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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
June 11, 1997, among Cybernet Internet Services International, Inc., a Delaware
corporation ("Cyber U.S."); and Cybermind Interactive Europe AG, a German
corporation, and Rudolf Strobl, Roland Manger, Thomas Schulz, Andreas Eder and
Holger Timm, all residents of Germany, being the holders of all the issued and
outstanding capital stock of Cybernet Internet-Dienstleistungen AG, a German
stock corporation ("Cybernet") (individually, a "Stockholder" and collectively,
the "Stockholder").
BACKGROUND:
All of the issued and outstanding capital stock of Cybernet, consisting of
640,000 shares of voting common stock, par value 5.00DM (the "Cybernet Stock")
is owned by the Stockholders.
The Stockholders have agreed to sell to Cyber U.S. and Cyber U.S. has
agreed to purchase from the Stockholders the Cybernet Stock on the terms and
conditions set forth in this Agreement.
In consideration of the mutual representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
STATEMENT OF TERMS:
SECTION 1
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE OF STOCK. Stockholders will sell to Cyber U.S. and
Cyber U.S. will purchase from Stockholders all of the Stockholders' right,
title and interest in the Cybernet Stock.
1.2 CONSIDERATION: STOCK EXCHANGE. At the Closing (as defined in Section
2.1 below), upon surrender of the certificates evidencing 640,000 shares of
the Cybernet Stock duly endorsed for transfer to Cyber U.S., Cyber U.S. will
cause 5,160,000 shares of the common voting stock, par value $0.001 of Cyber
U.S. ("Cyber Common"), 1,200,000 shares of the redeemable, convertible
preferred non-voting stock, Series A of Cyber U.S. having substantially the
rights and preferences set forth on Exhibit "A" to this Agreement ("Cyber A
Preferred") and 5,160,000 shares of the redeemable, convertible preferred
voting stock, Series B of Cyber U.S. having substantially the rights and
preferences set forth in Exhibit "B" to this Agreement ("Cyber B Preferred")
(collectively, the "Cyber U.S. Stock") (the "Consideration") to be issued to
the Stockholders pursuant to Section 1.5 of this Agreement. As a result of the
sale of the Cybernet Stock and the payment of the Consideration, Cybernet will
be a wholly-owned subsidiary of Cyber U.S.
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1.3 ISSUANCE OF CYBER U.S. STOCK TO STOCKHOLDERS. At the Closing, the
Pooling Trustee (as defined in Section 2.3(e) below) will receive stock
certificates for each Stockholder in the name of the Pooling Trustee for the
number of shares of Cyber Common Cyber A Preferred and Cyber B Preferred
respectively shown next to the name such Stockholder at the end of this
Agreement, being an exchange of 18 shares of Cyber U.S. Stock for each share of
Cybernet Stock being sold by each Stockholder and an aggregate of 11,520,000
shares of Cyber U.S. Stock.
1.4 NO FURTHER OWNERSHIP RIGHTS IN CYBER U.S. STOCK. The issuance of the
11,520,000 shares of Cyber U.S. Stock to be delivered to the Pooling Trustee at
Closing will be deemed to have been given in full satisfaction of all rights
pertaining to the Cybernet Stock and in full payment of the Consideration.
1.5 FINANCING. As a part of and subject to the Closing, Cyber U.S. agrees
to provide, on or before July 30, 1997, financing to Cybernet in the amount of
$6,750,000 net of all costs, expenses, fees and commissions related to such
financing through the issuance of up to 1,500,000 exchangeable preferred shares
Series C of Cyber U.S. (the "Financing") which shares shall have substantially
the right and powers set forth on Exhibit "C" to this Agreement, subject to
such modifications as may be required to comply with applicable securities laws
and to give effect to the Financing and the transactions among the parties as
mutually desired under Generally Accepted Accounting Principles and applicable
tax laws.
SECTION 2
CLOSING; CLOSING CONDITIONS
2.1 CLOSING. The parties to this Agreement will hold a closing (the
"Closing") for the purpose of consummating the transactions contemplated by
this Agreement at 10:00 am on July 30, 1997 or such other date and time
mutually agreed upon by the parties. The Closing will be held at the offices of
Rinderknecht, Glaus and Stadelhofer, Beethovenstrasse 7, Zurich Switzerland.
The date on which the Closing actually occurs is hereinafter referred to as the
"Closing Date." At the Closing, the parties will execute and exchange the
following documents, items, certificates and instruments described in this
Section 2.
2.2 CONDITIONS TO CLOSING OF CYBER U.S. Cyber U.S.'s obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the conditions set forth below and/or the delivery of all of
the documents, items, certificates and instruments described below, all of
which documents, items, certificates and instruments must be in form and
substance satisfactory to Cyber U.S., unless such condition is waived by Cyber
U.S. at the Closing. The Closing of the transactions contemplated by this
Agreement will be deemed to mean a waiver of all conditions to Closing.
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(a) Transaction Documents. The Stockholders will have executed this
Agreement and delivered all of the issued and outstanding shares of Cyber
Stock as provided in Section 1.2 above.
(b) Representations and Warranties. The representations and warranties of
the Stockholders set forth in this Agreement will be true, correct and complete
in all respects as of the Closing Date, as though made on and as of the Closing
Date. The Stockholder will have given such representations and warranties as
Cybernet U.S. or its counsel may reasonably require to assure compliance with
applicable securities laws, including without limitation Regulation S
promulgated under the U.S. Securities Act of 1933, as amended.
(c) No Action. No suit, action, or proceeding will be pending or
threatened before any governmental or regulatory authority wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge would
(1) prevent consummation of any of the transactions contemplated by this
Agreement; (2) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation; or (3) adversely affect the right of
Cybernet to own, operate or control the business or assets of Cybernet.
(d) Consents. Cybernet will have received duly executed copies of all
third-party consents and approvals contemplated by this Agreement.
(e) Shareholder Approval. The merger of New Century Technology, Inc.
(also known as "Cybernet Internet Services International, Inc."), a Utah
corporation ("Cyber Utah"), and the acquisition of all of the issued and
outstanding shares of Cybernet by Cyber U.S. as provided in this Agreement will
have been approved by the shareholders of Cyber Utah and Cyber U.S. and such
merger shall have become effective.
(f) Pooling Trust Agreement. The Stockholders will have executed a
pooling trust agreement (the "Pooling Trust Agreement"), substantially
acceptable to Cyber U.S., with Dr. Hubert Besner, Rechtsanwalt (the "Pooling
Trustee") providing that the Cyber U.S. shares making up the Consideration and
any Cyber U.S. Stock issued in connection therewith shall be held by the
Pooling Trustee and not sold, except to another Stockholder, until released by
the Pooling Trustee, that twenty-five percent (25%) of such Cyber U.S. shares
shall be released on January 1, 1999, that an additional 25% of such shares
shall be released on January 1, 2000, that the remainder of such shares shall
be released on January 1, 2001 and that the Stockholders shall have a right
pari passu of first refusal to purchase any of the shares held by the Pooling
Trustee that a Stockholder desires to sell.
(g) No Material Adverse Change. Since December 31, 1996, no "Cybernet
Material Adverse Effect" (as defined in Section 3.1 below) will have occurred.
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(h) OPINION OF COUNSEL. The Stockholders will furnish Cyber U.S. with an
opinion, dated the Closing Date, of counsel satisfactory to Cyber U.S. in form
and substance satisfactory to Cyber U.S. and its counsel.
(i) FINANCING CLOSING. The Financing shall close simultaneously with and
as a part of the Closing.
(j) DUE DILIGENCE REVIEW. Cyber U.S. will be satisfied in all respects with
its due diligence investigation of Cybernet.
2.3 CONDITIONS TO CLOSING OF THE STOCKHOLDERS. The Stockholders' obligation
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the conditions set forth below and/or the delivery of all of the
documents, items, certificates and instruments described below, all of which
documents, items, certificates and instruments must be in form and substance
satisfactory to the Stockholders, unless such condition is waived by the
Stockholders at the Closing. The Closing of the transactions contemplated by
this Agreement will be deemed to mean a waiver of all conditions to Closing.
(a) TRANSACTION DOCUMENTS. Cyber U.S. will have executed this Agreement and
delivered the shares of Cyber U.S. Stock as provided in Section 1.3 above.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Cyber U.S. set forth in this Agreement will be true, correct and complete in all
respects as of the Closing Date, as though made on and as of the Closing Date.
(c) NO ACTION. No suit, action, or proceeding will be pending or threatened
before any governmental or regulatory authority wherein an unfavorable judgment,
order, decree, stipulation, injunction or charge would (1) prevent consummation
of any of the transactions contemplated by this Agreement; (2) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation; or (3) adversely affect the right of Cyber U.S. to own, operate or
control the business or assets of Cyber U.S.
(d) FINANCING CLOSING. The Financing shall close simultaneously with and as
a part of the Closing.
(e) POOLING TRUST AGREEMENT. All of the Stockholders will have executed the
Pooling Trust Agreement with the Pooling Trustee providing that the Cyber U.S.
shares making up the Consideration shall be held by the Pooling Trustee and not
sold, except to another Stockholder, until released by the Pooling Trustee, that
twenty-five percent (25%) of such Cyber U.S. shares shall be released on January
1, 1999, that an additional 25% of such shares shall be released on January 1,
2000, that the remainder of such shares shall be released on January 1, 2001 and
that the Stockholders shall have a right pari passu of first
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refusal to purchase any of the shares held by the Pooling Trustee that a
Stockholder desires to sell.
(f) OPINION OF COUNSEL. Cyber U.S. will furnish the Stockholders with an
opinion, dated the Closing Date, of its counsel, in form and substance
satisfactory to the Stockholders and their counsel.
(g) COPIES OF RESOLUTIONS: SHAREHOLDERS APPROVAL. Cyber U.S. will have
furnished the Stockholders with certified copies of resolutions duly adopted by
the Board of Directors of Cyber U.S. approving the execution and delivery of
this Agreement and the other documents to be executed and delivered in
connection with this Agreement and consummation of the transactions contemplated
hereby and thereby. The merger of Cyber Utah and the acquisition of all of the
issued and outstanding shares of Cybernet by Cyber U.S. as provided in this
Agreement will have been approved by the shareholders of Cyber Utah and Cyber
U.S. and such merger shall have become effective.
(h) DUE DILIGENCE REVIEW. The Stockholders will be satisfied in all
respects with its due diligence investigation of Cyber U.S.
2.4 DIRECTORS AND OFFICERS.
(a) DIRECTORS AND OFFICERS OF CYBER U.S. Effective immediately after the
Closing, any persons other than those listed below who are directors or officers
of Cyber U.S. on the Closing will immediately elect or confirm the election of
the following individuals as directors of Cyber U.S. (the "New Directors") and
resign:
Andreas Eder
Holger Timm
One person to be named by Cybernet
prior to the Closing
Two persons named by Cyber U.S.
prior to the Closing
Immediately thereafter, the New Directors will appoint or confirm the
appointment of the following individuals as officers of Cyber U.S.:
Andreas Eder, Chairman, President and
Chief Executive Officer
One person each named by Cyber U.S. as Vice
President and Secretary/Treasurer
The Stockholders and Cyber U.S. agree that Cybernet may name a new director and
Chairman/CEO of Cyber U.S. as soon as is permissible.
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(b) Aufsichtsrat and Vorstand of Cybernet. Following the Closing,
Holger Timm (as Vorsitzender), Hubert Bosner and Wolfgang Hermanni shall remain
the members of the Aufsichtsrat of Cybernet; provided that prior to the
Closing, Cyber U.S. may designate one person to serve as a member of the
Aufsichtsrat. Following the Closing, Andreas Eder (as Vorzitzender), Thomas
Schulz and Rudolf Strobl shall remain members of the Vorstand of Cybernet;
provided that the Aufsichtsrat may change the members thereof and it is
understood that a new nominee may join the Vorstand.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders, jointly and severally, represent and warrant in the form
of a legally independent guarantee that the following is true and correct at
the Closing Date to Cyber U.S.:
3.1 CORPORATE ORGANIZATION AND GOOD STANDING. Cybernet is a German stock
corporation ("Aktiengesellschaft") duly organized, validly existing and in good
standing under the laws of Germany, with all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted. Cybernet is qualified or licensed to do business
and is in good standing in each jurisdiction in which the ownership or leasing
of property by it or the conduct of its business requires such licensing or
qualification, except where the failure to be so qualified or licensed or in
good standing will not have a Cybernet Material Adverse Effect. Cybernet has no
subsidiaries. For purposes of this Agreement, "Cybernet Material Adverse
Effect" means any materially adverse change in or effect on the business,
operations, properties, assets, liabilities, financial condition, results of
operations or prospects of Cybernet or its ability to carry out its obligations
under this Agreement, but does not mean any losses, adverse developments or
other conditions suffered by Cybernet arising from normal operations or market,
political or economic conditions affecting the internet service provider
industry as a whole. Cybernet is entered in the commercial register of the
County Court of Berlin-Charlottenburg under no. 60318. All facts relating to
Cybernet and eligible for registration in the commercial register are actually
entered in the commercial register. Its articles of association are those
recorded by the notary public Ernst Mittenzwie, February 2, 1996, as his deeds
numbered M767 and M769 and by the notary public Dr. Bernhard Murawo, September
13, 1996, as his deed numbered 292; the parties are well familiar with
Cybernet's articles of association and dispensed with them being read out when
this Agreement was recorded. No shareholders' agreements or any other side
agreements to the constitution or organization of Cybernet exist. The business
of Cybernet has been carried out at all times in accordance with German law
and custom and with the care and diligence of a prudent businessman.
3.2 DUE EXECUTION: ENFORCEABILITY. This Agreement has been, and all other
documents, agreements and instruments to be executed in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
the "Transaction Documents") will be, duly executed and delivered by the
Stockholders and this Agreement is,
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and the other Transaction Documents when executed and delivered by the
Stockholders as contemplated by this Agreement will be, the valid and binding
obligation of the Stockholders enforceable in accordance with their respective
terms, except (1) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (2) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
3.3 CAPITALIZATION. The entire authorized capital stock and other equity
securities of Cybernet consists of 640,000 shares of 5.00DM par value stock (the
"Cybernet Shares") all of which shares are issued and outstanding. All of the
issued and outstanding Cybernet Shares have been duly authorized, are validly
issued, were not issued in violation of any preemptive rights and are fully paid
and nonassessable, and have not been repaid or otherwise reduced or agreed to be
reduced, are not subject to preemptive rights and were issued in full compliance
with all national, federal, state and local laws, rules and regulations. Each
Stockholder owns beneficially and of record all of the shares of Cybernet Shares
issued to such Stockholder as set forth on the Cybernet share transfer ledger.
There are no outstanding options, warrants, subscriptions, conversion rights, or
other rights, agreements, or commitments obligating Cybernet to issue any
additional Cybernet Shares, or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire from
Cybernet any Cybernet Shares. There are no agreements purporting to restrict the
transfer of the Cybernet Shares, no voting agreements, voting trusts, or other
arrangements restricting or affecting the voting of the Cybernet Shares.
3.4 TITLE TO CYBERNET STOCK. The Cybernet Stock is lawfully owned by the
Stockholders in the respective amounts set forth opposite his or its name by
its signature below, free of preemptive rights and free and clear of all
claims, liens, charges, security interest, encumbrances and other restrictions
or limitations of any kind. Each Stockholder has the full power, right, and
authority to transfer the Cybernet Stock held by him pursuant to this Agreement.
