in, such number of "road shows" and all
such other customary selling efforts as the underwriters reasonably
request in order to expedite or facilitate such disposition.
In connection with each registration hereunder, the Subscriber will
furnish to the Company in writing such information with respect to
itself and the proposed distribution by it as shall be reasonably
necessary in order to assure compliance with Federal and applicable
state securities laws.
<PAGE>
In connection with each registration pursuant to clause 9(1), 9(2) or
9(3) covering an underwritten public offering, the Company and the
Subscriber agree to enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and
containing such provisions as are customary in the securities
business for such an arrangement between such underwriter and
companies of the Company's size and investment stature (it being
understood that the Company will not require the Subscriber to make
any representation, warranty or agreement in such agreement other
than with respect to the Subscriber, the ownership of the
Subscriber's securities being registered and the Subscriber's
intended method of disposition). The representations and warranties
by, and the other agreements on the part of, the Company to and for
the benefit of the underwriters in such written agreement with the
underwriters shall also be made to and for the benefit of the
Subscriber. In the event that any condition to the obligations under
any such written agreement with the underwriters are not met or
waived, and such failure to be met or waived is not attributable to
the fault of the Subscriber requesting a demand registration pursuant
to clause 9(2) and 9(3), such request for registration shall not be
deemed exercised for purposes of determining whether such
registration has been effected for purposes of clause 9(2) or 9(3).
(v) Expenses
All expenses incurred by the Company in complying with clause 9(1),
9(2) or 9(3), including all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel
fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and
registrars, costs of insurance and fees and disbursements of one
counsel for the Subscriber, but excluding any Selling Expenses, are
called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Shares are called
"Selling Expenses".
The Company will pay all Registration Expenses in connection with
each registration statement under clause 9(1), 9(2) or 9(3). All
Selling Expenses in connection with each registration statement under
clauses 9(1), 9(2) or 9(3) shall be borne by the Subscriber in
proportion to the number of shares sold by it, or by the Subscriber
and the Company (except to the extent the Company shall be a seller)
as the parties may agree.
(vi) Indemnification and Contribution
(i) In the event of a registration of any of the Shares under
the Securities Act pursuant to clause 9(1), 9(2) or 9(3), the Company
will indemnify and hold harmless the Subscriber, each underwriter of
such Shares thereunder and each other person, if any, who controls the
Subscriber or underwriter within the meaning of the Securities Act,
against any losses, claims, damage or liabilities, joint or several, to
which the Subscriber, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement
<PAGE>
under which such Shares were registered under the Securities Act
pursuant to clause 9(1), 9(2) or 9(3), any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will
reimburse the Subscriber, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or actin; provided, however, that the Company
will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished in writing by
the Subscriber, such underwriter or such controlling person
specifically for use in such registration statement or prospectus.
(ii) In the event of the registration of any of the Shares under
the Securities Act pursuant to clauses 9(1), 9(2) or 9(3), the
Subscriber will indemnify and hold harmless the Company, each person,
if any, who controls the Company within the meaning of the Securities
Act, each officer of the Company who signs the registration statement,
each Director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several,
to which the Company or such officer, Director, underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
the registration statement under which such Shares were registered
under the Securities Act pursuant to clauses 9(1), 9(2), or 9(3), any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer,
Director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that the liability of the Subscriber hereunder shall
be limited to the proportion of any such loss, claim, damage, liability
or expense which is equal to the proportion that the public offering
price of the shares sold by the Subscriber under such registration
statement bears to the total public offering price of all securities
sold thereunder, but not in any event to exceed the proceeds received
by the Subscriber from the sale of Shares covered by such registration
statement
(iii)Promptly after receipt of an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying
party hereunder, notifying the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to such indemnified party other
than under this clause 9(6) and shall only relieve it from any
liability which it may have to such indemnified party under this clause
9(6) if and to the extent the indemnifying party is prejudiced by such
<PAGE>
omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and
undertake the defence thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the
defence thereof, the indemnifying party shall not be liable to such
indemnified party of its election so to assume and undertake the
defence thereof, the indemnifying party shall not be liable to such
indemnified party under this clause 9(6) for any legal expenses
subsequently incurred by such indemnified party in connection with the
defence thereof other than reasonable costs of investigation and of
liaison with counsel so selected; provided, however, that, if the
defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defences available to it which
are different from or additional to those available to the indemnifying
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to
select a separate counsel and to assume such legal defences and
otherwise to participate in the defence of such action, with the
expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as
incurred.
(iv) In order to provide for such and equitable contribution to
joint liability under the Securities Act in any case which either:
(1) any indemnified party exercising rights under this Agreement, or
any controlling person of any such holder, makes a claim for indemnification
pursuant to this clause 9(6) but it is judicially determined (by the entry of
a final judgement or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this clause 9(6) provides for indemnification in such case;
(2) contribution under the Securities Act may be required on the part of
the Subscriber or any such controlling person in circumstances for which
indemnification is provided under this clause 9(6); or
(3) the indemnification provided for by this clause 9(6) is insufficient
to hold harmless an indemnified party, other than by reason of the exceptions
provided therein,
then, and in each such case, the Company and the Subscriber
will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution
from others):
(x) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand
and the indemnified party on the other; or
<PAGE>
(y) if the allocation provided by clause (x) above is not
permitted by Applicable Law, or provides a lesser sum to
the indemnified party than the amount hereinafter
calculated, in such proportion as is appropriate to
reflect not only the relative fault referred to in clause
(x) above but also the relative benefits received by the
indemnifying party and the indemnified party form the
offering of the securities (taking into account the
portion of the proceeds of the offering received by each
such party) as well as the statements or omissions which
resulted in such losses, claims, damages or liabilities
and any other relevant equitable considerations.
No person will be required to contribute any amount in excess
of the proceeds received by such person in respect of all such
Shares offered and sold by it pursuant to such registration
statement and no person or entity guilty of fraudulent
misrepresentations (within the meaning of clause 11(f) of the
Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent
misrepresentation.
(vii) Changes in Common Stock; Successors
(i) If, and as often as, there is any change in the common
stock of the Company by way of stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganisation
or recapitalisation, or by any other means, appropriate adjustment
shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the common
stock as so changed.
(ii) If the Company consolidates or merges into or with, another
person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or a majority of its assets to any person or group, or
any person or group consolidates with, or mergers into or with, the
Company, the Subscriber shall, as a condition to the relevant
transaction involving such person, group or successor in business, be
granted by such person, group or successor in business (each a
"Successor"), equivalent rights to the rights granted in this
Agreement.
(viii) Rule 144 Reporting
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale
of Shares to the public without registration, at all times 90 days
after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
<PAGE>
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(iii) furnish to the Subscriber immediately upon request a
written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by the
Company as the Subscriber may reasonably request in availing itself of
any rule or regulation of the Commission allowing the Subscriber to
sell any Shares without registration.
