SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only
(As Permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EUROWEB INTERNATIONAL CORP.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials.
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
(3) Filing Party:
________________________________________________________________________________
(4) Date Filed:
________________________________________________________________________________
EUROWEB INTERNATIONAL CORP.
1138 Budapest, Vaci ut 141. Hungary
(Tel) +36-1 889 7101
(Fax) +36-1 889 7128
SUPPLEMENTAL PROXY INFORMATION OF EUROWEB INTERNATIONAL CORP. FOR
THE SPECIAL MEETING ON MAY 15, 2006
This supplemental proxy material supplements, and should be read in conjunction
with, the Notice of Meeting and Proxy Statement dated April 24, 2006 previously
provided by Euroweb International Corp. (the "Company") for use at its special
meeting at 10:00 a.m. (local time) on May 15, 2006 at the offices of Sichenzia
Ross Friedman Ference LLP, 1065 Avenue of the Americas, 21st Floor, New York,
New York 10018.
On April 26, 2006, a lawsuit was filed in Delaware Court of Chancery by a
stockholder of the Company against the Company, each of its directors, and
CORCYRA d.o.o. ("CORCYRA"), a stockholder of the Company that beneficially owns
39.81% of the Company's outstanding common stock. The Complaint is entitled
Laurence Paskowitz v. Csaba Toro et al., C.A. No. 2110-N and is brought
individually and as a class action on behalf of certain of the Company's common
stockholders excluding defendants and their affiliates. The plaintiff alleges
the proposed sale of 100% of the Company's interest in the Company's two
Internet and telecom related operating subsidiaries (the "Subsidiaries")
constitutes a sale of substantially all of the Company's assets and requires
approval by a majority of the voting power of the Company's outstanding common
stock under Section 271 of the Delaware General Corporation Law. The plaintiff
also alleges the defendants breached their fiduciary duties in connection with
the sale of the subsidiaries and the disclosures contained in the proxy
statement filed on April 24, 2006. The plaintiff has applied for a temporary
restraining order seeking to enjoin the special meeting on May 15, 2006.
On April 28, 2006, the parties to the litigation entered into a Memorandum of
Understanding providing for, subject to confirmatory discovery by plaintiff, the
negotiation of a formal stipulation of a settlement of the litigation. Pursuant
to the proposed settlement, the Board of Directors has determined to (i)
increase the vote required to approve the sale of 100% of the Company's interest
in the Subsidiaries, (ii) revise the disclosure within the proxy statement to
state that the bonus of up to US $400,000, which the Compensation Committee of
the Company had the option to pay to select members of management as the Board
of Directors had previously elected to terminate the ability to pay such bonus
and (iii) provide supplemental disclosure as contained in this Supplemental
Proxy Statement. The settlement will provide for dismissal of the litigation
with prejudice and is subject to Court approval.
o Management of the Company believes it is necessary to increase the vote
requirement needed to approve the sale of the Subsidiaries. As initially
drafted, the Company's Proxy Statement provided that the approval of the
sale of 100% of the Company's interest in the Subsidiaries as contemplated
in the Share Purchase Agreement (the "Agreement") entered by and between
Invitel Tavkozlesi Szolgaltato Rt., a Hungarian joint stock company
("Invitel") and the Company will require an affirmative vote of the
majority of the votes cast in person or by proxy, provided that a quorum
is present at the special meeting. In the interest of allowing each of the
shareholders an opportunity to be heard on the sale of the Subsidiaries,
the Company has elected to revise the vote requirement to provide that
approval of the sale of the Subsidiaries will require an affirmative vote
of the majority of the outstanding shares of common stock of the Company.
o Management of the Company believes it is necessary to remove disclosure
regarding the Compensation Committee's ability to grant a bonus of up to
$400,000. As initially drafted, the Company's proxy statement provided
that upon closing on the sale of the Subsidiaries for US $30,000,000 to
Invitel, a bonus of up to US $400,000 may be paid by the Compensation
Committee to select members of management. Subsequent to the mailing of
the Proxy Statement, the Board of Directors determined that it will not
award this bonus and has terminated the Compensation Committee's ability
to pay such bonus.