3.5 FINANCIAL STATEMENTS. Attached to this Agreement as Disclosure
Schedule 3.5 are true, correct, and complete copies of (i) an audited Cybernet
Income Statement for the period ending December 31, 1996, and an unaudited
Cybernet Income Statement for the period ending March 31, 1997, and (ii) an
audited Cybernet Balance Sheet (including the balance sheet, the profit and
loss statement, the notes and the management report if required by law) for the
period ending December 31, 1996 (the "Cybernet Reference Balance Sheet")
(collectively, the "Cybernet Financial Statements"). The Cybernet Financial
Statements (a) are in accordance with the books and records of Cybernet and
have been prepared in accordance with the generally accepted accounting and
bookkeeping principles under German commercial law observing the principle of
balance sheet consistency as well as the principle of
lower-of-cost-or-market-value as well as the principle of conservatism and have
been certified without qualification by Cybernet's auditor, and (b) present
fairly the financial condition of Cybernet as of the respective dates indicated
and the results of operations for such periods. Cybernet has not received any
advice or notification from its independent
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certified public accountants that Cybernet has used any improper accounting
practice that would have the effect of not reflecting or incorrectly reflecting
in the Cybernet Financial Statements or the books and records of Cybernet, any
properties, assets, liabilities, revenues, or expenses. The books, records, and
accounts of Cybernet accurately and fairly reflect, in reasonable detail, the
transactions, assets, and liabilities of Cybernet. Cybernet has not engaged in
any transaction, maintained any bank account, or used any funds of Cybernet,
except for transactions, bank accounts, and funds which have been and are
reflected in the normally maintained books and records of Cybernet. Cybernet
does not have any liabilities or obligations that are not shown on the financial
statements although they would have had to be shown in the financial statements
or mentioned in the notes thereto under any mandatory provision of German
commercial law. The financial statements completely and accurately reflect all
potential liabilities of Cybernet, especially under warranties or guarantees
issued on behalf of third parties. There is no necessity to provide for any
reserves in addition to those shown in the financial statements. The reserves
set aside are sufficient and adequate to cover all contingent obligations or
liabilities. Cybernet has made sufficient and adequate provisions for all
existing pension obligations.
3.6 ABSENCE OF CERTAIN CHANGES. Since the date of the Cybernet Reference
Balance Sheet, except as set forth in Disclosure Schedule 3.6, Cybernet has not
suffered any Cybernet Material Adverse Effect. During the period between the
date of the Cybernet Reference Balance Sheet and the signing of this Agreement,
Cybernet has been managed in accordance with its former business policies and
with the care and diligence of a prudent businessman; Cybernet shall continue
to be managed in that way up to the Closing Date.
3.7 FILINGS, CONSENTS AND APPROVALS. Except for any filings required by
applicable securities laws and as otherwise set forth on Disclosure Schedule
3.7, no filing or registration with, no notice to and no permit, authorization,
consent, or approval of any public or governmental body or authority or any
other person or entity is necessary for the consummation by the Stockholders of
the transactions contemplated by this Agreement or to enable Cybernet to
continue to conduct its business after the Closing Date in a manner consistent
with that in which it is presently conducted.
3.8 NONCONTRAVENTION. Neither the execution, delivery and performance
of the Transaction Documents, nor the consummation of the transactions
contemplated thereby nor compliance with the provisions thereof, will:
(1) Except as set forth in Disclosure Schedule 3.8, conflict with,
result in a violation of, cause a default under (with or without notice,
lapse of time or both) or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of
any material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties or
assets of Cybernet under any term, condition or provision of any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
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agreement, instrument, permit, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Cybernet or its properties
or assets;
(2) Violate any provision of the articles of incorporation or bylaws
of Cybernet; or
(3) Violate any order, writ, injunction, decree, statute, rule, or
regulation of any court or governmental or regulatory authority applicable
to Cybernet or any of its properties or assets.
3.9 LITIGATION. There is no claim, charge, arbitration, grievance,
action, suit, investigation or proceeding by or before any court, arbiter,
administrative agency or other governmental authority now pending or, to the
Stockholders' knowledge, threatened against Cybernet or which involves any of
the business, or the properties or assets of Cybernet that, if adversely
resolved or determined, would have a Cybernet Material Adverse Effect. There is
no reasonable basis for any claim or action that, based upon the likelihood of
its being asserted and its success if asserted, would have a Cybernet Material
Adverse Effect.
3.10 MATERIAL CONTRACTS AND TRANSACTIONS. Disclosure Schedule 3.10
contains a list of all material contracts, agreements, licenses, leases for
real property or personal property, permit, arrangements, commitments,
instruments, understanding or contracts, whether written or oral, express or
implied, contingent, fixed or otherwise, to which Cybernet is a party
(collectively, the "Cybernet Contracts"). Except as listed on DISCLOSURE
SCHEDULE 3.10, Cybernet is not a party to any written or oral:
(1) contract for the purchase, sale or lease of any material capital
assets, or continuing contracts for the purchase or lease of any material
supplies, materials, equipment or services;
(2) agreement to pay material commissions or sales representative
agreements;
(3) agreement for the employment or consultancy or any person or
entity except those routinely entered into with employees and contracts
with members of the Vorstand expiring February 15, 1998;
(4) note, debenture, bond, trust agreement, letter of credit
agreement, loan agreement, or other contract or commitment for the
borrowing or lending of money, or agreement or arrangement for a line of
credit or guarantee, pledge, or undertaking of the indebtedness of any
other person;
(5) agreement, contract, or commitment for any charitable or
political contribution;
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(6) agreement, contract, or commitment limiting or restraining
Cybernet in its business or any successor thereto from engaging or
competing in any manner or in any business or from hiring any employees,
nor, to the Stockholders' knowledge, is any employee or independent
contractor of Cybernet subject to any such agreement, contract, or
commitment;
(7) material agreement, contract, or commitment not made in the
ordinary course of business;
(8) agreement establishing or providing for any joint venture,
partnership, or similar arrangement between Cybernet and any other person
or entity; or
(9) power of attorney or similar authority to act for Cybernet.
Each Cybernet Contract is in full force and effect, and there exists no material
breach or violation of or default by Cybernet under any Cybernet Contract nor,
to the Stockholders' knowledge, by any other party to a Cybernet Contract, or
any event that with notice or the lapse of time, or both, will create a material
breach or violation thereof or default under any Cybernet Contract by Cybernet
nor, to the Stockholders' knowledge, by any other party to a Cybernet Contract.
Except as set forth on Disclosure Schedule 3.10, the continuation, validity, and
effectiveness of each Cybernet Contract will in no way be affected by the
consummation of the transactions contemplated by this Agreement. Except as
indicated on Disclosure Schedule 3.10, there exists no actual or, to the
Stockholders' knowledge, any threatened termination, cancellation, or limitation
of, or any amendment, modification, or change to any Cybernet Contract, which
would have a Cybernet Material Adverse Effect. A true, correct and complete copy
(and if oral, a description of material terms) of each Cybernet Contract, as
amended to date, has been furnished to Cyber U.S.
3.11 Software. Disclosure Schedule 3.11 contains a list of all computer
software (other than word processing, spreadsheet, and database software of a
type generally available to the public through retail sales) owned, licensed or
used by Cybernet in the conduct of its business (collectively, the "Cybernet
Software") and a list of all agreements and contracts giving Cybernet a license
or other rights to the Cybernet Software. No use by Cybernet of any Cybernet
Software violates and no use by Cybernet of the Cybernet Software as
contemplated to provide internet services will violate the terms of any
agreement pursuant to which such Cybernet Software is licensed. No claim is
pending, or, to the Stockholders' knowledge, threatened, which alleges that the
ownership of, rights as licensee to, or other right to use any Cybernet
Software is invalid or unenforceable by Cybernet, nor is there any basis known
to the Stockholders for any such claim. Except as shown on Disclosure Schedule
3.11, no royalties or fees are payable by Cybernet to anyone for use of the
Cybernet Software. A true, correct, and complete copy of each agreement listed
on Disclosure Schedule 3.11, as such agreement have been amended to date), has
been furnished to Cyber U.S. All such agreements are in full force and effect
and, there are no existing material defaults or events of default, real or
claimed, or events which with or without notice
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or lapse of time both would constitute material defaults under such agreements
that would give the non-defaulting party a right to terminate such agreement or
a right to receive any payment pursuant to such agreement and all of such
agreements will in no way be affected by the consummation of the transactions
contemplated by this Agreement.
3.12 REAL PROPERTY AND REAL PROPERTY LEASES. Cybernet does not own any
real property. Disclosure Schedule 3.12 sets forth the name, parties, and date
of each lease and sublease of real property that is occupied by Cybernet
("Cybernet Leases"), and the address of each parcel of leased real property and
a list of all amendments to such Cybernet Leases. Each Cybernet Lease is in
full force and effect and there is no default asserted thereunder by any party
thereto and, to the Stockholders' knowledge, there are no unasserted defaults
(including any events which with the passage of time or giving of notice or
both would constitute a default). True, correct and complete copies of all the
Cybernet Leases, as amended to date, have been delivered to Cyber U.S. Cybernet
has not been notified that the use and operation of any of the real properties
leased by Cybernet does not conform to applicable building, zoning, safety,
environmental, and other laws, ordinances, regulations, codes, permits,
licenses, and certificates and all restrictions and conditions affecting title,
except where the failure to conform would not have an Cybernet Material Adverse
Effect.
3.13 PERSONAL PROPERTY AND PERSONAL PROPERTY LEASES. Except as set forth
on Disclosure Schedule 3.13, Cybernet owns or leases the use of, all material
equipment, furniture, fixtures and other material tangible personal property
and assets necessary for the continued operation of the business of Cybernet as
presently conducted and where the absence of such property and assets would
have a Cybernet Material Adverse Effect. All of such personal properties are in
good operating condition (normal wear and tear excepted), and are reasonably
fit for the purposes for which the such personal property is presently used.
3.14 COMPLIANCE WITH LAW. To the knowledge of the Stockholders, Cybernet
holds and is in compliance with all permits, certificates, licenses, approvals,
registrations and authorizations necessary for the conduct of its business or
the ownership of its properties or assets, except where the failure to hold or
comply could not have a Cybernet Material Adverse Effect, and all of such
permits, certificates, licenses, approvals, registrations, and authorizations
are in full force and effect. To the knowledge of the Stockholders, Cybernet is
in compliance with all applicable laws, statutes, ordinances, rules and
regulations (including without limitation those relating to environmental
protection, occupational safety and health, and equal employment practices) and
all orders, judgments and decrees, except where the failure to comply would not
have a Cybernet Material Adverse Effect.
3.15 TAXES. Except as set forth in Disclosure Schedule 3.15, Cybernet has
timely filed with the appropriate taxing authorities all returns required to be
filed on or prior to the date hereof in respect of all taxes of Cybernet, and
has paid all such taxes, including interest, penalties, and additions in
connection therewith shown to have become due on such returns or for which a
notice of assessment or demand for payment has been received. All such
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returns have been prepared in accordance with all applicable laws and
requirements. Any accruals for such taxes reflected in the Cybernet Reference
Balance Sheet are sufficient to satisfy the accrued liability for such taxes as
of the date of the Cybernet Reference Balance Sheet. No material tax issues have
been raised by the relevant taxing authorities in connection with any of the tax
returns referred to above, and no waivers of statutes of limitations or
extensions of time within which to file any tax return or with respect to a tax
assessment or deficiency have been given or requested with respect to Cybernet.
No constructive dividends ("verdeckte Gewinnausschutzungen") have been made by
Cybernet to any of its shareholders.
3.16 LABOR RELATIONS. None of Cybernet's employees is represented by any
union or other labor organization in regard to its employment by Cybernet. There
is no unfair labor practice charge or other labor related grievance pending or,
to the Stockholders' knowledge, threatened against Cybernet that might have a
Cybernet Material Adverse Effect. Cybernet has in relation to each of its
employees and to each of its former employees complied in all material respects
with all its obligations under statute and otherwise concerning the health and
safety at work of each of the employees and has not incurred any liability to
any employee in respect of any accident or injury which is not fully covered by
insurance. Except as set forth on Disclosure Schedule 3.15, all employees of
Cybernet are employed under agreements substantially in the form of the example
employment agreement provided by Cybernet on May 30, 1997. No employment
contracts between Cybernet and the employees of the upper executive level can be
terminated or modified by the employees on grounds of this stock purchase
agreement having been entered into, nor are there any other reasons jeopardizing
the continued existence of these employment contracts. Cybernet is not party to
any shop agreements (Betriebsvereinbarungen) or collective bargaining agreements
(Tarifvertrag) other than those listed in Disclosure Schedule 3.16.
3.17 PENSION AND EMPLOYEE BENEFIT PLANS AND COMPENSATION. Cybernet
maintains no employee pension benefit plans, welfare benefit plans, bonus, stock
purchase, stock ownership, stock option, deferred compensation, material or
substantial incentive, severance, termination or other compensation plan or
arrangement, and other material employee fringe benefit plans. No salary or
other payment due to the Stockholder remains unpaid by Cybernet and the
Stockholders have been completely paid for past services rendered to Cybernet,
other than current unpaid salary and current business expenses not to exceed
400,000 DM in the aggregate to be paid or reimbursed by Cybernet in the ordinary
course of business.
3.18 OTHER INTELLECTUAL PROPERTY. Cybernet has no registered or
unregistered, foreign or United States trademarks, trade names, trade styles,
and service marks and copyrights; trade secrets or know-how, except as listed on
Disclosure Schedule 3.18. To the best knowledge of the Stockholders, Cybernet
owns or has those rights to all the Intellectual Property Rights needed to
conduct its business and holds such rights free from any challenges to their use
by Cybernet.
- 12 -
13
3.19 INSURANCE. Set forth in Disclosure Schedule 3.19 is a list of all
insurance policies that relate to Cybernet's business. The coverage under each
such policy is in full force and effect, and no notice of cancellation or
nonrenewal with respect to, or disallowance of any claim under, any such policy
has been received by Cybernet. The Stockholders have no knowledge of any facts
or the occurrence of any event that reasonably might form the basis of any
claim against Cybernet relating to its business or operations or any of its
assets or properties covered by any of such policy that may materially increase
the insurance premiums payable under any such policy.
3.20 AFFILIATE TRANSACTIONS. Except as disclosed in Disclosure Schedule
3.20, no officer, director, affiliate of Cybernet provides any assets, services
or facilities used or held for use in connection with Cybernet's business and
Cybernet does not provide or cause to be provided any assets, services or
facilities to any such officer, director, or affiliate.
3.21 STOCKHOLDERS' ASSETS. The Stockholders are not hereby disposing of
their entire assets nor of a substantial part thereof (Section 419 German Civil
Code, "Burgerliches Gesetzbuch").
3.22 CORRECTNESS OF REPRESENTATIONS. No representation or warranty of
Cybernet in this Agreement or in any exhibit, certificate, or schedule attached
to this Agreement or furnished pursuant to this Agreement contains, or at the
Closing Date will contain, any untrue statement of fact or omits, or at the
Closing Date will omit, to state any material fact necessary in order to make
the statements contained therein not misleading, and all such statements,
representations, warranties, exhibits, certificates, and schedules shall be
true and complete in all material respects on and as of the Closing Date as
though made on that date.
SECTION 4
REPRESENTATIONS AND WARRANTIES
OF CYBER U.S.
Cyber U.S. represents and warrants to the Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING. Cyber U.S. is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Cyber U.S. has
no validly existing subsidiaries.
4.2 CAPITAL STRUCTURE. The entire authorized capital stock and other
equity securities of Cyber U.S. at the Closing Date shall consist of 10,000,000
shares of $0.001 par value preferred stock of which none are issued or
outstanding and 40,000,000 shares of $0.001 par value common stock of which no
more than 9,546,891 shares will be issued and outstanding following
consummation of the merger between Cyber Utah and Cyber U.S. All of the issued
and outstanding shares of Cyber U.S. Stock will be duly authorized, validly
issued, fully paid and nonassessable and will not be subject to preemptive
rights. Disclosure
- 13 -
14
Schedule 4.2 sets forth the percentage holdings of the Stockholders in Cyber
U.S. after giving effect to the transactions contemplated by this Agreement.