(ix) Suspension of Registration Obligations
Notwithstanding the provisions of clause 9(4)(a):
(i) the Company's obligation to file a registration statement,
or cause such registration statement to become and remain effective:
(1) may be suspended on one occasion for a period not to exceed 180 days
if there exists at the time material non-public information relating to the
Company which, in the reasonable opinion of the Company, should not be
disclosed; and
(2) shall not apply for the period which begins seven days prior to and
ends 90 days after the commencement of a public offering of the common stock,
so long as the Company has fulfilled its notice obligations under clauses
9(1), 9(2) or 9(3) with respect to such offering; and
(3) if a public offering of the common stock has been previously
commenced, neither the Company nor any controlling person of the Company shall
commence another public offering of the Common Stock until 90 days after the
commencement of such prior offering.
(x) Other Registration Rights
The Company has not granted and shall not grant to any third party
any registration rights more favourable than or inconsistent with any
of those contained herein, so long as any of the registration rights
under this Agreement remains in effect.
13. Confidentiality
(i) The Subscriber undertakes with the Company that it shall use all
reasonable endeavours to ensure that all information received by it relating
to the Companies which is not in the public domain shall be treated as
confidential and shall not be disclosed to any third party except as required
by law or by any competent regulatory authority or with the prior written
approval of the Company.
(ii) The Subscriber shall not be in breach of subclause (1) by virtue
of any director of the Company appointed by it passing to it any information
he receives as a director of the Company or any Subsidiary, but nothing in
this Agreement shall require such disclosure where the director's fiduciary
duty to the Company, or to any Subsidiary, would be breached as a result.
<PAGE>
14. Announcements
No party shall make or permit any person connected with it to make
any announcement concerning this Agreement or any ancillary matter
before, on or after Closing except as required by law or any
competent regulatory body or with the prior written approval of the
other parties, such approval not to be unreasonably withheld or
delayed.
15. consents and filings
(i) Each of the parties will use all reasonable efforts to obtain
consents of all persons and governmental authorities necessary to the
consummation of the issue and subscription of the Shares pursuant to this
Agreement.
(ii) The Company and the Subscriber will file, or cause to be filed,
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice pursuant to the HSR Act all requisite documents
and notifications in connection with the issue and subscription of the Shares
pursuant to this Agreement. The Company and the Subscriber will also file, or
cause to be filed, all requisite documents and notifications with the Slovak
anti-trust authorities in connection with the issue and subscription of the
Shares pursuant to this Agreement. The Subscriber will make or cause to be
made all such other filings and submissions under laws and regulations
applicable to the Subscriber, if any, as may be required of the Subscriber for
the consummation of the subscription for the Shares pursuant to this
Agreement. the Company will make or cause to be made all such other filings
and submissions under laws and regulations applicable to the Company, if any,
as may be required of the Company for the consummation of the issue of the
Shares pursuant to this Agreement. The parties will co-ordinate and co-operate
with one another in exchanging such information and reasonable assistance as
may be requested in connection with all of the foregoing.
16. FUrTHER ASSURANCES
Subject to the terms and conditions of this Agreement, each of the
parties will use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the issue and subscription of the
Shares pursuant to this Agreement. From time to time after the
Effective Date, without further consideration, the Company will at
its own expense, execute and deliver such documents to the Subscriber
as the Subscriber may reasonably request in order more effectively to
vest in the Subscriber good title to the Shares. From time to time
after the Effective Date, without further consideration, the
Subscriber will, at its own expense, execute and deliver such
documents to the Company as the Company may reasonably request in
order more effectively to consummate the issue and subscription of
the Shares pursuant to this Agreement.
<PAGE>
17. Costs
Each party shall pay the costs and expenses incurred by it in
connection with the entering into and completion of this Agreement.
Costs of and relating to filings to be made pursuant to clause 12
shall be met by the Company.
18. Notices
(i) Any notice or other document to be served under this Agreement may
be delivered or sent by facsimile process to the party to be served at its
address appearing in this Agreement or at such other address as it may have
notified to the other parties in accordance with this clause.
(ii) Any notice or document shall be deemed to have been served:
(i) if delivered, at the time of delivery; or
(ii) if sent by facsimile process, at the expiration of two
hours after the time of despatch, if despatched before 3.00 p.m. on any
Business Day, and in any other case at 10.00 a.m. on the Business Day
following the date of despatch.
(iii) In proving service of a notice or document it shall be sufficient
to prove that delivery was made or that the facsimile message was properly
addressed and despatched as the case may be.
19. General
(i) Each of the obligations, representations, Warranties and
undertakings set out in this Agreement which is not fully performed at Closing
will continue in force after Closing.
(ii) If the Shares or any of them are at any time sold or transferred
by the Subscriber, the benefit of each of the obligations, representations,
Warranties and undertakings undertaken or given by the Company may be assigned
to the purchaser or transferee of the shares who may enforce them as if he had
been named in this Agreement as the Subscriber and the purchaser or transferee
shall, as a condition of the sale or transfer, undertake to each of the
parties to this Agreement in a form satisfactory to them to be bound by all
the obligations of the seller or transferor under this Agreement.
<PAGE>
(iii) Except as stated above, none of the rights or obligations
contained in this Agreement may be assigned or transferred without the prior
written consent of all the parties. It shall be a condition of any assignment
which may be permitted that the assignee enters into an undertaking in a form
reasonably satisfactory to the remaining parties to this Agreement to be bound
by all the obligations of the assignor under this Agreement.
(iv) The provisions contained in each clause and subclause of this
Agreement shall be enforceable independently of each of the others and its
validity shall not be affected if any of the others is invalid. If any of
those provisions is void but would be valid if some part of the provision were
deleted, the provision in question shall apply with such modification as may
be necessary to make it valid.
(v) This Agreement may only be amended, modified or supplemented in
writing.
(vi) This agreement may be executed in any number of counterparts, all
of which taken together, shall constitute one and the same agreement, and any
party may enter into this Agreement by executing a counterpart.
20. Whole Agreement
(i) This agreement and the documents referred to in it contain the
whole agreement between the parties relating to the transactions contemplated
by this Agreement and supersede all previous agreements between the parties
relating to these transactions.
(ii) Each party acknowledges that, in agreeing to enter into this
Agreement, it has not relied on any representation, warranty, collateral
contract or other assurance, except those set out in this Agreement (and the
documents referred to in it) and waives all rights and remedies which, but for
this subclause, might otherwise be available to him in respect of any such
representation, warranty, collateral contract or other assurance, provided
that nothing in this subclause shall limit or exclude any liability for fraud.
21. Governing Law and Jurisdiction
(i) This Agreement shall be governed by the laws of the State of New
York (regardless of the laws that might otherwise govern under applicable New
York principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and
remedies.
(ii) The parties submit to the jurisdiction of the Courts of New York
for all purposes relating to this Agreement.