o Management of the Company believes it is necessary to clarify language
relating to the Company's strategy for identifying and developing
companies within emerging industries for the purpose of consolidation and
sale if favorable market conditions exist. To clarify, in 1997, the
Company shifted its focus upon the Internet service related business in
Central and Eastern Europe, which was implemented with the acquisition of
various assets in Hungary, Czech Republic, Slovakia and Romania. In 2002,
the Company revised this approach where it commenced looking at various
businesses across industries that included merging with companies, the
disposition of its operating units, a sale of a significant amount of its
assets or any combination of these items. The Company then instituted this
program in 2004 and 2005 with the disposition of its assets in the Czech
Republic and Slovakia. The Board of Directors believes that the sale of
the Subsidiaries is the culmination of the strategy that was first
implemented in 1997, revised in 2002, and then further deployed commencing
in 2004. This strategy was not influenced by CORCYRA or any other
shareholder of the Company and was an independent decision taken by the
Board of Directors of the Company.
o The Board of Directors believes it is necessary to clarify language
relating to its belief that the purchase price being paid for the
Subsidiaries is fair and reasonable under the circumstances and in the
current economic climate. In determining the value of the Subsidiaries,
the Company received a fairness opinion from Neville Weitzman Consultants
Limited ("NWC"), which we believe supported the purchase price of
$30,000,000 for the Subsidiaries and opined that the fair market value of
the Subsidiaries was approximately $22,000,000 as of December 2005. The
Company was introduced to NWC through Cukierman & Co. Ltd. ("Cukierman"),
the Company's investment banking advisors. Upon reviewing NWC's
qualifications including its work product and its work experience
including that of its principal who is a certified public accountant
registered in the United Kingdom, the Board of Directors elected to engage
NWC to provide a fairness opinion with respect to the value of the
Subsidiaries. The Company agreed to pay NWC EUR 13,500 in connection with
this matter. During the last two years, outside of the Company retaining
NWC in connection with the fairness opinion, no other relationship exists
or has existed between NWC and the Company.
NWC defines fair market value as the amount at which the Subsidiaries
would fairly change hands between a willing seller and a willing buyer. In
forming their opinion, NWC considered projections provided by management
from 2006 to 2008 and the analysis of future cash flows from operations
that are discounted by the risk adjusted cost of capital, which reflects
the risk of the operating cash flows. Specifically, the projections
provided by management, as set forth below, included the EBITDA for 2006
through 2008 for each of the Subsidiaries.
------------------------------ --------------------------- --------------------------- ---------------------------
2006 2007 2008
------------------------------ --------------------------- --------------------------- ---------------------------
Hungary EBITDA $3,514,000 $3,889,000 $4,021,000
------------------------------ --------------------------- --------------------------- ---------------------------
Romania EBITDA $3,612,000 $4,588,000 $4,954,000
------------------------------ --------------------------- --------------------------- ---------------------------
Combined EBITDA $7,126,000 $8,477,000 $8,975,000
------------------------------ --------------------------- --------------------------- ---------------------------
Free Cash Flow $ 848,000 $2,477,000 $3,375,000
------------------------------ --------------------------- --------------------------- ---------------------------
The discount rate of 15% employed by NWC is the average cost of capital,
which reflects, in addition to the time value of money, the risk in
achieving the net cash flow during the projection period. NWC has no
relationship with CORCYRA or any member of the Board of Directors. A copy
of the fairness opinion will be made available for inspection and copying
at the principal executive offices of the Company during its regular
business hours by any interested equity security holder of the Company or
representative that has been so designated in writing. A copy of the
fairness opinion will be transmitted by the Company to any interested
security holder of the Company or representative that has been so
designated in writing upon written request to Euroweb International Corp.,
1138 Budapest, Vaci ut 141. Hungary, Attention: K. Hollo, and at the
expense of the requesting security holder.
Further, the purchase price of $30,000,000 exceeded the purchase price
previously offered on December 8, 2005, which was contingent upon
financing, by an international telecommunications company in the amount of
EUR 25,000,000 (based upon the conversion rate as of December 8, 2005 of
1.1830, which would translate to $29,575,000). Given that this offer was
contingent upon obtaining financing, which financing could not be assured,
the Board of Directors opted to reject this offer and instead chose the
Invitel offer. Cukierman, the Company's investment banking advisors, have
advised the Company on this transaction and have no relationship with
CORCYRA or any member of the Board of Directors. It should be noted, on
December 2, 2004, Cukierman sent a letter to CORCYRA pursuant to which it
outlined a future strategic plan for the Company. Such letter was attached
as Exhibit 4 to CORCYRA's Schedule 13D that was filed with the Securities
and Exchange Commission on February 8, 2005.