4.3 AUTHORITY. Subject to the approval of the shareholders of Cyber Utah
and Cyber U.S., (a) Cyber U.S. has all requisite corporate power and authority
to enter into this Agreement and the Transaction Documents to which it is a
party and to perform its obligations thereunder and to consummate the
transactions contemplated thereby; (b) the execution and delivery of this
Agreement and each of the Transaction Documents to which it is a party by Cyber
U.S. and the consummation by Cyber U.S. of the transactions contemplated
thereby, have been duly authorized by the board of directors of Cyber U.S. and
no other corporate proceedings on the part of Cyber U.S. are necessary to
authorize such documents or to consummate the transactions contemplated
thereby; and (c) this Agreement has been, and all the other Transaction
Documents to which it is a party when executed and delivered by Cyber U.S. as
contemplated by this Agreement will be, duly executed and delivered by Cyber
U.S. and this Agreement is, and the other Transaction Documents when executed
and delivered by Cyber U.S. as contemplated hereby will be, the valid and
binding obligation of Cyber U.S. enforceable in accordance with their
respective terms, except (1) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (2) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
4.4 FINANCIAL STATEMENTS. Attached to this Agreement as Disclosure
Schedule 4.4 are true, correct, and complete copies of audited Cyber Utah
Financial Statements for the period ending December 31, 1996 and the years
ending August 31, 1996, 1995 and 1994 (collectively, the "Cyber U.S. Financial
Statements"). The Cyber U.S. Financial Statements (a) are in accordance with
the books and records of Cyber U.S. and (b) present fairly the financial
condition of Cyber U.S. as of the respective dates indicated and the results of
operations for such periods. Cyber U.S. has not received any advice or
notification from its independent certified public accountants that Cyber U.S.
has used any improper accounting practice that would have the effect of not
reflecting or incorrectly reflecting in the Cyber U.S. Financial Statements or
the books and records of Cyber U.S., any properties, assets, liabilities,
revenues, or expenses. The books, records, and accounts of Cyber U.S.
accurately and fairly reflect, in reasonable detail, the transactions, assets,
and liabilities of Cyber U.S. Cyber U.S. has not engaged in any transaction,
maintained any bank account, or used any funds of Cyber U.S., except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of Cyber U.S.
4.5 NONCONTRAVENTION. Neither the execution, delivery and performance of
the Transaction Documents, nor the consummation of the transactions
contemplated thereby nor compliance with the provisions thereof, will:
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15
(1) Conflict with, result in a violation of, cause a default under
(with or without notice, lapse of time or both) or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
the material properties or assets of Cyber U.S. under any term, condition
or provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Cyber U.S. or its material properties or assets;
(2) Subject to approval of the shareholders of Cyber Utah and Cyber
U.S., violate any provision of the articles or certificate of incorporation
or by-laws of Cyber U.S.; or
(3) Violate any order, writ, injunction, decree, statute, rule, or
regulation of any court or governmental or regulatory authority applicable
to Cyber U.S. or any of its properties or assets.
4.6 LITIGATION. There is no claim, charge, arbitration, grievance,
action, suit, investigation or proceeding by or before any court, arbiter,
administrative agency or other governmental authority now pending or, to Cyber
U.S.'s knowledge, threatened against Cyber U.S., or which involves any of the
business, or the properties or assets of Cyber U.S. that, if adversely resolved
or determined, would have a material adverse effect on Cyber U.S. There is no
reasonable basis for any claim or action that, based upon the likelihood of its
being asserted and its success if asserted, would have a material adverse
effect.
4.7 FILINGS, CONSENTS AND APPROVALS. Except for any filings required by
applicable securities laws, no filing or registration with, no notice to and no
permit, authorization, consent, or approval of any public or governmental body
or authority or other person or entity is necessary for the consummation by
Cyber U.S. of the transactions contemplated by this Agreement or to enable
Cyber U.S. to continue to conduct its business after the Closing Date in a
manner which is consistent with that in which it is presently conducted.
SECTION 5
SURVIVAL AND INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants made by the parties shall survive the Closing for a
period of six (6) months from the Closing Date.
5.2 INDEMNIFICATION BY STOCKHOLDERS. The Stockholders, jointly and
severally, agree to indemnify Cyber U.S. and its officers, directors,
shareholders, employees, agents and affiliates (other than the Stockholders
themselves) in respect of, and hold each of them
- 15 -
16
harmless from and against, any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, fees of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment)
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of the Stockholders contained in this Agreement.
5.3 INDEMNIFICATION BY CYBER U.S. Cyber U.S. agrees to indemnify the
Stockholders in respect of, and hold each of them harmless from and against, any
and all damages, fines, fees, penalties, deficiencies, losses and expenses
(including without limitation interest, court costs, fees of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment) suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Cyber U.S. contained in this Agreement.
5.4 PROCEDURES FOR INDEMNIFICATION FOR THIRD PARTY CLAIMS. Whenever
indemnification is sought under this Section 5 in connection with a claim or
demand brought by a third party, the party seeking indemnification ( the
"Indemnitee") will promptly notify the party from whom indemnification is
sought (the "Indemnitor"), specifying the nature of such claims, the amount or
estimated amount of such claim and attaching copies of all relevant information
concerning the underlying claim of liability. Within ten days of receipt of
such notice, the Indemnitor will notify the Indemnitee promptly whether it
disputes its indemnification obligation. If the indemnification obligation is
not so disputed, the Indemnitor, at the option of the Indemnitee, will, at the
Indemnitor's cost and expense, defend any such claim. If the Indemnitee so
elects for the Indemnitor to defend any claim, the Indemnitor will have full
control over the conduct of such proceeding, although the Indemnitee will have
the right to retain legal counsel at its own expense and will have the right to
approve any settlement of any claim, provided that such approval may not be
withheld unreasonably. If the Indemnitee does not elect for the Indemnitor to
assume the defense of such claim, the Indemnitee will have the right to defend
the claim at the reasonable cost and expense of the Indemnitor. The Indemnitor
will not be obligated to indemnify the Indemnitee with respect to such third
party claim to the extent that the Indemnitor's ability to defend has been
irreparably prejudiced by the failure or delay of the Indemnitee to give
Indemnitor the notice required by this Section 5.4. Any dispute of an
indemnification obligation under this Agreement may be resolved by litigation
in a court of competent jurisdiction.
5.5 PROCEDURES FOR INDEMNIFICATION FOR NON-THIRD PARTY CLAIMS. If any
Indemnitee has a claim under Section 5 against any Indemnitor that does not
involve a third party claim as described in Section 5.4 above, the Indemnitee
will promptly notify the Indemnitor of such claim, specifying the nature of
such claim and the amount of any loss
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incurred by the Indemnitee. The failure by any Indemnitee to give such notice
will not impair such party's rights under this Agreement except to the extent
that the Indemnitor demonstrates that it has been irreparably prejudiced
thereby. If the Indemnitor notifies the Indemnitee that it does not dispute the
claim described in such notice or fails to notify the Indemnitee within 30 days
its receipt of such notice, the loss in the amount specified in the notice will
be conclusively deemed a liability of the Indemnitor under Section 5 and the
Indemnitor will pay the amount of such loss to the Indemnitee on demand. If the
Indemnitor has timely disputed its liability with respect to such claim, the
Indemnitor and the Indemnitee will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations within 60
days after the Indemnitors receipt of the initial claim notice, such dispute may
be resolved by litigation in a court of competent jurisdiction.
5.6 INDEMNIFICATION FOR FEES AND COMMISSIONS. Each party to this
Agreement is responsible for paying any broker, finder or investment banker
that is entitled to receive any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of such party and indemnifies and holds
harmless the other parties from any such fees or commissions.
SECTION 6
MISCELLANEOUS PROVISIONS
6.1 ACTIONS BY STOCKHOLDERS. Any action or remedy of the Stockholders
under this Agreement, including without limitation, a request for arbitration
or indemnification, must be exercised jointly by the Stockholders.
6.2 EFFECTIVENESS OF REPRESENTATIONS. Each party is entitled to rely on
the representations, warranties and agreements of each of the other parties and
all such representation, warranties and agreement will be effective regardless
of any investigation that any party has undertaken or failed to undertake.
6.3 TERMINATION. This Agreement may be terminated at any time prior to
the Closing of the transactions contemplated hereby by:
(a) Mutual agreement of Cyber U.S. and Stockholders;
(b) Cyber U.S., if there has been a breach by Cybernet or
Stockholders of any material representation, warranty, covenant or agreement
set forth in this Agreement on the part of Cybernet or Stockholders that is
not cured, to the reasonable satisfaction of Cyber U.S., within ten business
days after notice of such breach is given by Cyber U.S. (except that no cure
period will be provided for a breach by Cybernet or Stockholders that by its
nature cannot be cured);
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18
(c) Stockholders, if there has been a breach by Cyber U.S. of any
material representation, warranty, covenant or agreement set forth in this
Agreement on the part of Cyber U.S. that is not cured by the breaching party,
to the reasonable satisfaction of Stockholders, within ten business days after
notice of such breach is given by Stockholders (except that no cure period will
be provided for a breach by Cyber U.S. that by its nature cannot be cured);
(d) Cyber U.S. or Stockholders, if the transactions contemplated by
this Agreement have not been consummated prior to August 15, 1997, unless the
parties agree to extend such date; or
(e) Cyber U.S. or Stockholders if any permanent injunction or other
order of a governmental entity of competent authority preventing the
consummation of the transactions contemplated by this Agreement has become
final and nonappealable.
6.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 6.3, this Agreement will be of no further
force or effect, provided, however, that no termination of this Agreement will
relieve any party of liability for any breaches of this Agreement that are
based on a wrongful refusal or failure to perform any obligations. Upon
termination of this Agreement, each party will, upon request, destroy all
documents, work papers and other materials of the other parties relating to the
transaction contemplated by this Agreement, whether obtained before or after
execution of this Agreement.
6.5 FURTHER ASSURANCES. Each of the parties hereto will cooperate with the
other and execute and deliver to the other parties hereto such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by any other party hereto as necessary to carry
out, evidence, and confirm the intended purposes of this Agreement and to
further structure the transactions contemplated hereby as may be necessary to
comply with applicable laws.
6.6 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
6.7 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as Cyber U.S. and the
Cybernet mutually determine. Unless consented to by Cyber U.S. in advance or
required by law, prior to the Closing Cybernet will keep this Agreement
strictly confidential and may not make any disclosure of this
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Agreement to any person or entity. Cybernet and Cyber U.S. will consult with
each other concerning the means by which the Cybernet's employees, customers,
and suppliers and others having dealings with the Cybernet will be informed of
the transactions contemplated by this Agreement, and Cyber U.S. will have the
right to be present for any such communication.
6.8 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, Cyber U.S., the Principal Stockholders and Cybernet will maintain in
confidence, and will cause the directors, officers, employees, agents, and
advisors of Cyber U.S. and Cybernet to maintain in confidence, and not use to
the detriment of another party or Cybernet any written, oral, or other
information obtained in confidence from another party or Cybernet in
connection with this Agreement or the transactions contemplated hereby, unless
(a) such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions contemplated hereby, or (c) the
furnishing or use of such information is required by legal proceedings. If the
Closing is not consummated, each party will return or destroy as much of such
written information as the other party may reasonably request.
6.9 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
6.10 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement and (c) waive
compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
will be valid only if set forth in a written instrument and signed by the party
granting such extension or waiver.
6.11 ENTIRE AGREEMENT. This Agreement, the exhibits, schedules attached
hereto and the other Transaction Documents contain the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
arrangements and understandings, both written and oral, expressed or implied,
with respect thereto. The Offer to Purchase between New Century Technologies
Corporation (now, Cyber U.S.) and the Stockholders dated April 3, 1997 is
expressly superseded and terminated by this Agreement.
6.12 SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, will be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or
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enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it will, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
such provision in any other jurisdiction.
6.13 NOTICES. All notices and other communications required or permitted
under to this Agreement must be in writing and will be deemed given if sent by
personal delivery, fax with electronic confirmation of delivery,
nationally-recognized overnight courier company that is able to provide proof
or receipt of delivery, or registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as may be specified by like notice):
If to Cybernet or the
Principal Stockholders: Andreas Eder
Cybernet Internet -
Dienstleistungen AG
Stefan-George-Ring 19
D-81929 Munich, Germany
Tel: 49-89-993-150
Fax: 49-89-993-15-199
With a copy to: Dr. Hubert Besner
Besner, Kreifels, Weber
Widenmayerstr 41
80538 Munich, Germany
Tel: 49-89-21-99-920
Fax: 49-89-21-99-9233
If to Cyber U.S.: Mr. Norman Wareham
Suite 1818
1177 West Hastings Street
Vancouver, British Columbia V6E 2K3
Canada
Tel: 604-683-9161
Fax: 604-687-6755
With a copy to: Powell, Goldstein, Frazer & Murphy
1001 Pennsylvania Avenue, N.W.
Sixth Floor South
Washington, D.C. 2004
Attention: Michael H. Chanin
Tel: 202-624-7235
Fax: 202-624-7222
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All such notices and other communications will be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery,
(b) in the case of a fax, when the party sending such fax has received
electronic confirmation of its delivery, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch
and (d) in the case of mailing, on the third business day following mailing.
6.14 HEADINGS. The headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.
6.15 BENEFITS. None of the provisions of this Agreement is or will be
construed as for the benefit of or enforceable by any person not a party to
this Agreement.
6.16 ASSIGNMENT. This Agreement may not be assigned by any party, by
operation of law or otherwise.
6.17 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of Delaware applicable to contracts made and to be
performed therein, without regard to conflicts of laws principles.
6.18 CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party. Any reference to
any federal, state, local, or foreign statute or law will be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein will have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
6.19 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
6.20 FAX EXECUTION. This Agreement may be executed by delivery of executed
signature pages by fax and such fax execution will be effective for all
purposes.
6.21 NON-COMPETITION. Without the prior approval of Cyber U.S., during
a period of 5 years after the Closing Date, no Stockholder and no companies in
which such Stockholder maintains a proprietary interest (other than companies
in which a stockholder has an interest of less than 1%) shall directly or
indirectly compete with or assist in the
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competition with Cybernet as to the present subject matter of Cybernet and the
present area of its business. The company's business area within the meaning of
this covenant shall be Europe and the United States of America and the subject
matter of its business within the meaning of this covenant shall be the
provision of Internet access and related services to commercial and
business entities. For every case of a violation of the covenant not to compete
the defaulting Stockholder shall pay a contractual penalty of DM 100,000 to
Cyber U.S. Each period of 2 weeks of a continued violation shall be deemed an
independent case of violation. The right to claim damages for breach of
contract or specific enforcement shall not be effected by the payment of the
contractual penalty. The amount of the contractual penalty will be credited to
the amount of damages.
[SIGNATURES ON FOLLOWING PAGE]
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EXECUTED on June 11, 1997.
Cybernet Internet Services International, Inc.
By: /s/ David Lehmberg
--------------------
Name: David Lehmberg
Title: President
Shares of Shares of
STOCKHOLDERS: Cybernet Stock Cyber U.S. Stock
Cybermind Interactive Europe AG -------------- ---------------------
By:
---------------------------- 320,000 5,160,000 Preferred B
Name: 600,000 Preferred A
Title:
- ------------------------------- 30,000 483,750 Common
Rudolf Strobl 56,250 Preferred A
- ------------------------------- 10,000 161,250 Common
Roland Manger 18,750 Preferred A
- ------------------------------- 40,000 645,000 Common
Thomas Schulz 75,000 Preferred A
- ------------------------------- 140,000 2,257,500 Common
Andreas Edef 262,500 Preferred A
- ------------------------------- 100,000 1,612,500 Common
Holger Timm 187,500 Preferred A
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EXECUTED on June 11, 1997.
Cybernet Internet Services International, Inc.
By:
-------------------------------------
Name:
Title:
Shares of Shares of
STOCKHOLDERS: Cybernet Stock Cyber U.S. Stock
-------------- ----------------
Cybermind Interactive Europe AG
By: /s/ Holger Timm
---------------------------- 320,000 5,160,000 Preferred B
Name: Holger Timm 600,000 Preferred A
Title: President
/s/ Rudolf Strobl
- -------------------------------- 30,000 483,750 Common
Rudolf Strobl 56,250 Preferred A
/s/ Roland Manger
- -------------------------------- 10,000 161,250 Common
Roland Manger 18,750 Preferred A
/s/ Thomas Schulz
- -------------------------------- 40,000 645,000 Common
Thomas Schulz 75,000 Preferred A
/s/ Andreas Eder
- -------------------------------- 140,000 2,257,500 Common
Andreas Eder 262,500 Preferred A
/s/ Holger Timm
- -------------------------------- 100,000 1,612,500 Common
Holger Timm 187,500 Preferred A
-23-
25
EXHIBIT A TO STOCK PURCHASE AGREEMENT
FORM OF PREFERRED SHARE RESOLUTION, SERIES A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CERTIFICATE TO DESIGNATION, PREFERENCES AND RIGHTS OF THE
SERIES A PREFERRED STOCK
Cybernet Internet Services International, Inc., a Delaware corporation
(the "Corporation"), submits the following Certificate of Designation in
accordance with Section 151 of the Delaware General Corporation Law.