<PAGE>
SCHEDULE 1
PARTICULARS OF THE COMPANY
Registered office: 15 East North Street
Dover DE
Date and place of
incorporation: 9th November, 1992, Delaware
Directors: Frank Cohen
Csaba Toro
Robert Genova
Donald Robertson
Richard Maresca
Secretary: Frank Cohen
Accounting reference date: 31st December
Auditors: BDO Seidman LP
<PAGE>
SCHEDULE 2
PARTICULARS OF THE SUBSIDIARIES
A. Eunet Slovakia, S.R.O.
Registered number: 00 588 458
Registered office: MFF UK Mlynska dolina, 842 15 Bratislava
Date of
incorporation: 17th September, 1990
Statutory representative: Ivan Lescak
Registered capital: SKK 300,000
Issued capital: SKK 300,000
Shareholders: Euroweb International Corporation (100%)
<PAGE>
B. Global Network Services, A.S.
Registered number: 35 698 446
Date and place of
incorporation: 17th September, 1996, Bratislava
Registered office: Racianska 36, 831 01 Bratislava
Board of Directors: Mgr. Stanislav Stowasser
Mgr. Juraj Durov
Rudolf Cizik
Supervisory Board: Ing. Peter Gabalec
Ing. Stanislav Molcan
Peter Mokros
Registered capital: SKK 36,500,000
Issued capital: SKK 36,500,000
Shareholders: Euroweb International Corporation (70%)
Slavia Capital, AS, OCP (26.16%)
Mgr. Stanislav Stowasser (0.96%)
Ing. Peter Gabalec (0.96%)
Ladislav Ratkovsky (0.96%)
<PAGE>
C. Dodo, S.R.O.
Registered number: 31 732 119
Date and place of
incorporation: 15th August, 1996, Ko ice
Registered office: Jesenskeho 16, 040 01 Ko ice
Statutory Representatives: Ing. Eva Petra ova
Ing. Alexander Ivan
Ing. Juraj Bartov
Secretary: None
Accounting reference date: None
Auditors: None
Registered capital: SKK 200,000
Issued capital: SKK 200,000
Shareholders: Euroweb International Corp (70%)
INFIS, spol, S.R.O. (30%)
<PAGE>
D. Luko Czech-net, spol S.R.O.
Registered number: 48 59 13 19
Date and place of
incorporation: 10th March, 1993
Registered office: Praha 7, Argentinska 38, PSC 170 75
Directors: Lucie Kozova
Richard Koza
Authorised capital: CZK 100,000
Issued capital: CZK 100,000
Shareholders: Euroweb International Corp (100%)
<PAGE>
E. INET Informatikai es Kereskedelmi KFT
Registered number: Cg 01 09 464708
Date and place of
incorporation: 4th March, 1997
Registered office: 1036 Budapest, Jajos u. 142
Managing Director: kos Lorant Golubeff
Auditors: None
Registered capital: HUF 1,000,000
Issued capital:
Members: Daniel Jellinek
Kalman Fabian
<PAGE>
SCHEDULE 3
WARRANTIES OF THE COMPANY
1. Accuracy of recitals and schedules
The particulars relating to the Companies set out in the recitals and the
schedules to this agreement are true and accurate.
2. Organization; Qualification
(1) Each Company is a corporation duly organized, validly existing and,
where relevant, in good standing under the laws of the jurisdiction
of its incorporation, and has all requisite power and authority to
own, lease and operate its assets and to carry on its business as now
being conducted.
(2) The Company has delivered to the Subscriber (or its legal advisers),
complete and correct copies of the Certificate of Incorporation and
By-laws, as currently in effect, of the Company and the relevant
constituent documents of each Subsidiary.
3. Capacity
(1) The Company has the requisite power and authority to enter into and
perform this Agreement and the Option Agreement.
(2) The execution and delivery by the Company of this Agreement, the Option
Agreement and the other documents and instruments to be executed and
delivered by the Company pursuant thereto, and the consummation by
the Company of the transactions contemplated thereby, have been duly
and validly authorized by all necessary corporate action of the
Company, except for the passing of the Resolution.
(3) This agreement and the Option Agreement constitute binding obligations on
the Company in accordance with their respective terms.
4. Share capital
(1) The Existing Shares constitute the whole of the issued and allotted share
capital of the Company and are validly issued and fully paid.
(2) Other than under the Options and Warrants set out in Schedule 4 no person
is entitled or has claimed to be entitled to require any Company to
issue any share or loan capital either now or at any future date,
whether contingently or not, and there is no subscription, option,
warrant, call, right, agreement or commitment relating to the
issuance, sale, delivery or transfer by the Company or any of its
subsidiaries (including any right of conversion or exchange under any
outstanding security or other instrument) of any Company's share
capital.
<PAGE>
(iii) The Company has good and valid title to 100% of the shares in each
of the Subsidiaries (or such lesser percentage as is indicated where relevant
in Schedule 2) and is entitled to dispose of the full legal and beneficial
ownership in such shares without the consent of any third party.
(iv) There is no option, right of pre-emption, right to acquire,
mortgage, charge, pledge, lien or other form of security or encumbrance on,
over or affecting any of the Shares or any shares in the capital of a
Subsidiary nor is there any commitment to give or create any of the foregoing,
and no person has claimed to be entitled to any of the foregoing.
5. Consequences of share issue
The execution, delivery and performance by the Company of its obligations
under this Agreement and the consummation of the transactions
contemplated hereby:
(a) will not violate any provision of any law, regulation, order or
judgment applicable to any Company;
(b) will not require any consent of, or any filing with or notification
to, any governmental or regulatory authority under any provision
of applicable law or regulation except for any consents already
obtained;
(c) will not violate or constitute a breach of any provision of the
organizational and/or foundation documents of any Company; and
(d) will not require any consent under and will not result in the
breach of any agreement to which any Company is a party or by which
any Company or any of their respective material assets, are bound,
except for such consents and waivers which have been obtained.
6. Reports filed with SEC
The Company has filed all reports required to be filed by the Company or its
subsidiaries with the SEC pursuant to the Exchange Act and the rules and
regulations of the SEC thereunder on (i) Form 10-K since 1st January, 1997 and
(ii) Forms 8-K and 10-Q since 1st January, 1999, all of which complied, as of
the date of filing, as to form in all material respects with the Exchange Act
and the rules and regulations of the SEC thereunder. None of such documents
contained at the time it was filed any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
7. Subsidiaries, associations and branches
No Company:
<PAGE>
(a) holds or beneficially owns or has agreed to acquire any securities of
any other corporation other than shares of a Subsidiary; or
(b) is or has agreed to become a member of any partnership or other
unincorporated association, joint venture or consortium (other
than recognised trade associations); or
(c) has any branch or any permanent establishment outside the country of
incorporation..
8. Compliance with laws; Licences and consents
(1) No Company, nor (so far as the Company is aware) any of its officers,
agents or employees (during the course of their duties), has done or
omitted to do anything which is a contravention of any statute,
order, regulation or the like giving rise to any fine, penalty or
other liability or sanction on the part of that Company which is
material to the operation of that Company.
(2) Each Company has all licences and consents necessary to own and operate
its assets and to carry on its business as it does at present and the
Company is not aware of anything that might result in the revocation,
suspension or modification of any of those licences or consents or
that might prejudice their renewal.
9. Corporate actions; Powers of attorney
(1) The register of members and other statutory books and registers of each
Company have been properly kept for all material purposes and no
notice or allegation that any of them is incorrect or should be
rectified has been received.
(2) All returns and particulars, resolutions and other documents which a
Company is required by law to file with or deliver to the Court or
appropriate authority have in all material respects been correctly
made up and duly filed or delivered by each Company.