The undersigned certifies that pursuant to the authority conferred upon
the Board of Directors by the Corporation's Articles of Incorporation, the
Board of Directors has duly adopted resolutions providing for the establishment
of a series of preferred stock consisting of 1,200,000 shares, with a par value
of $0.001 and designated as the "Series A Preferred Stock" (the "Series A
Preferred Stock"), which resolutions are set forth below in their entirety;
NOW, THEREFORE, IT IS RESOLVED, that the Corporation's Board of Directors
approves the designation of a series of preferred shares of the Corporation
consisting of 1,200,000 shares with a par value of $0.001, to be designated as
the "Series A Preferred Stock." The rights, powers, privileges, preferences,
designations, qualifications, limitations, restrictions and conditions
attaching to the Series A Preferred Stock will be as set forth in the attached
Schedule A which is incorporated herein and made a part hereof by this
reference.
FURTHER, RESOLVED, that the President and the Secretary of the
Corporation, are each authorized and directed, in the name and on behalf of the
Corporation, to execute, acknowledge, file and record with the appropriate
officials at the office of the Secretary of State of the State of Delaware, a
certificate of designation setting forth a copy of these resolutions and such
additional information as required by Section 151 of the Delaware General
Corporation Law.
FURTHER, RESOLVED, that the proper officers of the Corporation are
authorized and directed to take all such other actions and to execute, deliver
and file all such further documents, certificates, notices or instruments as
may be required or as such officers may deem necessary or appropriate in
furtherance of or in connection with the foregoing resolutions and to
effectuate fully the purposes and intents thereof.
[Signatures on following page]
26
IN WITNESS WHEREOF, the undersigned has caused the execution of this
Certificate of Designation on ____________, 1997.
_________________________________
President
ATTEST:
____________________________
Secretary
27
SCHEDULE A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS AND CONDITIONS OF THE
SERIES A PREFERRED STOCK
The rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions and conditions attaching to the Series A Preferred
Stock (the "Series A Preferred Stock") of Cybernet Internet International
Services, Inc., a Delaware corporation (the "Corporation"), are as follows:
A. Issuance. The Series A Preferred Stock will be issued to shareholders
of Cybernet Internet-Dienstleistungen AG, a German stock corporation, as
partial consideration for the purchase of all of the shares thereof.
B. Dividends. The holders of the Series A Preferred Stock will be entitled
to receive out of the surplus or net profits of the Corporation legally
available for dividends whether or not declared, dividends at a rate equal to
U.S. $0.01 per share per annum, and no more, before any dividends are paid or
set apart for payment upon any other series of preferred stock of the
Corporation, other than the Series B and Series C Preferred Stock of the
Corporation, or on the common stock of the Corporation. Commencing for the
fiscal year beginning on January 1, 1998, the dividend on the Series A
Preferred Stock will be paid for each fiscal year within five months of the end
of each fiscal year, subject to the availability of surplus or net profits
therefor. Any dividends paid on the Series A Preferred Stock in an amount less
than the total amount of dividends at the time payable on the shares will be
allocated pro rata in accordance with the number of shares then outstanding.
The dividends on the Series A Preferred Stock will not be cumulative, so
that if for any period the surplus or net profit of the Corporation are not
sufficient to allow payment of the dividend, only that portion as to which
surplus or net profits are sufficient, if any, shall be paid and any dividend
not so payable shall not accrue. Following payment of the dividends on the
Series A Preferred Stock, the holders of the Series A preferred stock shall
share pari passu on a per share basis in the distribution of any dividends by
the Corporation with the holders of shares of the common stock of the
Corporation and shares of any other class of stock of the Corporation entitled
to share therein.
C. No Voting Rights. The holders of the Series A Preferred Stock are not
entitled to receive notice of or to vote on any matter that is the subject of a
vote of the stockholders of the Corporation, except as is otherwise required by
the laws of the State of Delaware.
D. Redemption and Put. The shares of Series A Preferred Stock may be
redeemed by the Corporation at any time after January 1, 2000, upon ten (10)
days prior written notice (the "Redemption Notice") to the holder thereof of
the Corporation's intention to redeem the Series A Preferred Stock at a
redemption price of one share of the common stock of the Corporation for each
share of Series A Preferred Stock plus any unpaid dividends earned thereon
through the date of redemption; provided that all and not less than all of the
shares of Series A Preferred Stock are so redeemed and provided further that if
the Corporation has not redeemed the Series A Preferred Stock by December 31,
2002, a holder of Series A Preferred Shares may at any time commencing January
1, 2002, require the Corporation to purchase all of
28
the shares of the Series A Preferred Stock held by him for a purchase price of
$3.00 per share plus any dividends earned but unpaid on such shares.
E. Conversion. A holder of Series A Preferred Stock may convert each
share held by him into one share of the common stock of the Corporation upon
ten (10) days written notice to the Corporation; provided, however, that (1) no
conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series A Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series A Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series A Preferred Shares held by the holder may be converted commencing
January 1, 2001; and (5) any conversion may not be for less than all of the
Series A Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
F. Liquidation, Dissolution or Winding Up. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
Corporation, the holders of the Series A Preferred Stock will be entitled to be
paid the sum of U.S.$3.00 per share plus an amount equal to any unpaid earned
dividends before any amount is paid to the holder of any other series of
preferred stock other than the Series B Preferred Stock of the Corporation or
the common stock of the Corporation. After payment of these amounts to the
holders of the Series A Preferred Stock, the remaining assets of the
Corporation will be distributed to the holders of the common stock, subject to
any other preferences granted to the holders of any other series of preferred
stock as created by the Board of Directors of the Corporation prior to such
time.
G. Preemptive Rights. The holders of the Series A Preferred Stock will
not have any preemptive right to subscribe for or purchase any shares of stock
or any other securities that may be issued by the Corporation by virtue of
their holding the Series A Preferred Stock.
H. Transferability. The Series A Preferred Stock may not be transferred
by the holder except in compliance with applicable securities laws.
I. Variation of Rights. Any amendment to the Articles of Incorporation
of the Corporation (including any certificates of designation pursuant to a
resolution of the Board of Directors) to delete or vary the rights, powers,
privileges, preferences, designations, qualifications, limitations,
restrictions or conditions attaching to the Series A Preferred Stock must be
approved by the affirmative vote of the holders of a majority of the shares of
Series A Preferred Stock then outstanding, given in person or by proxy whether
in writing or at a meeting at which the holders of the shares of Series A
Preferred Stock will be entitled to vote separately as a class.
J. Exclusion of Other Rights. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series A Preferred Stock, the Series A Preferred Stock will
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth above in this Certificate of Designation, as the same may
be amended and/or restated from time to time.
29
EXHIBIT B TO STOCK PURCHASE AGREEMENT
FORM OF PREFERRED SHARE RESOLUTION, SERIES B
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE
SERIES B PREFERRED STOCK
Cybernet Internet Services International, Inc., a Delaware corporation (the
"Corporation"), submits the following Certificate of Designation in accordance
with Section 151 of the Delaware General Corporation Law.
The undersigned certifies that pursuant to the authority conferred upon the
Board of Directors by the Corporation's Articles of Incorporation, the Board of
Directors has duly adopted resolutions providing for the establishment of a
series of preferred stock consisting of 1,200,000 shares, with a par value of
$0.001 and designated as the "Series B Preferred Stock" (the "Series B Preferred
Stock"), which resolutions are set forth in their entirety:
NOW, THEREFORE, IT IS RESOLVED, that the Corporation's Board of Directors
approves the designation of a series of preferred shares of the Corporation
consisting of 5,160,000 shares with a par value of $0.001, to be designated as
the "Series B Preferred Stock." The rights, powers, privileges, preferences,
designations, qualifications, limitations, restrictions and conditions attaching
to the Series B Preferred Stock will be as set forth in the attached Schedule A
which is incorporated herein and made a part hereof by this reference.
FURTHER, RESOLVED, that the President and the Secretary of the Corporation,
are each authorized and directed, in the name and on behalf of the Corporation,
to execute, acknowledge, file and record with the appropriate officials at the
office of the Secretary of State of the State of Delaware, a certificate of
designation setting forth a copy of these resolutions and such additional
information as required by Section 151 of the Delaware General Corporation Law.
FURTHER, RESOLVED, that the proper officers of the Corporation are
authorized and directed to take all such other actions and to execute, deliver
and file all such further documents, certificates, notices or instruments as may
be required or as such officers may deem necessary or appropriate in furtherance
of or in connection with the foregoing resolutions and to effectuate fully the
purposes and intents thereof.
[Signatures on following page]
30
IN WITNESS WHEREOF, the undersigned has caused the execution of this
Certificate of Designation on ________________ , 1997.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
President
ATTEST:
XXXXXXXXXXXXXXXXXXXXXXXX
Secretary
31
SCHEDULE A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS AND CONDITIONS OF THE
SERIES B PREFERRED STOCK
The rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions and conditions attaching to the Series B Preferred
Stock (the "Series B Preferred Stock") of Cybernet Internet International
Services, Inc., a Delaware corporation (the "Corporation"), are as follows:
A. ISSUANCE. The Series B Preferred Stock will be issued to shareholders
of Cybernet Internet-Dienstleistungen AG, a German stock corporation, as
partial consideration for the purchase of all of the shares thereof.
B. DIVIDENDS. The holders of the Series B Preferred Stock will be entitled
to receive out of the surplus or net profits of the Corporation legally
available for dividends whether or not declared, dividends at a rate equal to
U.S. $0.01 per share per annum, and no more, before any dividends are paid or
set apart for payment upon any other series of preferred stock of the
Corporation, other than the Series C Preferred Stock of the Corporation, or on
the common stock of the Corporation. Commencing for the fiscal year beginning on
January 1, 1998, the dividend on the Series B Preferred Stock will be paid for
each fiscal year within five months of the end of each fiscal year, subject to
the availability of surplus or net profits therefor. Any dividends paid on the
Series B Preferred Stock in an amount less than the total amount of dividends at
the time payable on the shares will be allocated pro rata in accordance with the
number of shares then outstanding.
The dividends on the Series B Preferred Stock will not be cumulative, so
that if for any period the surplus or net profit of the Corporation are not
sufficient to allow payment of the dividend, only that portion as to which
surplus or net profits are sufficient, if any, shall be paid and any dividend
not so payable shall not accrue. Following payment of the dividends on the
Series B Preferred Stock, the holders of the Series B Preferred Stock shall
share pari passu on a per share basis in the distribution of any dividends by
the Corporation with the holders of shares of the common stock of the
Corporation and shares of any other class of stock of the Corporation entitled
to share therein.
C. VOTING RIGHTS. The holders of the Series B Preferred Stock are entitled
to receive notice of and vote on any matter that is the subject of a vote of
the stockholders of the Corporation in the same manner and with the holders of
the common stock of the Corporation, except as is otherwise required by the
laws of the State of Delaware.
D. REDEMPTION. The shares of Series B Preferred Stock may be redeemed by
the Corporation at any time after January 1, 2000, upon ten (10) days prior
written notice (the "Redemption Notice") to the holder thereof of the
Corporation's intention to redeem the Series B Preferred Stock at a redemption
price of one share of the common stock of the Corporation for each share of
Series B Preferred Stock plus any unpaid dividends earned thereon through the
date of redemption; provided that all and not less than all of the shares of
Series B Preferred Stock are so redeemed.
32
E. CONVERSION. A holder of Series B Preferred Stock may convert each
share held by him into one share of the common stock of the Corporation upon ten
(10) days written notice to the Corporation; provided, however, that (1) no
conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series B Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series B Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series B Preferred Shares held by the holder may be converted commencing
January 1 2001; and (5) any conversion may not be for less than all of the
Series B Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
F. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
Corporation, the holders of the Series B Preferred Stock will be entitled to be
paid the sum of U.S.$3.00 per share plus an amount equal to any unpaid earned
dividends before any amount is paid to the holder of any other series of
preferred stock other than the Series B Preferred Stock of the Corporation or
the common stock of the Corporation. After payment of these amounts to the
holders of the Series B Preferred Stock, the remaining assets of the
Corporation will be distributed to the holders of the common stock, subject to
any other preferences granted to the holders of any other series of preferred
stock as created by the Board of Directors of the Corporation prior to such
time.
G. PREEMPTIVE RIGHTS. The holders of the Series B Preferred Stock will
not have any preemptive right to subscribe for or purchase any shares of stock
or any other securities that may be issued by the Corporation by virtue of
their holding the Series B Preferred Stock.
H. TRANSFERABILITY. The Series B Preferred Stock may not be transferred
by the holder except in compliance with applicable securities laws.
I. VARIATION OF RIGHTS. Any amendment to the Articles of Incorporation
of the Corporation (including any certificates of designation pursuant to a
resolution of the Board of Directors) to delete or vary the rights, powers,
privileges, preferences, designations, qualifications, limitations,
restrictions or conditions attaching to the Series B Preferred Stock must be
approved by the affirmative vote of the holders of a majority of the shares of
Series B Preferred Stock then outstanding, given in person or by proxy whether
in writing or at a meeting at which the holders of the shares of Series B
Preferred Stock will be entitled to vote separately as a class.
J. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series B Preferred Stock, the Series B Preferred Stock will
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth above in this Certificate of Designation, as the same
may be amended and/or restated from time to time.
33
EXHIBIT C TO STOCK PURCHASE AGREEMENT
FORM OF PREFERRED SHARE RESOLUTION, SERIES C
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE
SERIES C PREFERRED STOCK
Cybernet Internet Services International, Inc., a Delaware corporation
(the "Corporation"), submits the following Certificate of Designation in
accordance with Section 151 of the Delaware General Corporation Law.
The undersigned certifies that pursuant to the authority conferred upon
the Board of Directors by the Corporation's Articles of Incorporation, the
Board of Directors has duly adopted resolutions providing for the establishment
of a series of preferred stock consisting of shares, with a par value of
$0.001 and designated as the "Series C Preferred Stock" (the "Series C
Preferred Stock"), which resolutions are set forth below in their entirety:
NOW, THEREFORE, IT IS RESOLVED, that the Corporation's Board of Directors
approves the designation of a series of preferred shares of the Corporation
consisting of shares, with a par value of $0.001, to be designated as the
"Series C Preferred Stock." The rights, powers privileges, preferences,
designations, qualifications, limitations, restrictions and conditions attaching
to the Series C Preferred Stock will be as set forth in the attached Schedule A
which is incorporated herein and made a part hereof by this reference.
FURTHER, RESOLVED, that the President and the Secretary of the
Corporation, are each authorized and directed, in the name and on behalf of the
Corporation, to execute, acknowledge, file and record with the appropriate
officials at the office of the Secretary of State of the State of Delaware, a
certificate of designation setting forth a copy of these resolutions and such
additional information as required by Section 151 of the Delaware General
Corporation Law.
FURTHER, RESOLVED, that the proper officers of the Corporation are
authorized and directed to take all such other actions and to execute, deliver
and file all such further documents, certificates, notices or instruments as
may be required or as such officers may deem necessary or appropriate in
furtherance of or in connection with the foregoing resolutions and to
effectuate fully the purposes and intents thereof.
[Signatures on following page]
34
IN WITNESS WHEREOF, the undersigned has caused the execution of this
Certificate of Designation on ________________, 1997.
XXXXXXXXXXXXXXXXXXXXX
President
ATTEST:
XXXXXXXXXXXXXXXXXXXXXX
Secretary
35
SCHEDULE A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS AND CONDITIONS OF THE
SERIES C PREFERRED STOCK
The rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions and conditions attaching to the Series C Preferred
Stock (the "Series C Preferred Stock") of Cybernet Internet International
Services, Inc., a Delaware corporation (the "Corporation"), are as follows:
A. ISSUANCE. The Series C Preferred Stock will be issued to subscribers of
the Series C Preferred Stock upon receipt of a fully executed and delivered
subscription agreement ("Subscription Agreement") and receipt of the monies
under the terms of the Subscription Agreement. One share of Series C Preferred
Stock will be issued for each U.S.$5.50 received from the subscriber.
B. DIVIDENDS. The holders of the Series C Preferred Stock will be entitled
to receive out of the surplus or net profits of the Corporation, dividends at a
rate equal to 8% per annum, and no more, before any dividends are paid or set
apart for payment upon any other series of preferred stock or on the common
stock of the Corporation. Dividends will begin to accrue on January 1, 1998.
Commencing for the fiscal year beginning on January 1, 1998, the dividend on the
Series C Preferred Stock will be paid for each fiscal year within five months of
the end of each fiscal year, subject to the availability of surplus or net
profits therefor. Any dividends paid on the Series C Preferred Stock in an
amount less than the total amount of dividends at the time accrued and payable
on the shares will be allocated pro rata in accordance with the number of shares
then outstanding.
The dividends on the Series C Preferred Stock will be cumulative, so that
if for any period the dividend is not paid, the right to such dividend will
accumulate, and all arrears so accumulated will be paid before any dividends are
paid to any other series of preferred stock or the common stock of the
Corporation.
C. VOTING RIGHTS. The holders of the Series C Preferred Stock are not
entitled to receive notice of or to vote on any matter that is the subject of a
vote of the stockholders of the Corporation, except as otherwise required by the
laws of the State of Delaware.
D. REDEMPTION AND EXCHANGE. The Shares of Series C Preferred Stock may be
redeemed by the Corporation at any time upon ten (10) days prior written notice
(the "Redemption Notice") to the holder thereof of the Corporation's intention
to redeem the Series C Preferred Stock at a redemption price of 100% of the
purchase price paid to the Corporation for such shares plus any unpaid accrued
dividends thereon through the date of redemption so long as prior to the date of
redemption the following has occurred:
1. The Corporation must have offered to exchange on the terms set
forth below (the "Exchange Offer") each share of Series C Preferred Stock
for (a) one share of the Corporation's voting common stock par value U.S.
$0.001 per share (the "Common Stock"), plus (b) one warrant ("Warrant") to
purchase the number of shares of Common Stock equal in the aggregate to
one-half the number of shares of Common Stock received in the Exchange
Offer, which Warrant will be exercisable at any time through the first
anniversary of the date of issuance of the Warrant at a
36
purchase price equal to U.S.$7.50 per share. The Exchange Offer will remain
open for at least twenty (20) days; and
2. A registration statement under the Securities Act of 1933, as
amended, must be in effect registering the issuance of the Common Stock and
Warrants pursuant to the Exchange Offer.
E. Liquidation, Dissolution or Winding Up. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
Corporation, the holders of the Series C Preferred Stock will be entitled to be
paid the sum of U.S.$5.50 per share plus an amount equal to any unpaid accrued
dividends before any amount is paid to the holder of any other series of
preferred stock or the common stock of the Corporation. After payment of these
amounts to the holders of the Series C Preferred Stock, the remaining assets of
the Corporation will be distributed to the holders of the common stock, subject
to any other preferences granted to the holders of any other series of
preferred stock as created by the Board of Directors of the Corporation prior
to such time.
F. Preemptive Rights. The holders of the Series C Preferred Stock will not
have any preemptive right to subscribe for or purchase any shares of stock or
any other securities that may be issued by the Corporation by virtue of their
holding the Series C Preferred Stock.
G. Transferability. The Series C Preferred Stock may not be transferred by
the holder and any attempted transfers will not be recognized by the
Corporation or its stock transfer agent.
H. Variation of Rights. Any amendment to the Articles of Incorporation of
the Corporation (including any certificates of designation pursuant to a
resolution of the Board of Directors) to delete or vary the rights, powers,
privileges, preferences, designations, qualifications, limitations,
restrictions or conditions attaching to the Series C Preferred Stock must be
approved by the affirmative vote of the holders of a majority of the shares of
Series C Preferred Stock then outstanding, given in person or by proxy whether
in writing or at a meeting at which the holders of the shares of Series C
Preferred Stock will be entitled to vote separately as a class.
I. Exclusion of Other Rights. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series C Preferred Stock, the Series C Preferred Stock will
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth above in this Certificate of Designation, as the same
may be amended and/or restated from time to time.
37
DISCLOSURE SCHEDULES FOR SECTION 3
THE STOCK PURCHASE AGREEMENT
Disclosure Schedule 3.5
[previously provided]
Disclosure Schedule 3.6
None
Disclosure Schedule 3.7
Agreement with AimQuest Corp., dated March 19, 1997,
which consent is being obtained
Disclosure Schedule 3.8
None except as disclosed in Disclosure Schedule 3.7
Disclosure Schedule 3.17
Disclosure Schedule 3.10
1. Agreement with Info AG dated 11 July 1996
2. Agreement with European Computer Industry Research Center dated 5/11
Feb. 1997
3. Agreement with Microsoft Corp. dated 6 Sept./11 Oct. 1996
4. Agreement with Spider Technologies Inc. dated 29 Aug. 1996
5. Agreement with AimQuest Corp. dated 19 March 1997
6. Agreement with Merisel GmbH dated 8 Oct. 1996
7. Agreement with Sun Microsystems GmbH dated 1 Dec. 1996
No other material agreements.
Consent is required under the agreement with AimQuest Corp., which consent is
being obtained.
38
Disclosure Schedule 3.11
None except as disclosed in Disclosure Schedule 3.10.
Disclosure Schedule 3.12
Lease Agreement Between Cybernet and
KG Bayerische Hausbau GmbH und Co.
dated February 29, 1996 and
Addendum No. 1 and Addendum No. 2 thereto.
Disclosure Schedule 3.13
None
Disclosure Schedule 3.15
None
Disclosure Schedule 3.16
None
Disclosure Schedule 3.18
See Attached.
Disclosure Schedule 3.19
See Attached.
Disclosure Schedule 3.20
None
2
39
DISCLOSURE SCHEDULE 3.5
Financial Statements of
Cybernet Internet-Dienstleistungen AG
40
Cybernet
Internet-Dienstleistungen AG
Berlin
Financial Statements
For the years ended December 31, 1996 and 1995
41
[COOPERS & LYBRAND LETTERHEAD]
NMM - 9584
To the Shareholders of Cybernet Internet-Dienstleistungen AG
Report of Independent Accountants
1. We have audited the accompanying balance sheets of Cybernet
Internet-Dienstleistungen AG as of December 31, 1996 and December 31, 1995
and the related statements of income, retained earnings and cash flows for
the years then ended, which have been prepared on the basis of accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
2. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
3. In our opinion, the financial statements described in the first paragraph
present fairly, in all material respects, the financial position of
Cybernet Internet-Dienstleistungen AG as of December 31, 1996 and December
31, 1995, and the results of its operations and its cash flows for the
years then ended in accordance with accounting principles generally
accepted in the United States of America.
April 28, 1997
Coopers & Lybrand
Wirtschaftsprufungsgesellschaft GmbH
(Illegible signature)
42
CYBERNET Internet-Dienstleistungen AG
Berlin
Statement of Income and Retained Earnings
for the two years ended December 31
- --------------------------------------------------------------------------------
1996 1995
DM DM
------------- ---------
REVENUES:
Hardware and software 223.913,49
Services 243.893,49
------------- ---------
Total sales and revenues 467.806,98 0,00
COSTS AND EXPENSES:
Cost of sales and revenues 552.112,75
Marketing 261.838,31
General and administrative 402.205,09 5.285,86
Interest expense, net 3.161,83 13,07
Other expenses 290.964,65
------------- ---------
Total costs and expenses 1.510.282,63 5.298,93
LOSS BEFORE TAXES -1.042.475,65 -5.298,93
Income tax credit 611.000,00
------------- ---------
NET LOSS -431.475,65 -5.298,93
Retained deficit at beginning of year -5.298,93 0,00
------------- ---------
RETAINED DEFICIT AT END of YEAR -436.774,58 -5.298,93
============= =========
NET LOSS PER COMMON SHARE -1,47 -0,26
============= =========
The accompanying notes are an integral part of the financial statements.
43
CYBERNET Internet-Dienstleistungen AG
Berlin
Balance Sheets as of December 31
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
__________________________________________________________________________________________________________________________________
1996 1995 1996 1995
DM DM DM DM
---- ---- ---- ----
Current assets: Current liabilities:
Cash and cash equivalents 43.362,14 70.446,82 Short term borrowings 111.762,07
Short-term investments 705.409,00 Trade accounts payable 351.973,43
Trade accounts receivable
(net of allowances
DM 23,500.00) 285.325,27 Other accrued liabilities 54.075,84 1.600,00
Other receivables 131.653,49 25.854,25 Deferred revenue 9.598,00
Prepaid expenses and other
current assets 16.492,37 Accrued personnel costs 127.207,51
------------ ---------- ----------- ----------
Total current assets 1.182.242,27 96.301,07 Total current liabilities 654.616,85 1.600,00
Property and equipment, net 782.874,00 0,00 Long-term liabilities
Deferred income taxes 466.000,00 0,00
Other assets: Stockholders' equity:
Product development costs, net 663.894,00
Software licenses 197.832,00 Common stock 100.000,00 100.000,00
Deferred income taxes 1.077.000,00 Other Stocks issued and fully paid in 3.100.000,00
------------ --------- Additional paid-in capital 20.000,00
Total other assets 1.938.726,00 0,00
Accumulated deficit -436.774,58 -5.298,93
------------ ----------
Total stockholders' equity 2.783.225,42 94.701,07
------------ --------- ------------ ----------
3.903.842,27 96.301,07 3.903.842,27 96.301,07
============ ========= ============ ==========
The accompanying notes are an integral part of the financial statements.
44
CYBERNET Internet-Dienstleistungen AG
Berlin
Statements of Cash Flows
1996 1995
for the two Years Ended December 31, DM DM
- ------------------------------------ ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss -431.475,65 -5.298,93
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred tax credit -611.000,00
Depreciation and amortization 56.583,21
Amortization of purchased and capitalized
software 14.926,66
Provision for losses on accounts receivable 23.500,00
Changes in operating assets and liabilities
Trade accounts receivable -308.825,27
Other receivables -105.799,24 -25.854,25
Prepaid expenses and other current assets -16.492,37
Trade accounts payable 351.973,43
Other accrued expenses and liabilities 52.475,84 1.600,00
Deferred revenue 9.598,00
Accrued personnel costs 127.207,51
----------
Total adjustments -405.852,23 -24.254,25
---------- ----------
Net Cash used in operating activities -837.327,88 -29.553,18
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments -705.409,00
Purchase of property and equipment -839.457,21
Product development costs -663.894,00
Purchase of capitalized software -212.758,66
---------- ----------
Net Cash used in investing activities -2.421.518,87 0,00
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of common stock, net 3.120.000,00 100.000,00
Proceeds from short term borrowings 111.762,07
------------ ----------
Net Cash provided by financing activities 3.231.762,07 100.000,00
-------------- ----------
NET DECREASE/INCREASE IN CASH AND CASH
EQUIVALENTS -27.084,68 70.446,82
Cash and Cash Equivalents at Beginning of Year 70.446,82 0,00
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR 43.362,14 70.446,82
--------- ----------
The accompanying notes are an integral part of the financial statements.
45
CYBERNET Internet-Dienstleistungen AG
Berlin
Statement of Income and Retained Earnings
for the two years ended December 31
- --------------------------------------------------------------------------------
1996 1995
US $ US $
---- ----
REVENUES:
Sales and service revenues 144.460,32
Other revenues 157.350,64
---------- ----------
Total sales and revenues 301.810,96 0,00
COST AND EXPENSES:
Cost of sales and revenues 356.201,77
Marketing 168.927,94
General and administrative 259.487,16 3.410,23
Interest expense, net 2.039,90 8,43
Other expenses 187.719,13
---------- ---------
Total costs and expenses 974.375,90 3.418,66
LOSS BEFORE TAXES -672.564,94 -3.418,66
Income tax benefit 394.193,55
---------- ---------
NET LOSS -278.371,39 -3.418,66
Retained deficit at beginning of year -3.418,66 0,00
---------- ---------
RETAINED DEFICIT AT END OF YEAR -281.790,05 -3.418,66
========== =========
NET LOSS PER COMMON SHARE -0.95 -0,17
========== =========
The accompanying notes are an integral part of the financial statements.
46
CYBERNET Internet-Dienstleistungen AG
Berlin
Balance Sheets as of December 31
ASSETS
- -------------------------------------------------------------
1996 1995
US $ US $
------------ ---------
Current assets:
Cash and cash equivalents 27.975,57 45.449,56
Short-term investments 455.102,58
Trade accounts receivable
(net of allowances US $15.161,29) 184.080,82
Other receivables 84.937,74 16.680,16
Prepaid expenses and other
current assets 10.640,24
------------ ---------
Total current assets 762.736,95 62.129,72
Property and equipment, net 505.080,00 0,00
Other assets:
Product development costs, net 428.318,71
Software licenses 127.633,55
Deferred income taxes 694.838,71
------------ ---------
Total other assets 1.250.790,97 0,00
------------ ---------
2.518.607,92 62.129,72
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------
1996 1995
US $ US $
------------ ---------
Current liabilities:
Short term borrowings 72.104,56 0,00
Trade accounts payable 277.079,63 0,00
Other accrued liabilities 34.887,64 1.032,26
Deferred revenue 6.192,26 0,00
Accrued personnel costs 82.069,36 0,00
------------ ---------
Total current liabilities 422.333,45 1.032,26
Long-term liabilities
Deferred income taxes 300.645,16 0,00
Stockholders' equity:
Common stock 64.516,13 64.516,12
Other Stocks issued and fully
paid in 2.000.000,00 0,00
Additional paid-in capital 12.903,23 0,00
0,00
Accumulated deficit -281.790,05 -3.418,66
------------ ---------
1.795.629,31 61.097,46
------------ ---------
Total stockholders' equity 2.518.607,92 62.129,72
============ =========
The accompanying notes are an integral part of the financial statements.
47
CYBERNET Internet-Dienstleistungen AG
Berlin
Statements of Cash Flows
1996 1995
for the two Years Ended December 31, US $ US $
- ----------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss -278.371,39 -3.418,66
Adjustments to reconcile net income to
net cash provided by operating
activities:
Deferred tax credit -394.193,55
Depreciation and amortization 36.505,30
Amortization of purchased and
capitalized software 9.630,10
Provision for losses on accounts
receivable 23.500,00
Changes in operating assets and
liabilities
Trade accounts receivable -207.580,82
Other receivables -68.257,58 -16.680,16
Prepaid expenses and other current
assets -10.640,24
Trade accounts payable 227.079,63
Other accrued expenses and liabilities 33.855,38 1.032,26
Deferred revenue 6.192,26
Accrued personnel costs 82.069,36
- ----------------------------------------------------------------------
Total adjustments -261.840,16 -15.647,90
- ----------------------------------------------------------------------
Net Cash used in operating activities -540.211,55 -19.066,56
- ----------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchase of short-term investments -455.102,58
Purchase of property and equipment -541.585,30
Product development costs -428.318,71
Purchase of capitalized software -137.263,65
- ----------------------------------------------------------------------
Net Cash used in investing activities -1.562.270,24 0,00
Cash Flows from Financing Activities:
Proceeds from issue of common stock, net 2.012.903,24 64.516,12
Proceeds from short term borrowings 72.104,56
- ----------------------------------------------------------------------
Net Cash provided by financing
activities 2.085.007,80 64.516,12
- ----------------------------------------------------------------------
Net Decrease/Increase in Cash and
Cash Equivalents -17.473,99 45.449,56
Cash and Cash Equivalents at Beginning
of Year 45.449,56 0,00
- ----------------------------------------------------------------------
Cash and Cash Equivalents at End of Year 27.975,57 45.449,56
- ----------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
48
NOTES TO FINANCIAL STATEMENTS
1. ORGANISATION
Cybernet AG, founded 1995 by three experienced industry experts, has
established its headquarters in Munich, Germany, and today is offering a
full spectrum of Internet- and Intranet-related telecommunication and
systems integration services to corporate customers.