(3) No Company has granted any power of attorney or similar authority to any
person who is not currently a director of a group company and which
remains in force.
10. Assets
(1) Each Company owns, or otherwise has a legal right to use, all the assets
(real or personal, tangible or intangible) that are necessary and
material to the conduct of its business and operations as presently
conducted.
(2) Except as provided in the Disclosure Letter one Company has good and valid
title to all assets which are referred to in the foregoing item (1),
in each case free and clear of all liens, mortgages or other
encumbrances other than liens that would not, individually or in the
aggregate, materially detract from the values of such assets or
materially interfere with the use of such assets or the conduct of
the business and operations of the Companies.
<PAGE>
11. Financial Statements
(1) The Company has provided the Subscriber with true and correct copies
of (i) the audited balance sheets of each of the Companies dated 31st
December, 1997 and 31st December, 1998 (the "Company Accounts") and
the audited consolidated balance sheet of the Company dated 31st
December, 1997 and 31st December, 1998 (the "Consolidated Accounts")
and in each case the related audited statements of income for the
fiscal years ending on such dates, and all annexes and notes thereto,
prepared in accordance with generally accepted accounting principles
and practices and all applicable statutes and regulations;
(2) The Company Accounts and the Consolidated Accounts give a true and
fair view of the financial position and the results of operation and
cash flows of each Company at the relevant dates and do not fail to
reflect or reserve against any material obligations of such Company
(whether accrued, absolute, contingent or otherwise) which are
customarily reflected or reserved against in accordance with
generally accepted accounting principles and practices and all
applicable statutes and regulations.
(3) Form 10-QSB filed by the Company with the SEC for the quarterly
period ended September 30th, 1999 has been prepared on bases consistent
with those employed in preparing the Company Accounts and the
Consolidated Accounts and gives a true and fair view of the income and
expenditure of the Companies for that period.
12. Position since 31st December, 1998
(1) Since 31st December 31, 1998, there has not been any:
(a) material adverse change in any Company's financial condition,
business, results of operations, properties, prospects,
liabilities (absolute, accrued, contingent or otherwise) or
assets;
(b) sale, assignment or transfer of any of the assets of any Company
or any purchase of assets or other transaction, other than in
the ordinary course of business, consistent with past practices
and on an arm's length basis;
(c) amendment, cancellation, termination, waiver or release of any
contract, lease, license or other instrument which amendment,
cancellation or termination would have, individually or in the
aggregate, a material adverse effect on the financial
condition, business, results of operations, properties,
prospects, liabilities (absolute, accrued, contingent or
otherwise) or assets of any Company (a "Material Adverse
Effect");
(d) damage, destruction or loss of any of the assets of any Company
(whether or not covered by insurance) which, individually or in
the aggregate, would have a Material Adverse Effect;
<PAGE>
(e) except as set out in the Disclosure Letter, the making of any
loan, advance or capital contribution to or investment in any
person by the Company on behalf of any Company;
(f) grant of any severance or termination pay to any officer or
employee of any Company over an amount of $50,000, or any
increase in compensation, bonus or other benefits payable to
officers or employees of any Company other than in direct
proportion to salary increases in the ordinary course of
business and consistent with past practices;
(g) change in any method of accounting or accounting practice with
respect to any Company; or
(h) dividend or other distribution of profits or assets, which
has been or agreed to be declared, made or paid by any
Company since 31st December, 1998.
13. Insolvency
(1) No liquidator, trustee in bankruptcy or similar official has been
appointed in respect of the whole or any part of the assets or
undertaking of any Company.
(2) No order has been made and no resolution has been passed for the
bankruptcy or liquidation of any Company and no petition has been
presented for the bankruptcy or liquidation of any Company.
(3) No Company is insolvent and no Company is unable to pay its debts as
they fall due.
14. Material contracts
(1) No Company is a party to any material contract which was entered into
otherwise than in the ordinary course. Except as referred to in the
disclosure Letter, the Company is not a party to any contract with an
annual expenditure or receipt in excess of $50,000 ("Material
Contract"). There are no other contracts which are material to the
business or financial condition of any Company other than the
Material Contracts.
(2) No Company has received notice that it is in default under any Material
Contract or any agreement, mortgage, charge, lien, pledge or
encumbrance which is material to the financial condition of the
Company where in any case such default is likely to have a material
adverse effect on its business. No Company is in such default under
any such agreement, mortgage, charge, lien, pledge or encumbrance.
(3) The copies of the Material Contracts made available by each Company for
inspection and referred to in the Disclosure Letter are true,
complete and up-to-date in all respects.
(4) No Company is party to a contract which is expected to result in a
loss to any Company on completion of performance of over $50,000 or
cannot be fulfilled or performed by the relevant Company on time and
without undue or unusual expenditure of money and effort.
<PAGE>
15. Insider Contracts
Except as disclosed in the Disclosure Letter, there are no subsisting material
contracts, or agreements or arrangements involving any of the Companies with
a value in excess of $50,000 or which are otherwise material to the business
and/or operations of the Company and in which any director, senior employee
or member has a material interest.
16. Vulnerable antecedent transactions
No Company has at any relevant time been party to a transaction pursuant to
or as a result of which an asset of a value in excess of $50,000 owned,
purportedly owned or otherwise held by any Company is liable to be transferred
or re-transferred to another person (whether as a result of an insolvency or
otherwise) or which gives or may give rise to a right of compensation or other
payment in favour of another person under the law of any relevant jurisdiction
or country.
17. Suppliers and customers
To the best of the knowledge, information and belief of the Company:
(a) no supplier of any Company has ceased or will cease supplying it or
has reduced or will reduce its supplies to any Company; and
(b) no customer of any Company has terminated or will terminate any
contract with it or withdraw or reduce its custom with it,
after Closing or as a result of the proposed issue of the Shares to the
Subscriber.
18. Intellectual Property Rights
(1) Except as referred to in the Disclosure Letter, there is no commercially
significant unregistered Intellectual Property that is legally or
beneficially owned by any Company.
(2) Except as referred to in the Disclosure Letter, there are no licences and
other agreements under which any Company uses Intellectual Property
owned by a third party (and support and maintenance agreements in
relation to the same) which are material to the business of any
Company.
(3) Except as referred to in the Disclosure Letter, there are no licences and
other agreements under which any Company licenses any of its
Intellectual Property (and support and maintenance agreements in
relation to the same) to third parties.
(4) No Company is in material breach of any licence or other agreement that is
listed under paragraphs 2 and 3 above and the Company is not aware of
any such breach by any third party.
<PAGE>
(5) Except as referred to in the Disclosure Letter, none of the activities of
any Company infringe the proprietary rights of any third party.
(6) Except as referred to in the Disclosure Letter, the Company is not aware of
any third party infringing or threatening to infringe the Company's
proprietary rights.
(7) The copyright in all the software applications used by the Companies is
legally and beneficially owned one of the Companies.
(8) Except as referred to in the Disclosure Letter, there are no licences of
software (either to or from one of the Companies).