Today, corporations interested in reducing costs or increasing revenues
through the use of Internet or Intranet technology have to use the services
of an array of vendors: telecommunication carriers, Internet access
providers, multimedia agencies, system integrators, firewall vendors,
database designers and specialists for encryption and electronic mail
(email). Cybernet AG is uniquely positioned as a full-service provider of
all the services related to the utilization of related business
applications around the Internet and Intranet. Cybernet AG's portfolio
includes:
system integration, building customer-specific applications and
networks
access to state-of-the-art network with 120 access locations for leased
lines and 35 access locations (end-of-the-year:80) for fast modems, and
ISDN
fast Internet access to the German Internet exchange, other
European cities, and MAE-East (U.S.)
virtual private networks for corporations and "virtual Internet
providers"
value-added services (international roaming, Internet fax services, and
in the future, telephony and videoconferencing)
security-related products and services (firewalls, secure virtual private
networks, encrypted email)
electronic commerce (catalogs, secure electronic payment)
software development tools for Java (host-integration)
training
Whereas most competitors address only part of the customer requirements,
Cybernet AG is able to build a lasting customer relationship by providing a
larger variety of higher-value services. Other competitors focus on the
consumer Internet access market, whereas Cybernet AG is focused serving the
corporate market. The company believes that in the medium to long term
professional use of the Internet and Intranets is a much more valuable
segment of the market than others, e.g. running consumer online services.
The U.S. market for Internet services provides clear evidence for this
assumption.
In the first year Cybernet AG not only succeeded in attracting a lot of
talent to build up an operational organization and technical
infrastructure, but also started to serve strategically important corporate
customers: e.g. GZS (Gesellschaft fur Zahlungssysteme) Germany's only
MasterCard credit card processor; Commerzbank, Germany's third largest
bank; START, the largest nationwide network for the travel industry, and
others. The company focuses on projects that utilize both its system
integration and nationwide networking capabilities. Also, Cybernet AG
positions itself as a main provider for electronic commerce solutions by
working with credit card companies. VeriFone, and providers of so-called
Merchant Server software (e.g. Microsoft). At the industry's largest trade
show, CeBIT'97 in Hannover, Cybernet AG demonstrated the first fully
operational online shop based on Microsoft Merchant Server.
49
2. BASIS OF PRESENTING FINANCIAL STATEMENTS
The Company maintains its accounts and records in Deutsche Mark in
accordance with accounting principles and practices generally accepted in
Germany. The accompanying financial statements have been prepared from the
Jahresabschlubss (financial statements) as required by German
Handelsgesetzbuch. Certain modifications have been made in the accompanying
financial statements in order to present them in a form which is in
accordance to US GAAP.
The accompanying statements are expressed in Deutsche Mark and solely for
the convenience of the reader, have been translated into US $ at 1,55 DM =
1.00 US $, the approximate rate of exchange on December 31, 1996. The
translation should not be construed as a representation that Deutsche Mark
have been, could have been or could in the future be, converted into US $
at the above or any other rate.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION Revenues from network services are recognized over the
period services are provided. Other revenues, consisting principally of the
sale of merchandise (mainly EDP-hardware), data network services,
production services, and development and licensing fees are recognized as
services are rendered or the product is shipped. Deferred revenue consists
primarily of monthly subscription fees billed in advance.
PROPERTY AND EQUIPMENT Property and equipment are recorded at cost and
depreciated or amortized using the straight-line methode over the estimated
useful life of the asset, which ranges from 4 years (EDP-hardware) to 10
years (furniture). Software license fees with net unamortized values of DM
197,832.00 (US $ 127,633.55) are included in other assets. Amortization
expense for the year ended December 31, 1996 was DM 14,926.66 (US
$9,630.00).
PRODUCT DEVELOPMENT COSTS The Company capitalizes costs incurred for the
production of computer software used in the sale of its services. Costs
capitalized include direct labor and related overhead for software produced
by the Company and the costs of software purchased from third parties. All
costs in the software development process that are classified as research
and development are expensed as incurred until technological feasibility
has been established. Once technological feasibility has been established,
such costs are capitalized until the software is commercially available.
Amortization is provided on a product-to-product basis, using the greater
of the straight-line method or current year revenue as a percentage of
total revenue estimates for the related software product, not to exceed
four years, commencing the month after the date of product release.
CASH AND CASH EQUIVALENTS The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
SHORT TERM INVESTMENTS In accordance to Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" available-for-sale securities are carried at fair value,
with unrealized gains and losses reported as a separate component of
stockholder's equity.
50
Realized gains losses and declines in value judged to be other than
temporary on available-for-sale securities are included in other income.
The company has classified all debt and equity securities as
available-for-sale. At December 31, 1996 the estimated fair value of
available-for-sale securities approximated cost.
NET LOSS PER COMMON SHARE Net loss per share is calculated by dividing net
loss by the weighted average number of common shares outstanding during the
period.
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31, 1996
US $ DM
Computer equipment 308.808,00 478.652,84
Leasehold improvements 30.546,00 47.346,65
Furniture and fixtures 202.231,00 313.457,72
-------------------------
541.585,00 839.457,21
Less accumulated depreciation and
amortization 36.505,00 56.583,21
-------------------------
Net Property and equipment 505.080,00 782.874,00
-------------------------
5. LEASES
The company leases facilities and equipment under long-term operating
leases. Future minimum payments under noncancelable operating leasing with
initial terms of one year or more are as follows:
US $ DM
Year ending December 31
1997 106.015,00 164.324,00
1998 114.890,00 178.080,00
1999 120.272,00 186.421,00
2000 112.742,00 174.750,00
2001 115.974,00 179.760,00
Thereafter 0,00 0,00
-------------------------
569.893,00 883.335,00
=========================
The company's rental expense under operating leases in the year ended
December 31, 1996 totaled approximately DM 87.588,00 (US $56.508,39).
51
6. COMMITMENTS COMMUNICATION NETWORKS
The Company has guaranteed monthly usage levels of data and voice
communications with one of its vendors. The remaining commitments are as
follows:
US $ DM
Year ending December 31
1997 277.463,00 430.068,00
1998 277.463,00 430.068,00
1999 208.097,00 322.551,00
The related expense for the year ended December 31, 1996 was DM 79.658,00
(US $51.392,00)
7. CAPITAL ACCOUNTS
COMMON STOCK At December 31, 1996, the Company's authorised share capital
was 20.000 common shares of DM 5,00 (US $3,23) par value. 20.000 shares
were issued and outstanding.
INCREASE OF CAPITAL At extraordinary meetings held on February 15, 1996
and on September 13, 1996 the Company's shareholders approved amendments
and restatements of the certificate of incorporation that authorized the
future issuance of 180.000 shares and 440.000 shares of common stock DM
5,00 (US $3,23) par value. According to German Law the increase of capital
becomes valid, when it is registered in the Handelsregister (German
Register of Companies). This registration is still outstanding. Although
the shares still are unissued the subscribers paid in fully during 1996.
8. INCOME TAXES
Tax Rate
The following is reconciliation of the statutory German income tax rate to
the financial statement effective tax rate:
1996
German federal income tax rate
Korperschaftsteuer 45.0%
Solidartratszuschlag 3.4%
German trade tax, net of federal income tax benefit 10.2%
-----
Effective tax rate 58.6%
-----
52
Tax Expense/Credit
------------------
The tax credit for the year can be analysed as follows:
US $ DM
Tax currently payable 0,00 0,00
Deferred tax credit 394.193,53 611.000,00
---------- ----------
394.193,53 611.000,00
---------- ----------
Deferred income taxes are provided in accordance with SFAS 109 on
differences in the treatment of income and expense item for financial
reporting and income tax purposes, primarily relating to depreciation of
Property and Equipment and to product development costs.
As of December 31, 1996 the company has net tax loss carryforwards of
approximately DM 1.835.000,00. For tax purposes these losses will be
available to offset future taxable income.
Deferred income tax reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
Year ending December 31 US $ DM
Deferred tax liabilities
-------------------------
Product development costs 428.387,00 664.000,00
Depreciation and amortization 75.484,00 117.000,00
Other 9.032,00 14.000,00
------------ ------------
Total temporary differences 512.903,00 795.000,00
Net deferred tax liabilities 300.645,00 466.000,00
============ ============
Deferred tax Assets
-------------------
net operating loss carryforwards 1.186.452,00 1.839.000,00
Total deferred tax assets 694.839,00 1.077.000,00
============ ============
9. SOFTWARE DEVELOPMENT COSTS
Costs of DM 284.525,44 (US $ 183.564,80) incurred in developing software to
a stage where its technological feasibility was established have been
expensed as incurred.
53
DISCLOSURE SCHEDULES 3.7 AND 3.10
Filings, Consents and Approvals
Material Contracts and Transactions
54
[BESNER - KREIFELS - WEBER LETTERHEAD]
Michael H. Chanin, Esq.
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue, N. W.
Washington, D.C. 20004-2505
via Telefax Munchen,
001 - 202 624 7222 13.06.1997
2 pages 06-97/96003-06
HB/AB
Stock Purchase Agreement
Cybernet Internet-Dienstleistungen AG
Supplement to Disclosure Schedules 3.7 and 3.10
Dear Michael,
I make reference to our telephone conversation of earlier today. As already
discussed with Patrick Biagosch on Wednesday Disclosure Schedules 3.7 and 3.10
of the Stock Purchase Agreement have to be supplemented as follows:
Disclosure Schedule 3.7:
"Notice and public announcement in accordance with Section 20 German Stock
Corporation Act"
55
- 2 -
Disclosure Schedule 3.10:
"8. Employment Agreement with a new member of the Vorstand"
9. Agreement with Holger Timm providing a loan to Cybernet in the amount of
DM 1.2 Mio."
To confirm the above mentioned supplements please have this letter
countersigned on behalf of Cyber U.S. and return the signed letter by fax.
With kind regards
BESNER KREIFELS WEBER
/s/ Hubert Besner
Dr. Hubert Besner
Rechtsanwalt
We agree to the foregoing:
__________
Cyber U.S.
56
-2-
Disclosure Schedule 3.10:
"8. Employment Agreement with a new member of the Vorstand"
9. Agreement with Holger Timm providing a loan to Cybernet in the amount of
DM 1.2 Mio."
To confirm the above mentioned supplements please have this letter
countersigned on behalf of Cyber U.S. and return the signed letter by fax.
With kind regards
BESNER KREIFELS WEBER
/s/ Dr. Hubert Besner
- --------------------------------
Dr. Hubert Besner
Rechtsanwalt
We agree to the foregoing
/s/ XXXXXXXXXXXXXXXX
-----------------------------
Cyber U.S.
57
[PUNDER, VOLHARD, WEBER & AXSTER LETTERHEAD]
By fax
Mr. Michael H. Chanin
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue
N.W. 6th Floor
Washington DC 2004 June 19, 1997
USA 934.51-0.12 88.a-fer/uk
STOCK PURCHASE AGREEMENT
CYBERNET INTERNET DIENSTLEISTUNGEN AG
SUPPLEMENT TO DISCLOSURE SCHEDULES 3.7 AND 3.10
Dear Mike,
I refer to a telefax of Hubert Besner dated June 18, 1997, we received together
with several enclosures.
With regard to the content of Dr. Besner's fax of June 18, 1997, we have the
following comments:
1. LOAN AGREEMENT
We were provided with a copy of a handwritten loan agreement
(Darlehensvertrag) between Cybernet Internet Dienstleistungen AG ("Cybernet")
and Holger Timm, dated May 30, 1997 (hereinafter the "Loan Agreement).
[PUNDER GROUP LOGO]
58
-2-
1.1 Content of the Loan Agreement
-----------------------------
The Loan Agreement roughly has the following content: Holger Timm has
provided a short-term interest-free loan of an amount of 1,200,000 DM to
Cybernet AG on May 30, 1997. The loan has been received by Cybernet in
full. The loan amount shall be repaid on July 31, 1997, the latest. If
repayment has not been made until the aforementioned date, the conditions
of the Loan Agreement shall be renegotiated. Part of the loan amount shall
be repaid before July 1, 1997 by loans of other shareholders.
The signatures to the contract are only partly legible: The legible ones
read "Holger Timm", "A. Eder" (signed twice).
1.2 Remarks
-------
Due to the Loan Agreement being handwritten and the signatures applied only
partly legible, we are not in a position to assess whether the Loan
Agreement is binding for Cybernet. This may be the case e.g. if Mr. A.
Eder, presently member of Cybernet's management board, who has signed the
Loan Agreement twice, has acted with power of attorney granted by another
member of the management board. According to the commercial register
extract, each of the members of the Board of Management is entitled to
represent the company jointly with another member of the Board or jointly
with a holder of a registered power of procuration (Prokura).
As the Loan Agreement is concluded for a limited period of time, a
termination with notice (ordentliche Kundigung) is not permitted. Both
parties remain, however, entitled to terminate the agreement for good
cause.
The agreement is in accordance with Art. 57 para 2 Stock Corporation Act
(Aktiengesetz, in the following "AktG"), prohibiting any promise of
interest or payment of interest to shareholders, in order to prevent a
hidden repayment of their capital contributions. As Mr. Timm has only
granted an interest-free loan, Art. 57 para 2 AktG is not violated by the
Loan Agreement. It should be noted that in case of non-repayment of
Cybernet in due time, the renegotiation of the conditions of the Loan
Agreement may also not provide for interest payment.
59
-3-
Please note that Art 57 para 1 sentence 1 AktG generally prohibits the
return of their capital contributions to the shareholders. German
jurisdiction considers the repayment of shareholders' loans replacing
registered capital under certain conditions as a hidden return of
shareholders' contributions. If an "entrepreneurially engaged"
(unternehmerisch Beteiligter) shareholder grants such a capital
replacement loan, the repayment of the loan in a period of financial crisis
for the company is considered a violation of Art. 57 para 1 sentence 1
AktG.
An "entrepreneurial engagement" of a shareholder is generally assumed if
the respective shareholder holds more than 25% of the voting shares of the
company. Now Mr. Timm estimatedly only holds about 6.4% of the company's
shares. German jurisdiction does, however, not exclude that an
entrepreneurial engagement of a shareholder can be given also in case
additional circumstances lead to the conclusion that the respective
shareholder exerts entrepreneurial influence despite his relatively low
share. Whether such circumstances are given in this case, we are not in a
position to assess.
Neither are we in a position to assess whether Cybernet is presently or
might in the near future find itself in a financial crisis which would
prohibit the repayment of the loan given by Mr. Timm.
2. EMPLOYMENT AGREEMENT
We were provided with a copy of an employment agreement between Cybernet
and Dr. Alessandro Giacalone dated April 28 and May 15, 1997 (hereinafter
the "Employment Agreement").
2.1 Content
-------
Art. 1 stipulates that Mr. Giacalone has been appointed as a member of the
management board (Mitglied des Vorstandes) of Cybernet upon decision of
Cybernet's supervisory board (Aufsichtsrat). The appointment is valid for
the duration of three years dating from the date of acceptance of this
appointment by Mr. Giacalone. Mr. Giacalone is entitled to represent
Cybernet together with another member of the management board or a holder
of a registered power of procuration (Prokura).
60
-4-
Mr. Giacalone shall be responsible for the business areas research and
development as well as communication services. The following items require the
prior approval of the company's supervisory board:
- - Acquisition, establishment or sale of other enterprises as well as
participation in other enterprises.
- - Acquisition, sale or encumbrance of real property, of rights similar to
real property (grundstucksahnlichen Rechten) or rights to real property.
- - Contracts of Cybernet AG with its shareholders or persons close to the
shareholders and conclusion, amendment or termination of enterprise
agreements (Untemehmensvertragen).
Art. 1(3) contains a prohibition of any additional occupation for Mr. Giacalone
without prior approval of the supervisory board of Cybernet.
The duration of the Employment Agreement shall be three years, beginning with
the date of acceptance of the appointment as member of the management board.
The Agreement shall be prolongated automatically for another two years, if not
expressly excluded before by written declaration of the supervisory board.