(9) One of the Companies legally and beneficially owns all computer hardware
and peripheral that it uses.
(10) Except as referred to in the Disclosure Letter, there are no leases and
support agreements in relation to hardware and peripherals used by
the Companies with an annual revenue value of over $50,000.
(11) There are no escrow agreements in relation to source code of software
licensed to or by any of the Companies.
(12) Except as referred to in the Disclosure Letter, there are no agreements
with Internet Service Providers, Network Service Providers, telecoms
companies, newsgroup providers or similar entities which support the
business.
(13) Except as referred to in the Disclosure Letter, there are no agreements and
other arrangements for links, net advertising (including, without
limitation, management of advertising space), or other Internet-specific
relationships, including registrations with any search
engines with an annual revenue value of over $50,000.
(14) Each of the Companies has complied with all relevant Data Protection laws
and regulations and has provided a copy of its Data Protection
registration and/or notification to the Subscriber.
(15) No proceedings have been brought against any of the Companies by any
individual or regulatory body in relation to failure to comply with
relevant Data Protection laws or regulations.
(16) All hardware, software (including firmware) and other processes used by any
of the Companies (whether or not automated) (the "Systems") are
Millennium Compliant.
For the purposes of this warranty:
"Millennium Compliant" means that the Systems are able to provide all
of the following functions:
(i) accurately process all date information whether before,
during or after 1st January 2000, including but not limited to
accepting date input, providing accurate date output and
performing accurate calculations involving dates or portions of
dates;
<PAGE>
(ii) function accurately, efficiently and without interruption
before, during and after 1st January 2000 without any change in
operations, or in any input or output procedures;
(iii)accurately process date input in a way that does not
create any ambiguity as to century;
(iv) accurately store, retrieve and process date information
in a manner that does not create any ambiguity as to century;
(v) accurately present all date output information in a
manner that does not create any ambiguity as to century.
(17) Except as referred to in the Disclosure Letter, there are no internet
domain names which any of the Companies uses or hosts.
(18) The use of the internet domain names listed pursuant to paragraph (18) by
the Companies does not infringe the proprietary rights of any third
party.
19. Insurance
All the assets and undertaking of each Company of an insurable nature are
insured in amounts representing their full replacement or reinstatement
value against fire and other risks normally insured against by persons
carrying on the same classes of business as those carried on by that
Company and the Companies are adequately covered against accident,
damage, injury, third party loss, loss of profits and other risks
normally covered by insurance.
20. Bank accounts and indebtedness
The Company has no bank or deposit accounts and no loans or
indebtedness other than as referred to in the Disclosure Letter.
21. Loans and Guarantees
(1) Except as referred to in the Disclosure Letter, no Company has lent any
money which is due to be repaid and as at the date of this agreement
has not been repaid to it or owns the benefit of any debt, other than
debts accrued to it in the ordinary course of its business.
(2) No Company is responsible for the indebtedness of any other person or
entity by way of guarantee or surety or otherwise for an amount in
excess of $10,000 in aggregate.
22. Litigation
<PAGE>
(1) No Company is engaged in any litigation or arbitration proceedings
except as plaintiff for collection of debts not exceeding an aggregate of
$50,000 in the case of all sums being collected by all the Companies or a
sum not exceeding $20,000 in the case of any one debt due to any one of the
Companies and there are no such proceedings pending or threatened by any
Company.
(2) The Company is not aware of anything which is likely to give rise to
any litigation or arbitration proceedings by or against any Company for a
sum exceeding in any case $50,000.
(3) No Company is the subject of any investigation, inquiry or
enforcement proceedings or process by any governmental, administrative or
regulatory body nor is the Company aware of anything which is likely to
give rise to any such investigation, inquiry, proceedings or process where
it may have in any case a material adverse effect on the Companies.
23. Environment
(1) No Company has received a written or unwritten notification or claim
that it or any of its facilities or properties is in violation of any
law, rule, regulation or ordinance relating to pollution or
protection of the environment (collectively the "Environmental Laws"),.
(2) Each Company has obtained all permits, licences and other
authorizations which are required under the Environmental Laws. There are
no past, present or future events, conditions, circumstances, activities,
practices, incidents or plans which may interfere with or prevent
compliance with the Environmental laws by any Company. No pollutant,
contaminant, chemical or industrial, toxic or hazardous substance or waste
has been buried in or stored on the properties and facilities of any
Company, or has spilled, leaked, discharged, emitted or released, on or
from any of the properties or facilities of any Company.
(3) There are no existing conditions which may lead to responsibilities
or liabilities, or an assertion thereof by any governmental entity or
private person, based on any action or inaction by any Company
relating to the management and disposal of toxic or hazardous
substances and wastes. No Company has received information indicating
that any person, including any employee, may have impaired health as
the result of any exposure to hazardous materials located on or
contained in such properties.
24. Employees
(1) There are no employees of the Companies except as referred to in the
Disclosure Letter and the Disclosure Letter makes reference to the
correct job description and remuneration payable and other principal
benefits provided to such employees, as well as their correct terms of
employment.
(2) None of the directors, managing directors or principal employees
(i.e. heads of departments) of the Company has given notice to
terminate his employment.
(3) Save as disclosed pursuant to (1) above, there is not outstanding
any agreement to which the Company is a party for profit-sharing or for
payments to any of its directors or employees of bonuses or for
incentive payments.
(4) The Company is not under an obligation to pay nor has it since
31st December, 1998 paid or agreed to pay any compensation for loss of
office for an amount in excess of $50,000 to any of its directors or
employees.
<PAGE>
(5) (a) Each Company is in material compliance with all applicable
laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged
in any unfair labour practice;
(b) there is no unfair labour practice complaint against any
Company pending before the National Labor Relations Board or
any equivalent regulatory authority in any other jurisdiction;
(c) there is no labor strike, dispute, slowdown, representation
campaign or work stoppage actually pending or threatened
against or affecting any;
(d) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claim
therefor has been asserted against the Company or any of its
subsidiaries; and
(e) neither the Company nor any of its subsidiaries has experienced
any material work stoppage.
25. Pensions
(1) Each Company has fulfilled its obligations under minimum funding standards
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Code of 1986, as amended (the
"Code"), which respect to each "employee pension benefit plan" (as
defined in clause 3(2) of ERISA) which is subject in all respects to
Parts 2, 3 and 4 of Subtitle B of Title I of ERISA (the "Pension
Plans").
(2) The Pension Plans are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code.
(3) No Company has incurred any liability to the Pension Benefit Guaranty
Corporation with respect to any Pension Plan.
(4) Each Pension Plan is qualified under clause 401(a) of the Code.
(5) No withdrawal liability has been incurred by or asserted against any
Company with respect to any "employer plan" (as defined in clause 3(38)
of ERISA).
(6) The Disclosure Letter makes reference to each Pension Plan and each
"employee welfare benefit plan" (as defined in clause 3(1) of ERISA) of
each Company. Each Company is in compliance with all similar pension and
benefit legislation outside the US applicable to the business, operations
or employees of the relevant Company.
<PAGE>
26. Taxation
(1) Each Company has duly filed all material reports and returns of Taxes
(as defined below) required to be filed by it and has duly paid or made
provision for payment of all material Taxes and other charges shown on such
reports and returns.