Mr. Giacalone shall be entitled to terminate the Agreement upon notice six
months in advance (Art. 2(2)).
If Mr. Giacalone shall, during the duration of the Agreement, become perpetually
unable to work (dauernd arbeitsunfahig), the Agreement shall be terminated by
the end of the month in which the perpetual unability to work is acknowledged.
This perpetual unability to work shall be assumed if Mr. Giacalone has been, for
reasons of health, unable to resume his activities for more than six months and
the recuperation of his working ability cannot be expected within further six
months.
As remuneration, Mr. Giacalone shall receive a yearly salary of 225,000 DM.
Cybernet shall additionally pay half of the health insurance fees of Mr.
Giacalone (Art. 3).
According to Art. 4, Mr. Giacalone shall enjoy a yearly vacation of 30 working
days.
61
-5-
Mr. Giacalone shall keep confidential all business related affairs of
Cybernet also for the time after the termination of the Employment
Agreement. Furthermore, he may not use business secrets or other affairs
of Cybernet for his own purposes (Art. 5).
According to Art. 6 ?? documentation and other results of the activity of
Mr. Giacalone related to the employment activities of Mr. Giacalone for
Cybernet, shall be the sole property (alleiniges Eigentum) of Cybernet.
Cybernet shall be solely entitled to all intellectual property rights
thereto. The provisions of the Act on Employee Inventions
(arbeitnehmererfindungsgesetz, hereinafter "ArbEG") are applicable.
Art. 6(2) stipulates that, upon termination of the Employment Agreement,
Mr. Giacalone shall return all documentation and other work results
including copies and other data carriers related to Cybernet in his
position. Mr. Giacalone shall not have any right of retention
(Zuruckbehaltungsrecht) with regard to this documentation etc.
2.2 Remarks
2.2.1 Rights and Obligations, Power of Attorney
The limitations of Mr. Giacalone's power of attorney are fairly common.
Missing is an amount limitation for the acceptance of loans or the
granting of security.
2.2.2 Non-Competition
The prohibition of any additional occupation contained in Art.1(3) does
include a prohibition of competition for the duration of the Employment
Agreement. Please note that ????? prohibition of competing activities
????? ????? agreed ????? ????? certain period of time after the
termination of an Employment Agreement, subject, however, to the
special circumstances of the employment relationship. Furthermore ???
prohibition to participate in or hold shares of enterprises competing
with Cybernet is missing.
62
-6-
2.2.3 Termination
The notice period for Mr. Giacalone's termination declaration in Art.
2 (2) is not overly long. Apart from this termination with notice,
both parties remain entitled to a termination without notice for good
cause.
2.2.4 Remuneration
The remuneration amount in Art. 3 (1) refers to remuneration before
tax and social security payments (Bruttogehalt).
2.2.5 Working Results
With regard to the working results of Mr. Giacalone, Art. 6 (1)
provides for a far reaching ownership by Cybernet of intellectual
property rights. Art. 6 (1) does, however, stipulate the applicability
of the ArbEG. The ArbEG contains provisions on the procedure of
acquisition of employee inventions by the employer as well as certain
rules for dispute resolution in cases of conflict.
2.2.6 Documentation
The obligation of Mr. Giacalone to return to Cybernet all
documentation, working results and other data carriers related to
Cybernet upon termination of the Employment Agreement is fairly
common.
I hope the above is helpful to you. Please do not hesitate to contact me if you
have any further questions.
Yours sincerely,
/s/ Patrick Biagosch
- --------------------
(Patrick Biagosch)
63
DISCLOSURE SCHEDULE 3.18
OTHER INTELLECTUAL PROPERTY
64
Disclosure Schedule 3.18
Anmeldungen:
1. Deutsche Wortmarke "CYBER NET"
Akt.-Z.: 395 28 921.1
2. Schweizer Wortmarke "CYBERNET"
Akt.-Z.: 08270/1996 von 08.11.1996
3. Euro-Wortmarke "CYBERNET"
Akt.-Z.: 314 427
4. Schweizer Bildmarke "Cybernet - Der Business Provider"
Akt.-Z.: 08275/1996
5. Euro Bildmarke "Cybernet - Der Business Provider"
Akt.-Z.: 433 094
65
DISCLOSURE SCHEDULE 3.19
Insurance
66
DISCLOSURE SCHEDULE 3.19
[TO COME]
67
DISCLOSURE SCHEDULE 4.1, 4.3, and 4.6
RESTATED NOTICE AND PROXY
SEE TAB 10
68
DISCLOSURE SCHEDULE 4.2
-----------------------
Financial Statements of
Cybernet Internet Services International, Inc.
(formerly known as New Century Technologies Corporation)
69
DISCLOSURE SCHEDULE 4.2
CAPITALIZATION OF CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
(based on common shares)
New Century Cybernet Internet Services
Technologies Corporation International, Inc.
(NCTC) (CISI)
Original Shareholders
166,891 shares (1)
Reg D Offering
9,380,000
---------
9,546,891 shares
Merger of NCTC and CISI 9,546,891 shares
----------------
Acquisition of all shares of 11,520,000
Cybernet 5,160,000 common shares
1,200,000 Series A
Preferred Shares
5,160,000 Series B
Preferred Shares
Issuance of Series C Preferred Shares and 1,500,000 (2)
subsequent exchange ------------
Total 22,566,891 shares
- --------------------
(1) Includes 5,000 shares issued to Dr. Robert Moore under a settlement
agreement. Also, includes 20,000 shares claimed by Dr. S.E. Beladi under an
agreement with Cyber Utah which have not been issued and are in dispute.
(2) Assumes that 1,500,000 Series C Preferred Shares are issued and
subsequently exchanged for 1,500,000 common shares. Does not include
possible subsequent exercise of warrants to purchase 750,000 common shares
which warrants are intended to be included in the exchange offer for the
Series C Preferred S Shares.
70
NEW CENTURY TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED FEBRUARY 28, 1997 AND
FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994
71
CONTENTS
Independent Auditors' Report.................................................. 3
Balance Sheets................................................................ 4
Statements of Operations...................................................... 5
Statements of Stockholders' Equity............................................ 6
Statements of Cash Flows...................................................... 9
Notes to the Financial Statements.............................................11
72
[JONES, JENSEN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
New Century Technologies Corporation
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of New Century Technologies
Corporation (a development stage company) as of February 28, 1997 and August
31, 1996 and 1995, and the related statements of operations, stockholders'
equity, and cash flows for the periods then ended February 28, 1997, August 31,
1996, 1995 and 1994 and from inception on September 27, 1983 through February
28, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Century Technologies
Corporation (a development stage company) as of February 28, 1997 and August
31, 1996 and 1995, and the results of its operations and its cash flows for the
periods ended February 28, 1997, August 31, 1996, 1995 and 1994 and from
inception on September 27, 1983 through February 28, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has no operating capital and has had no
operations that together raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 4. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
March 29, 1997
73
NEW CENTURY TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
AUGUST 31,
FEBRUARY 28, --------------------------
1997 1996 1995
------------ ----------- -----------
CURRENT ASSETS
Cash $ 59,785 $ -- $ --
----------- ----------- -----------
Total Current Assets 59,785 $ -- $ --
----------- ----------- -----------
TOTAL ASSETS $ 59,785 $ -- $ --
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,901 $ 3,716 $ 3,716
Accrued expense 18,060 15,560 10,560
Taxes payable 1,015 400 300
Notes payable -- shareholder
(Notes 3 and 6) 50,000 50,000 50,000
----------- ----------- -----------
Total Current Liabilities 72,976 69,676 64,576
----------- ----------- -----------
COMMITMENT AND CONTINGENCY (Note 5) -- -- --
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common Stock $.001 par value,
50,000,000 shares authorized,
141,891 shares outstanding at
February 28, 1997; 106,867 shares
outstanding at August 31, 1996 and 1995 142 107 107
Additional paid-in capital 1,812,089 1,745,310 1,745,310
Loss accumulated during the
development stage (1,825,422) (1,815,093) (1,809,993)
----------- ----------- -----------
Total Stockholders' Equity (13,191) (69,626) (64,576)
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 59,785 $ -- $ --
=========== =========== ===========
The accompanying notes are an integral part of these financial statements
4
74
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Operations
From
For The Inception on
Six Months September 27,
Ended For the Years Ended August 31, 1983 Through
February 28, ------------------------------------ February 28,
1997 1996 1995 1994 1997
------------ ------- -------- ----------- -------------
LOSS FROM DISCONTINUED
OPERATIONS $(10,329) $(5,100) $(45,100) $(1,512,294) $(1,825,422)
======== ======= ======== =========== ===========
WEIGHTED AVERAGE
LOSS PER SHARE (Note 1) $ (0.07) $ (0.05) $ (0.42) $ (15.07)
======== ======= ======== ===========
The accompanying notes are an integral part of these financial statements
5
75
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From inception on September 27, 1983 through February 28, 1997
Loss
Accumulated Total
Common Stock Additional During the Stock-
----------------- Paid-in Development holders'
Shares Amount Capital Stage Equity
------ ------ ---------- ----------- --------
Issuance of 883 shares for $3.40 per share
in October 1983 834 $1 $ 2,999 $ - $ 3,000
Issuance of 8,333 shares for $3.60 per share
in October 1985 from public offering 8,333 8 29,992 - 30,000
Costs of public offering - - (6,324) - (6,324)
Net loss from inception through August 31,
1987 - - - (23,599) (23,599)
----- -- ------- -------- --------
Balance, August 31, 1987 9,167 9 26,667 (23,599) 3,077
Net loss for the year ended August 31,
1988 - - - (4,256) (4,256)
----- -- ------- -------- --------
Balance, August 31, 1988 9,167 9 26,667 (27,855) (1,179)
Net loss for the year ended August 31,
1989 - - - (100) (100)
----- -- ------- -------- --------
Balance, August 31, 1989 9,167 9 26,667 (27,955) (1,279)
Payments of accounts payable by
shareholder - - 1,179 - 1,179
Net loss for the year ended August 31,
1990 - - - (100) (100)
----- -- ------- -------- --------
Balance, August 31, 1990 9,167 9 27,846 (28,055) (200)
Net loss for the year ended August 31,
1991 - - - (100) (100)
----- -- ------- -------- --------
Balance, August 31, 1991 9,167 $9 $27,846 $(28,155) $ (300)
----- -- ------- -------- --------
The accompanying notes are an integral part of these financial statements
6
76
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From inception on September 27, 1983 through February 28, 1997
LOSS
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DURING THE STOCK-
------------------------ PAID-IN DEVELOPMENT HOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY
--------- --------- ----------- --------------- -------------
Balance forward 9,167 $ 9 $ 27,846 $ (28,155) $ (300)
Net loss for the year
ended August 31, 1992 -- -- -- (3,205) (3,205)
--------- --------- ----------- --------------- --------------
Balance, August 31, 1992 9,167 9 27,846 (31,360) (3,505)
Issuance of shares to
former directors for
consulting services 833 1 165 -- 166
Issuance of shares for
cash in August 1993 1,630 2 165,998 -- 166,000
Issuance of shares for
services rendered and
inventory 48,420 48 394,623 -- 394,671
Issuance of shares for
cash in August 1993 550 1 12,499 -- 12,500
Net loss for the year
ended August 31, 1993 -- -- -- (221,239) (221,239)
--------- --------- ----------- -------------- ----------------
Balance, August 31, 1993 60,600 61 601,131 (252,599) 348,593
Issuance of shares for cash 41,017 41 1,042,184 -- 1,042,225
Issuance of shares for
services 1,250 1 62,499 -- 62,500
Returned to authorized (2,500) (3) (497) -- (500)
Net loss for the year
ended August 31, 1994 -- -- -- (1,512,294) (1,512,294)
--------- --------- ------------ -------------- ----------------
Balance, August 31, 1994 100,367 $ 100 $1,705,317 $(1,764,893) $ (59,476)
--------- --------- ------------ -------------- ----------------
The accompanying notes are an integral part of these financial statements
7
77
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From inception on September 27, 1983 through February 28, 1997
LOSS
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DURING THE STOCK-
------------------------ PAID-IN DEVELOPMENT HOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY
--------- --------- ----------- ------------- -------------
Balance, August 31, 1994 100,367 $100 $1,705,317 $(1,764,893) $(59,476)
Issuance of shares
for cash at $5.00 per share 5,000 5 24,995 -- 25,000
Issuance of shares for
services at $10.00 per share 1,500 2 14,998 -- 15,000
Net loss for the year
ended August 31, 1995 -- -- -- (45,100) (45,100)
------- ---- ---------- ----------- --------
Balance, August 31, 1995 106,867 107 1,745,310 (1,809,993) (64,576)
Net loss for the year
ended August 31, 1996 -- -- -- (5,100) (5,100)
------- ---- ---------- ----------- --------
Balance, August 31, 1996 106,867 107 1,745,310 (1,815,093) (69,676)
Payments of accounts
payable by shareholder -- -- 1,814 -- 1,814
Issuance of shares for cash
at $1.86 per share 35,000 35 64,965 -- 65,000
Fractional shares resulting
from 1 for 20 reverse split 24 -- -- -- --
Net loss for the period
ended February 28, 1997 -- -- -- (10,329) (10,329)
------- ---- ---------- ----------- --------
Balance, February 28, 1997 141,891 $142 $1,812,089 $(1,825,422) $(13,191)
======= ==== ========== =========== ========
The accompanying notes are an integral part of these financial statements
8
78
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
For the Inception on
Six Months September 27,
Ended For the Years Ended August 31, 1983 Through
February 28, ------------------------------- February 28,
1997 1996 1995 1994 1997
-------- ------- -------- ----------- -------------
Cash Flows From Operations
Net loss $(10,329) $(5,100) $(45,100) $(1,512,294) $(1,825,382)
Amortization - - - - 1,877
Decrease in inventory - - - 400,000 400,000
Decrease in other assets - - - 4,000 -
Increase in accounts payable 185 - - 1,571 -
Increase in accrued expenses 2,500 5,000 5,000 5,000 18,060
Increase in taxes payable 615 100 100 100 1,015
Shares issued for services - - 15,000 62,500 77,500
Expenses paid by shareholder 1,814 - - - 5,595
Bad debt - note receivable - - - - 21,099
Loss from partnership
interest - - - - 2,500
-------- ------- -------- ----------- -----------
Net Cash Flows Used
From Operations (5,215) - (25,000) (1,039,123) (1,297,736)
-------- ------- -------- ----------- -----------
Cash Flows From Investing
Activities
Organization costs - - - - (1,877)
Note receivable - - - - (21,099)
Investment in partnership - - - - (2,500)
-------- ------- -------- ----------- -----------
Net Cash Flows Used From
Investing Activities - - - - (25,476)
-------- ------- -------- ----------- -----------
Cash Flows From Financing
Activities
Issuance (repayment) of
notes payable - - - (2,602) 47,398
Issuance of common shares,
net of stock offering
costs 65,000 - 25,000 1,042,225 1,332,238
Stock returned to authorized - - - (500) (500)
-------- ------- -------- ----------- -----------
Net Cash Flows Provided
by Financing Activities $ 65,000 $ - $ 25,000 $1,039,123 $1,379,136
-------- ------- -------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
9
79
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
From
For the Inception on
Six Months September 27,
Ended For the Years Ended August 31, 1983 Through
February 28, ------------------------------ February 28,
1997 1996 1995 1994 1997
------- ------- -------- ----------- -------------
Net Change in Cash $59,785 $ - $ - $ - $ 55,924
Cash at Beginning of Period - - - - -
------- ------- -------- ----------- ---------
Cash at End of Period $59,785 $ - $ - $ - $ 55,924
------- ------- -------- ----------- ---------
Cash paid for:
Interest $ - $ - $ - $ - $ -
Income taxes $ 400 $ - $ - $ - $ 700
Non-Cash Financing Activities:
Issuance of shares for
services $ - $ - $15,000 $62,500 $ 77,500
Issuance of shares for
inventory $ - $ - $ - $ - $400,000
The accompanying notes are an integral part of these financial statements.