(2) The reserves for Taxes reflected in the Consolidated Accounts are
adequate, and there are no material tax liens upon any property or assets
of the Company or any of its Subsidiaries, except liens for current Taxes
not yet due or delinquent or the validity of which is being contested in
good faith by appropriate proceedings.
(3) The federal income tax returns of the Company and each of its
Subsidiaries have been examined by the Internal Revenue Service or other
equivalent governmental authority for each of the last two financial years,
and, except to the extent stated in the Disclosure Letter, all deficiencies
asserted as a result of such examinations have been paid or finally
settled.
(4) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any federal income tax return
for any period.
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
including income, excise, property, sales and franchise taxes, imposed by
the United States, or any state, county, local or foreign government or
subdivision or agency thereof, and including any interest, penalties or
additions attributable thereto.
27. Real property
(1) No Company owns any real property.
(2) (a) All leases pursuant to which the Company or any of its
subsidiaries leases real property are valid, binding and
enforceable in accordance with their terms, and are in full
force and effect.
(b) There are no existing defaults by the Company or any of its
subsidiaries under such leases.
(c) No event has occurred which (whether with or without notice,
lapse of time or both) would constitute a default under any
material lease.
<PAGE>
SCHEDULE 4
DETAILS OF OPTIONS AND WARRANTS
Options Outstanding
Option Holder Number of Options
Richard Koza and Lucie Kozova 50,000
Imre M. Kovats 25,000
Frank Cohen 515,000
Robert Genova 500,000
Csaba Toro 465,000
Peter Klenner 100,000
Laszlo Josa 10,000
Kriszine Holla 10,000
John B. Ryan 5,000
Donald K. Roberton 100,000
Radio Telephony 50,000
Richard Maresca 100,000
Total 1,930,000
Warrants outstanding
Warrant Holder Number of Warrants
MJJ Management Group Corp. 200,000
Steve Altman 50,000
Kenneth S. Grossman 25,000
Edward S. Gutman 50,000
Hudson Investment Partners 25,000
Augustus La Rocca and
Joseph La Rocca 250,000
Joel Stuart 50,000
George Szakacs 100,000
J.P. Carey Securities Inc. 206,514
Gerald Yellin 50,000
Augustus La Rocca
and Joseph La Rocca 114,284
Greenwood Partners LP 399,994
GMG & Associates Inc. 57,142
Silverman Partners LP 399,994
Edward S. Gutman 257,138
The Gutman Family 57,142
HRG Trust 57,142
Stuart Orsher 28,570
Robert Gutman 57,140
Mel Paikoff 57,142
Mark D. Greenberg 57,142
Randy Frankel and Barbara Frankel 114,284
Stuart Sternberg 57,142
Penelope A. Collins 57,140
Paul L. Karp 57,142
Nicholas D. Ponzio Jr. 57,142
Total 2,892,194
Total warrants and options
outstanding 4,822,194
<PAGE>
IN WITNESS WHEREOF, the Company and the Subscriber have caused to be signed
by its duly authorised officers this Agreement as of the date written on
the first page.
By:________________________________
Name:
Title:
for EUROWEB INTERNATIONAL CORP.
By:________________________________
Name:
Title:
for KPN TELECOM B.V.
By:________________________________
Name: FRANK COHEN
Title:
By:________________________________
Name: CSABA TORO
Title:
<PAGE>
APPENDIX III
<PAGE>
APPENDIX III
Dated as of 19th November, 1999
KPN TELECOM B.V.
and
EUROWEB INTERNATIONAL CORP.
__________________________________
AMENDED AND RESTATED
OPTION AGREEMENT
relating to
Shares of Common Stock of EUROWEB INTERNATIONAL CORP.
__________________________________
Signed on 19th November, 1999
and amended and restated on 13th December, 1999
ALLEN & OVERY
<PAGE>
CONTENTS
CLAUSES PAGE
1. Interpretation. . . . . . . . . . . . . . . . . . . . 1
2. Grant of the KPN Options. . . . . . . . . . . . . . . 2
3. The Option Price. . . . . . . . . . . . . . . . . . . 3
4. Exercise of the KPN Options . . . . . . . . . . . . . 3
5. Conditions Precedent. . . . . . . . . . . . . . . . . 3
6. Completion. . . . . . . . . . . . . . . . . . . . . . 4
7. Adjustments . . . . . . . . . . . . . . . . . . . . . 4
8. Certification . . . . . . . . . . . . . . . . . . . . 4
9. Specific Performance. . . . . . . . . . . . . . . . . 4
10. Warranties. . . . . . . . . . . . . . . . . . . . . . 5
11. Notices . . . . . . . . . . . . . . . . . . . . . . . 5
12. Announcements . . . . . . . . . . . . . . . . . . . . 6
13. Further assurances. . . . . . . . . . . . . . . . . . 6
14. General . . . . . . . . . . . . . . . . . . . . . . . 6
16. Governing law and jurisdiction. . . . . . . . . . . . 7
SCHEDULES
<PAGE>
1. Form of Rejection Notice . . . . . . . . . . . . . . . 8
2. Form of Rejection Notice . . . . . . . . . . . . . . . 9
Schedule 3 . . . . . . . . . . . . . . . . . . . . . . . . . . 10
THIS AMENDED AND RESTATED AGREEMENT is dated as of 19th November, 1999 BETWEEN:
(2) EUROWEB INTERNATIONAL CORP., a Delaware corporation whose principal
place of business is at 445 Park Avenue, 15th Floor, New York, NY
10022 (the "Company"); and
(2) KPN TELECOM B.V., a Netherlands limited liability company
incorporated in the Netherlands whose registered office is at
Maanplein 5, The Hague, The Netherlands (the "Subscriber").
RECITALS:
(A) The Company has granted various options and warrants to third
parties, each as described in Schedule 3, in respect of shares of
common stock of the Company.
(B) The Company wishes to grant to the Subscriber Options which mirror
the Third Party Options on the terms and subject to the conditions of
this agreement so that the Subscriber may maintain its 51 per cent.
stake in the Company, as more fully set out in the Subscription
Agreement (the "Subscription Agreement") of today's date between the
Company, the Subscriber, Frank Cohen and Csaba Toro as directors.
(C) The parties have amended and restated the option agreement executed
by the parties on 19th November, 1999 to correct certain inaccuracies
in Schedule 3 thereto. This amended and restaetd agreement, including
the correct Schedule 3, sets out the agreement between the parties
as of 19th November 1999.