10
80
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was incorporated under the laws of the State of Utah on
September 27, 1983. The Company has not begun significant operations
and is classified as a development stage company per Statement of
Financial Accounting Standards Number 7. At a Special Meeting of the
shareholders of All Time High, Inc. on July 26, 1993 the Company's
name was changed to New Century Technologies Corporation.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
c. Income Taxes
There has been no provision for income taxes due to net operating
losses since inception. The Company has available unused net operating
loss carryforwards of approximately $1,800,000 which may be applied
against future taxable income. The minimum state franchise tax has
been accrued in operating expenses for each reporting period. The
potential tax benefits of the net operating loss carryovers have been
offset by a valuation allowance of the same amount.
d. Loss Per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the period.
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
f. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
-11-
81
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 2 -- COMMON SHARES REVERSE SPLIT
At a Special Meeting of Shareholders on October 14, 1994 the Company
effected a reverse stock split of its issued and outstanding shares on
a one for ten (1:10) basis.
At a Special Meeting of Shareholders on February 28, 1997 the Company
effected a reverse stock split of its issued and outstanding shares on
a one for twenty (1:20) basis.
All references to shares issued and outstanding have been restated to
conform to the reverse splits.
NOTE 3 -- NOTES PAYABLE SHAREHOLDER
The Company entered into a Purchase Agreement on July 26, 1993 with
Robert Moore, Jr., M.D. (Dr. Moore), a shareholder of the Company, for
the purchase of parts inventories, valued at $400,000 and all assets
of the Seller relating to, or used, or employed in connection with, or
related to development of the RM 2000 engine. In partial payment of
the purchase price the Company assumed a monthly rental on a storage
facility in which the RM 2000 engine parts and components are stored,
and the Company assumed phone service utilized at the storage
facility. The Company also issued one hundred thousand (100,000)
unregistered common shares, and a promissory note in the principle sum
of fifty thousand dollars ($50,000) bearing interest at ten percent
(10%) per annum and payable in full on or before December 31, 1993. An
additional one hundred thousand dollars ($100,000) was due and payable
upon the completion of the offer and sale of common shares to the
public pursuant to Regulation D, rule 504, promulgated under the
securities act of 1933, as amended. Also a royalty payable to Dr.
Moore of ten cents ($0.10) per RM 2000 engine manufactured and sold
would be paid. No engines were manufactured and no payments were made
to Dr. Moore under the terms of the purchase agreement. During 1994
all development activities related to the engine were discontinued.
The remaining inventory of parts having no value, was written off. On
March 14, 1997 the Company settled all outstanding claims with Dr.
Moore. (See Note 6)
NOTE 4 -- GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has no
operations at this time and no operating expenses. The Company is
presently seeking a merger and, or acquisition candidate with ongoing
operations. In the interim shareholders of the Company have committed
to meeting its minimal operating costs.
NOTE 5 -- ROYALTY AGREEMENT/COMMITMENTS AND CONTINGENCIES
The Company entered into a royalty agreement with Dr. Moore to pay ten
cents ($0.10) per RM 2000 engine manufactured and sold. When the
Company completed its public offering of common shares, an additional
one hundred thousand dollars ($100,000) was due and payable in
connection with the purchase of the RM 2000 engine parts and
components from Dr. Moore. No engines were manufactured and no
payments were made to Dr. Moore under the terms of the agreement. The
agreement with Dr. Moore was cancelled on March 14, 1997. (See Note 6)
-12-
82
NEW CENTURY TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6 - SUBSEQUENT EVENTS
On March 14, 1997, Dr. Moore signed a settlement agreement with the
Company accepting 5,000 shares of the Company's unregistered common
stock in full satisfaction of all amounts owed Dr. Moore by the Company
under the terms of the purchase agreement. A trustee for Dr. Moore will
hold the shares until they can be sold through the market. The
President of the Company has personally guaranteed to pay Dr. Moore the
difference if any, between the proceeds of the sale of the stock and
$50,000.
On March 3, 1997 the Company wired $45,000 to Dr. S.E. Beladi (Dr.
Beladi), former President of the Company, under the terms of a
settlement agreement signed by Dr. Beladi and dated February 28, 1997.
In addition to the cash payment, the Company will deliver 20,000 shares
of the Company's common stock to Dr. Beladi within 60 days of the
signed agreement. A delay in the delivery of the stock will initiate a
5% penalty, compounded daily, until the shares are delivered. Dr.
Beladi has agreed to accept the cash and stock in full satisfaction of
all amounts which may be owing to him pursuant to his employment with
the Company. Additionally, the President of the Company has personally
guaranteed the Company's obligation to Dr. Beladi under the terms of
the agreement.
13
83
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
July 28, 1997
The Shareholders of Cybernet Internet-Dienstleistungen AG:
Cybermind Interactive Europe AG,
a German Corporation; and Messrs.
Andreas Eder, Roland Manger, Thomas
Schulz, Rudolf Strobl and Holger Timm
Re: Assignment of Stock Purchase Agreement and Related Agreements;
Closing Date for Stock Purchase Agreement and Financing
Gentlemen:
By this letter, Cybernet Internet Services International, Inc., a Delaware
corporation ("Cybernet Delaware"), assigns all of its interest in the Stock
Purchase Agreement, dated June 11, 1997, to its parent corporation, Cybernet
Internet Services International, Inc., a Utah corporation ("Cybernet Utah"),
and Cybernet Utah assumes Cybernet Delaware's rights and obligations under the
Stock Purchase Agreement. The terms of the Stock Purchase Agreement will remain
unchanged except for the substitution of Cybernet Utah for Cybernet Delaware
throughout and the substitution of Utah law for Delaware law.
Cybernet Delaware and Cybernet Utah hereby further agree and undertake to
obtain any additional consents and take any further necessary actions for
Cybernet Delaware to assign and Cybernet Utah to assume all related agreements,
including without limitation: (i) the Escrow Agreement, dated June 24, 1997,
between Rinderknecht, Glaus & Stadelhofer and Cybernet Delaware; (ii) all
Subscription Agreements executed for the purchase of Cybernet Delaware stock;
(iii) the Placement Agreement, dated June 23, 1997, between Union Capital
Markets (UK) Ltd. and Cybernet Delaware. Further, Cybernet Delaware and
Cybernet Utah agree to make any necessary clarifying amendments to the Private
Placement Memorandum dated June 23, 1997.
With respect to the Closing Date for the Stock Purchase Agreement,
reference is made to Paragraphs 2.1 (Closing Date) and 1.5 (Financing) of the
Stock Purchase Agreement. As provided therein, we propose on behalf of Cybernet
Utah that the Closing Date for the Stock Purchase Agreement and related
transactions and the date on which the Financing is provided by August 18,
1997, assuming shareholder approval by Cybernet Utah or on the business day
after such approval if later. In addition, the date of "August 15, 1997" in
Paragraph 6.3(d) of the Stock Purchase Agreement is proposed to be changed to
"August 31, 1997."
84
Shareholders of
Cybernet Internet-Dienstleistungen AG
July 28, 1997
Page 2
The signatures below evidence approval of the parties to the assignments
by Cybernet Delaware and assumptions by Cybernet Utah described above and to
adjusted dates for the Stock Purchase Agreement and the Financing as stated
above.
Sincerely,
/s/ David Lehmberg
--------------------------
David Lehmberg
President
Cybernet Internet Services
International, Inc., a Delaware corporation
ACKNOWLEDGED AND AGREED:
1. CYBERNET INTERNET SERVICES INTERNATIONAL, INC.,
A UTAH CORPORATION
By: /s/ David Lehmberg
-------------------------------
David Lehmber, President
Date:
2. SHAREHOLDERS OF CYBERNET INTERNET-DIENSTLEISTUNGEN AG:
Cybermind Interactive Europe AG
By: /s/ Holger Timm /s/ Thomas Schulz
------------------------------- -----------------------------
Holger Timm, President Thomas Schulz
Date: 28 July 1997 Date: 28 July 1997
/s/ Andreas Eder /s/ Rudolf Strobl
------------------------------- ----------------------------
Andreas Eder Rudolf Strobl
Date: Date: 28-7-97
/s/ Roland Manger /s/ Holger Timm
------------------------------- ----------------------------
Roland Manger Holger Timm
Date: Date: 28 July 1997
85
[CYBERNET INTERNET SERVICES INTERNATIONAL, INC. LETTERHEAD]
August 26, 1997
The Shareholders of Cybernet Internet-Dienstleistungen AG:
Cybermind Interactive Europe AG, a German stock corporation;
and Messrs. Andreas Eder, Roland Manger, Thomas Schulz,
Rudolf Strobl and Holger Timm
Re: Second Modification to Stock Purchase Agreement
Gentlemen:
This letter is to set forth our agreement on minor modifications of the
Stock Purchase Agreement.
1. Compliance With Utah Law. The assignment of the Stock Purchase
Agreement from Cybernet Delaware to Cybernet Utah necessitates a minor
modification of the description of the Series C shares involved in the private
placement to comply with Utah law. With respect to the ability to transfer the
shares, the original description of the Series C shares status:
G. Transferability. The Series C Preferred Stock may not be transferred by
the holder and any attempted transfers will not be recognized by the
Corporation or its stock transfer agent.
Utah law will not permit such a broad restriction on the transfer of
shares. Therefore, by this letter, we amend Exhibit C of the Stock Purchase
Agreement to permit greater transferability of the Series C shares.
Specifically, the transferability provision of the description of the Series C
shares is hereby modified to state the following:
G. Transferability. Subject to compliance with applicable securities laws,
a holder of Series C Preferred Stock may sell such stock or otherwise
transfer it for valuable consideration; provided, that the Company has a
right of first refusal. A holder of Series C Preferred Stock who receives
a Qualified Offer to buy such stock and who wishes to sell such stock
("Offered Stock"), must promptly send a written notice to the Company
("Sale Notice"), and offer (or be deemed to have offered), to sell the
Offered Stock to the Company at the same price and on the same terms as
the Qualified Offer.
86
Shareholders of Cybernet Internet-
Dienstleistungen AG
August 26, 1997
Page 2
(For these purposes, a Qualified Offer is a legally enforceable written
offer that is made at arm's length by a party that is not an affiliate of
the holder and that is financially capable of carrying out the terms of the
written offer.) The Sale Notice must include the identity of the proposed
transferee, the terms of the transfer, and the price offered by the
proposed transferee for the Offered Stock. The holder must be bound to the
terms of the Qualified Offer as stated in the Sale Notice and must keep the
Company informed of any material changes in the proposed transfer. The
holder must also provide the Company with any other information regarding
the Qualified Offer and the proposed transfer as the Company may reasonably
request.
The Company will have an option for thirty (30) days from the receipt of
the Sale Notice to elect to purchase all, but not less than all, of the
Offered Stock. The Company may exercise its option by sending a written
notice to the holder containing a statement that it is exercising its
option. The purchase price of the Offered Stock will be the price contained
in the Qualified Offer. The purchase price of the Offered Stock will be
paid on the same terms as the terms contained in the Qualified Offer.
If the Company does not exercise its option to purchase the Offered Stock,
the holder may sell the Offered Stock to the proposed transferee at a price
and on terms and conditions no less favorable than those set forth in the
Sale Notice. The Company, on the request of the holder, will provide
written evidence to the holder that it has waived its option, so as to
permit the transfer of the Offered Stock. If the holder fails to make the
sale to the proposed transferee within thirty (30) days following the
Company's waiver of its option to purchase the Offered Stock, the waiver
for such sale will lapse and any subsequent proposed transfer to the
proposed transferee or another transferee will be subject to the Company's
right of first refusal. A transfer is consummated when the Company has been
given notice that legal title to the shares of the Offered Stock has been
transferred, subject to recordation on the books of the Company. Any person
or entity acquiring Series C Preferred Stock will take the Offered Stock
subject to any applicable securities laws.
2. Typographical Error in Description of Series A Shares. Exhibit A to the
Stock Purchase Agreement contains the descriptions of the three series of
preferred shares that Cybernet Utah will issue in connection with the Stock
Purchase Agreement and related private financing. Schedule A of Exhibit A,
which describes the Series A shares has a typographical error in Paragraph D
which should be corrected to maintain the clarity of the share description. The
date "December 31, 2002" as used in Paragraph D is inserted to read "December
31, 2001."
87
Shareholders of Cybernet Internet-
Dienstleistungen AG
August 26, 1997
Page 3
3. Disclosures Pursuant to Paragraphs 4.1, 4.5 and 4.6: In preparing to
consummate the Stock Purchase Agreement and related transactions, Cybernet Utah
determined that certain recent corporate actions reflected in its corporate
records may have been taken without following appropriate corporate governance
procedures. Therefore, the shareholders meeting originally called for August 16,
1997 has been delayed until September 6, 1997 (assuming a quorum is then
obtained) to permit the preparation of additional disclosures in a Restated
Proxy Statement. In addition to seeking the approval from its shareholders for
the transactions contemplated by the Stock Purchase Agreement, Cybernet Utah
will submit additional proposals to its shareholders requesting ratification of
certain actions of the Cybernet Utah directors and/or shareholders from January,
1997 to the present. These actions are detailed in the Restated Proxy Statement
attached hereto and made a part hereof as Disclosure Schedule 4.1/4.3/4.6.
4. Closing Date. With reference to Paragraphs 2.1 (Closing Date) and 1.5
(Financing) of the Stock Purchase Agreement, we propose on behalf of Cybernet
Utah that, to accommodate the new date for the meeting of Cybernet Utah
shareholders, the Closing Date for the Stock Purchase Agreement and related
transactions and the date on which the Financing is provided be latest September
30, 1997.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
88
SHAREHOLDERS OF CYBERNET INTERNET-
DIENSTIELSTUNGEN AG
AUGUST 26, 1997
PAGE 4
The signatures below evidence approval of the parties to the Second
Modification to the Stock Purchase Agreement.
Sincerely,
David Lehmberg
President
Cybernet Internet Services
International, Inc., a Utah corporation
ACKNOWLEDGED AND AGREED:
CYBERMIND INTERACTIVE EUROPE AG
By:
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Holger Timm, President Thomas Schulz
Date: Date:
- ------------------------------------- -------------------------------------
Andreas Eder Rudolf Strobl
Date: Date:
- ------------------------------------- -------------------------------------
Roland Manger Holger Timm
Date: Date:
89
VOLLMACHT
Ich, der unterzeichmende Thomas Schulz, wohnhaft in Zweibruckenstrasse 8, 80331
Munchen, bevollmachtige hiermit Herrn Andreas Eder, mich im Zusammenhang mit dem
Closing des Stock Purchase Agreements vom 11.06.1997 mit der CYBERNET Internet
Services International, Inc., umfassend zu vertreten, insbesondere auch das
Pooling Trust Agreement im meinem Namen abzuschliessen und meine Aktien der
CYBERNET Internet-Dienstleistungen AG zu ubertragen. Herr Andreas Eder ist
ermachtigz, alle in diesem Zusammenhang erforderlichen oder zweckmassigen
Erklarungen abzugehen. Herr Andreas Eder ist von den Beschrankungen des Section
181 BGB befreit und ermachtigt. Untervollmacht zu erteilen.
[Illegible] den 14.8.97
- ----------- -------
/s/ Thomas Schulz
- -----------------------
(Thomas Schulz)
90
VOLLMACHT
Ich, der unterzeichmende Rudolf Strobl, wohnhaft in Friedenspromenade 49a, 81827
Munchen bevollmachtige hiermit Herrn Andreas Eder, mich im Zusammenhang mit dem
Closing des Stock Purchase Agreements vom 11.06.1997 mit der CYBERNET Internet
Services International, Inc., umfassend zu vertreten, insbesondere auch das
Pooling Trust Agreement im meinem Namen abzuschliessen und meine Aktien der
CYBERNET Internet-Dienstleistungen AG zu ubertragen. Herr Andreas Eder ist
ermachtigz, alle in diesem Zusammenhang erforderlichen oder zweckmassigen
Erklarungen abrugeben. Herr Andreas Eder ist von den Beschrankungen des Section
181 BGB befreit und ermachtigt. Untervollmacht zu arteilen.
[Illegible] den 14.8.97
- ----------- -------
/s/ Rudolf Strobl
- -----------------------
(Rudolf Strobl)