IT IS AGREED as follows:
22. Interpretation
(1) In this agreement:
"Adjustment" means an adjustment to the Shares and/or the Option
Price in accordance with clause 7;
"Business Day" means a day (other than a Saturday or a Sunday) on
which banks are generally open in New York for normal business;
"Company" includes any other issuer of any securities which for the
time being form part of the Shares as a result of any Adjustment;
"Completion Date" means the date for completion of the issue and
subscription of the Third Party Option Shares and the Shares in
accordance with clause 6(1);
"Corresponding Option" means each KPN Option set out in column 4 of
Schedule 3 which corresponds to the Third Party Option set out next
to such KPN Option in columns 2 and 3 of Schedule 3;
"Exercise Date" means the date on which a Third Party Option Holder
notifies the Company that it wishes to exercise its Third Party
Option;
<PAGE>
"Exercise Notice" means a notice substantially in the form of
Schedule 1;
"KPN Option" means each call option specified in columns 1 and 4 of
Schedule 3 granted by the Company to the Subscriber under clause 2;
"Option Price" means the price per Share referred to in clause 3;
"Rejection Notice" means a notice substantially in the form of
Schedule 2;
"Reorganisation" means every issue by way of capitalisation of
profits or reserves and every issue by way of rights and every
consolidation or sub-division or reduction of capital or capital
distribution or other reconstruction or adjustment relating to the
equity share capital of the Company and any amalgamation or
reconstruction affecting the equity share capital of the Company;
"Shares" means, with respect to any KPN Option, the number of shares
of ordinary common stock of the Company specified in column 3 of
Schedule 3 and includes such other securities as are for the time
being subject to an KPN Option as a result of any Adjustment;
"Third Party Option" means each third party option or warrant
specified in column 2 and 3 of Schedule 3;
"Third Party Option Holder" means each third party specified in
column 2 of Schedule 3 as holding the Third Party Option; and
"Third Party Option Shares" means, with respect to any Third Party
Option, the number of shares of ordinary common stock which the
Company must issue to a Third Party Option Holder upon exercise of
such Third Party Option specified in column 3 of Schedule 3.
(2) In this agreement:
(i) references to a person include a body corporate and an
unincorporated association of persons;
(ii) references to a natural person include his estate and
personal representatives; and
(iii) subject to clause 14(2) below, references to a party to
this agreement include references to the successors or assigns
(immediate or otherwise) of that party.
(3) Subclauses (1) and (2) above apply unless the contrary intention
appears.
(4) The headings in this agreement do not affect its interpretation.
<PAGE>
23. Grant of the KPN Options
(i) In consideration of the Subscriber subscribing 51 per cent. of the
outstanding share capital of the Company under the Subscription Agreement, the
Company grants to the Subscriber each KPN Option to subscribe the Shares at
the Option Price on the terms and subject to the conditions of this agreement.
24. The Option Price
The price payable by the Subscriber for the Shares shall be the sum
of $1.38 per share, subject to any Adjustment.
25. Exercise of the KPN Options
(1) Within 1 Business Day of a Third Party Option Holder exercising its
Third Party Option, the Company shall serve an Exercise Notice on the
Company notifying the Subscriber that the Third Party Option Holder
has exercised the Third Party Option, referring to it by the number
given to it in Schedule 3 and describing the Corresponding Option as
set out in Schedule 3.
(2) The Subscriber shall be deemed to have exercised the Corresponding
Option subject of the Exercise Notice if it does not serve a
Rejection Notice on the Company within 2 Business Days of receiving
an Exercise Notice under subclause (1).
(3) A Corresponding Option may only be exercised in respect of all (and
not some only) of the Shares, unless the Third Party Option has been
exercised in part only, in which case the Exercise Notice shall
specify that the Corresponding Option may be exercised in part only,
in respect of Shares amounting to 100% of the number of Third Party
Option Shares which were the subject of the corresponding Third Party
Option which was exercised. In case of such part exercise, the
Subscriber shall be deemed to have exercised the Corresponding Option
in part, as described in this clause, if it does not serve a
Rejection Notice on the Company within 2 Business Days of receiving
an Exercise Notice under subclause (1).
(4) Exercise of a Corresponding Option shall oblige the Company to issue
and the Subscriber to subscribe the Shares.
(5) The Shares shall be issued free from all liens, charges, equities and
encumbrances and together with all rights attached to the Shares at
the date of service of the Exercise Notice.
(6) If a Third Party Option is not duly exercised within the relevant
period specified in such Third Party Option, the Corresponding Option
shall cease to be exercisable and shall lapse.
<PAGE>
(7) Notwithstanding the foregoing, in the event the Company delivers an
Exercise Notice in respect of less than 500,000 Third Party Option
Shares in aggregate, the Subscriber may, within 2 Business Days of
receiving the Exercise Notice, notify the Company that it wishes to
exercise the Corresponding Option but wishes to delay the Completion
Date until at least 500,000 Third Party Option Shares in aggregate
have become the subject of this and future Exercise Notices. In such
case, the Subscriber shall be deemed to have exercised the
Corresponding Option in respect of all of the subject Shares whose
subscription is so delayed, and shall complete the subscription of
the subject Shares in accordance with clause 6.
5. Conditions Precedent
(i) The exercise of each Corresponding Option shall be conditional on
(i) Closing (as defined in the Subscription Agreement) under the Subscription
Agreement and (ii) exercise of the related Third Party Option.
6. Completion
(1) Completion of any issue and subscription of the Shares following the
exercise of a Corresponding Option shall take place simultaneously
with the scheduled completion for the Third Party Option as set out
in the Exercise Notice or, if the outcome of any Adjustment is not
known at that time, the third Business Day after the outcome has been
ascertained.
(2) At that time the Company shall procure the delivery to the Subscriber
of:
(a) the share certificate(s) representing the Shares; and
(b) such other documents as may be necessary to enable the
Subscriber or its nominee(s) to obtain good title to the
Shares.
(3) Against delivery of the documents referred to in subclause (2) above,
the Subscriber shall pay in full for the Shares in immediately
available funds.
(4) If for any reason the provisions of subclause (2) are not fully
complied with the Subscriber shall be entitled (in addition and
without any prejudice to all other rights or remedies available to
it) to elect to rescind this agreement or to fix a new Completion
Date.
<PAGE>
7. Adjustments
(ii) If any Reorganisation takes place after the date of this agreement
but on or before the Exercise Date, all shares, stock and other securities (if
any) which become owned by the Company or to which it may be entitled as a
result of the Reorganisation shall be subject to the KPN Option and/or the
Option Price shall be adjusted appropriately to take account of any such
Reorganisation.
8. Certification
On 15th January of each year, the secretary of the Company shall
deliver to the Subscriber a certificate (the "Secretary's
Certificate") setting out, with respect to the previous 12 months:
(a) the number of Third Party Option Shares issued to Third Party
Option Holders;
(b) the number of Shares issued to the Subscriber as a result of
the exercise of KPN Options;
(c) the number of shares of common stock of the Company outstanding
as of the date of the Secretary's Certificate; and
(d) the percentage of shares in the Company owned by the Subscriber
as of the date of the Secretary's Certificate as shown in the
Company's records.
9. Specific Performance
It being the intention of the parties that the Subscriber maintain
its holding of 51 per cent. of the outstanding share capital of the
Company, and it being acknowledged by each of the parties that the
Subscriber may suffer irreparable harm in the event the Company fails
to notify the Subscriber of the exercise of a Third Party Option, the
parties agree that the Subscriber will be entitled to equitable
relief, including specific performance, in the event the Company
breaches any of its obligations under this agreement.
10. Warranties
(iii) The Company represents, warrants and undertakes to the Subscriber
that:
(a) other than under the Third Party Options no person is entitled
or has claimed to be entitled to require the Company to issue
any share or loan capital either now or at any future date,
whether contingently or not, and there is no subscription,
option, warrant, call, right, agreement or commitment relating
to the issuance, sale, delivery or transfer by the Company or
any of its subsidiaries (including any right of conversion or
exchange under any outstanding security or other instrument) of
the Company's share capital.
<PAGE>
(b) the Company has the requisite power and authority to enter into
and perform this agreement;
(c) this agreement has been duly authorised and executed by, and
constitutes a binding obligation on, the Company;
(d) compliance with the terms of this agreement does not and will
not conflict with or constitute a default under any provision
of:
(i) any agreement or instrument to which the Company is a
party; or
(ii) the Company's certificate of incorporation or by-laws; or
(iii)any lien, lease, order, judgment, award, injunction,
decree, ordinance or regulation or any other restriction
of any kind or character by which the Company is bound;
(e) no further consent, approval or authorisation of any
governmental agency or other person is required by it for the
entry into and the performance of its obligations under this
agreement; and
(f) the Company has the right to issue the full legal and
beneficial interest in the Shares free from any lien, charge,
equity or encumbrance and all the Shares are fully paid or
credited as fully paid.
11. Notices
(iv) Any notice or other document to be served under this agreement may
be delivered or sent by facsimile process to the party to be served at its
address appearing in this agreement or at such other address as it may have
notified to the other parties in accordance with this clause.
(v) Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if sent by facsimile process, at the expiration of 2 hours
after the time of despatch, if despatched before 3.00 p.m. on any
Business Day, and in any other case at 10.00 a.m. on the Business
Day after the date of despatch.
<PAGE>
(vi) In proving service of a notice or document it shall be sufficient
to prove that delivery was made or that the facsimile message was properly
addressed and despatched as the case may be.
12. Announcements
Neither party shall make or permit any person connected with it to
make any announcement concerning this agreement or any ancillary
matter except as required by law or any competent regulatory body or
with the written approval of the other parties, such approval not to
be unreasonably withheld or delayed.
13. FURTHER assurances
(vii) The Company will, at its own cost and expense, execute and do (or
procure to be executed and done by any other necessary party) all such deeds,
documents, acts and things as the Subscriber may from time to time after the
relevant Completion Date require in order to vest any of the Shares in the
Subscriber or as otherwise may be necessary to give full effect to this
agreement.
14. General
(1) Each obligation, representation and warranty on the part of each
party under this agreement (except any obligation fully performed)
shall continue in force after the Completion Date.
(2) None of the rights or obligations under this agreement may be
assigned or transferred by one party without the written consent of
the other party.
(3) This agreement and the documents referred to in it contain the whole
agreement between the parties relating to the transactions
contemplated by in this agreement and supersede all previous
agreements between the parties relating to those transactions.
(4) In entering into this agreement no party may rely on any
representation, warranty, collateral contract or other assurance
(except those set out in this agreement and the documents referred to
in it) made by or on behalf of any other party before the signature
of this agreement and each of the parties waives all rights and
remedies which, but for this subclause, might otherwise be available
to him in respect of any such representation, warranty, collateral
contract or other assurance; provided that nothing in this subclause
shall limit or exclude any liability for fraud.
(5) This agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement and
any party may enter into this agreement by executing a counterpart.
(6) Each party shall bear its own costs and expenses incidental to the
negotiation, preparation and completion of this agreement and the
Subscriber shall be solely liable for payment of any stamp duty or
stamp duty reserve tax in respect of any transfer of the Shares.
<PAGE>
16. Governing law and jurisdiction
This agreement is governed by and shall be construed in accordance
with the law of the State of New York. The Subscriber submits to the
jurisdiction of the New York courts for all purposes relating to this
agreement.
AS WITNESS the hands of the duly authorised representatives of the parties
on the date which appears first on page 1.
<PAGE>
SCHEDULE 1
FORM OF EXERCISE NOTICE
To: [The Subscriber]
Dear Sirs,
We refer to the Option Agreement dated [ ] between you and us and
to the KPN Option granted by us to you under that agreement.
We hereby give notice under clause 3 of the Option Agreement that [specify
Third Party Option Holder] has exercised [specify Third Party Option] in
respect of [specify Third Party Option Shares]. In the event you do not
respond within 2 Business Days of receiving this notice by delivering to us
a Rejection Notice, you shall be deemed to have exercised the following
Corresponding Option:
[Specify terms of KPN Option]
By not responding to this notice, you agree to deliver $ to us in
immediately available funds on the Completion Date, which shall be .
Yours faithfully,
For and on behalf of
[The Company]
<PAGE>
SCHEDULE 2
FORM OF REJECTION NOTICE
To: [The Company]
Dear Sirs,
We, [the Subscriber], refer to the Option Agreement dated [ ] and
between you and us and to the KPN Option granted by you to us under that
agreement.
We refer to the Exercise Notice dated which you delivered to us and
notify you that we do not exercise our Corresponding Option to subscribe
the subject Shares.
Yours faithfully,
For and on behalf of
[The Subscriber]
<PAGE>
SCHEDULE 3
DETAILS OF OPTIONS AND WARRANTS
Options outstanding
Option Holder Number of Options
Richard Koza and Lucie Kozova 50,000
Imre M. Kovats 25,000
Frank Cohen 515,000
Robert Genova 500,000
Csaba Toro 465,000
Peter Klenner 100,000
Laszlo Josa 10,000
Kriszine Holla 10,000
John B. Ryan 5,000
Donald K. Roberton 100,000
Richard G. Maresca 100,000
Radio 50,000
Total 1,880,000
Warrant Holder Warrants outstanding
12. MJJ Management Group Corp. 200,000
13. Steve Altman 50,000
14. Kenneth S. Grossman 25,000
15. Edward S. Gutman 50,000
16. Hudson Investment Partners 25,000
17. Augustus La Rocca and
Joseph La Rocca 250,000
18. Joel Stuart 50,000
19. George Szakacs 100,000
20. J.P. Carey Securities Inc. 206,514
21. Gerald Yellin 50,000
22. Augustus La Rocca
and Joseph La Rocca 114,284
23. Greenwood Partners LP 399,994
24. GMG & Associates Inc. 285,710
25. Silverman Partners LP 57,142
26. Edward S. Gutman 257,138
27. The Gutman Family 57,142
28. HRG Trust 57,142
29. Stuart Orsher 28,570
30. Robert Gutman 57,140
31. Mel Paikoff 57,142
32. Mark D. Greenberg 57,142
33. Randy Frankel and Barbara Frankel 114,284
34. Stuart Sternberg 57,142
35. Penelope A. Collins 57,140
36. Paul L. Karp 57,142
37. Nicholas D. Ponzio Jr. 57,142
Total 3,120,762
Total warrants
and options
outstanding 5,000,762
<PAGE>
The Company:
EUROWEB INTERNATIONAL CORP.
By:___________________________________
Name:
Title
The Subscriber:
KPN TELECOM B.V.
By:___________________________________
Name:
Title
