OND Overnet Data

RNS Number:4654F
OverNet Data PLC
23 December 2002

                        OverNet Data plc (the "Company")


The following is an extract of a letter to be sent to shareholders of the
Company on 24 December 2002:


"On 26 September 2002, the Board noted in its interim results announcement that
it had taken action to reduce its operating costs and its actual and contingent
liabilities to a minimum whilst maintaining existing operations. These decisions
were taken against a background of uncertain stock market conditions and the
Company's belief that there was, at that time, limited investor appetite for
technology companies which were not already cash generative. The Board has
subsequently continued its efforts to protect shareholder value.


The Board noted at that date that initial discussions were being held with a
number of parties which might or might not lead to a change of direction for the
Company and its subsidiary (the "Group"). In the event that a suitable
opportunity could not be identified in the near future, it was anticipated that
the Company would consider what other options were available to it (including
ceasing to trade) which would be in the interests of shareholders and creditors.
The Company also announced that an equity credit line for up to #500,000 had
been entered into subject to the necessary shareholder approvals which, if and
when required, will be put before an Extraordinary General Meeting of the
Company ("EGM"). The Company has continued to review its alternatives to seek to
ensure that creditors are paid and to maximise any potential shareholder value.


The Company, as assisted by its advisors, has discussed with a number of parties
the possibility of their business being acquired by the Company in exchange for
an issue of the Company's shares (a "Reverse Takeover Transaction"). Whilst
preliminary indications of interest have been expressed, no formal discussions
with any third party are currently taking place. The Board will continue to keep
shareholders informed on progress.


Net Assets and Section 142 of the Companies Act 1985

It has now become clear to the Board that the net assets of the Company have
been diminished to less than half of its called up share capital. Section 142 of
the Companies Act 1985 provides that the Directors must in such circumstances
convene an extraordinary general meeting to consider whether, and if so what,
steps should be taken to deal with this situation.


The Directors have formulated a package of proposals which they believe to be in
shareholders' best interests and which they now present to the shareholders for
approval. These proposals are explained in this letter..


The Proposals:


(a)     Non Pre-emptive Share Issue and Capital Reorganisation


The Company has utilised the equity credit line referred to above and has raised
to date approximately #11,000, being the maximum amount permitted under the
authority to issue ordinary shares ("Shares") on a non-pre-emptive basis granted
at the AGM on 26 July 2002. The Company therefore proposes to renew and increase
these authorities such that they have the flexibility to raise additional funds
without recourse to Shareholders if necessary (under resolution 2 in the
attached notice of EGM) by the issue of up to a further 5,200,000 shares (which
if exercised in full would increase shares in issue by approximately 188%).


In addition, the Board is proposing a reorganisation of the Company's share
capital which in effect will reduce the nominal value of each Share from 5p to
0.5p. The reorganisation will permit the Company greater flexibility to issue
Shares (which under company law may not be issued at a price less than their
nominal value) should this be necessary. This reorganisation will not result in
a change to the number of Shares held by any Shareholder, nor his/her
proportionate interest in the Company. The Board is also proposing to subdivide
the existing 5p unissued authorised share capital into 0.5p unissued authorised
share capital to facilitate further equity issues as required.


(b)     Directors


It was announced on 25 November 2002 that I would be stepping down as Chairman
and a Director of the Company on 31 December 2002 following a decision to move
overseas. The Board has requested Mr Laurence, currently Chief Executive, to
also act as interim Chairman following my departure and for the purposes of the
EGM.


The Directors believe that shareholders interests will be best served by the
appointment of new directors who will be incentivised to identify and complete a
Reverse Takeover Transaction which may take the Company into new areas of
activity and who aim to procure that appropriate funds will be available to the
Company to maintain its listing until such transactions can be concluded.


It is therefore intended that Mr Leo Knifton and Mr Nigel Weller be appointed to
the Board immediately following the EGM at which time James Laurence, David
Tilston and Larry Rees intend to resign as directors. Mr Knifton and Mr Weller
have previously assisted the Company in arranging the equity credit line
mentioned above. They have also been closely involved in discussions which may
lead to a Reverse Takeover Transaction. Mr Knifton and Mr Weller have had
experience of being directors of an AIM quoted company, Netwindfall plc. Mr
Weller was a founder and joint managing director of Manifest Voting Agency
Limited and Mr Knifton has worked for a number of stockbroking companies. They
have extensive knowledge and experience of the financial markets and a range of
City contacts which may be utilised to resolve the Company's present
requirements for a Reverse Takeover Transaction.


(c)     Agreement with Monument Capital (LC) Limited


Until such time as a Reverse Takeover Transaction can be completed, Mr Knifton
and Mr Weller will receive no remuneration as directors of the Company. However,
the Company has entered into an agreement with Monument Capital (LC) Limited
("Monument"), a company jointly owned by Mr Knifton and Mr Weller, which is
conditional on the passing of resolutions by shareholders set out in the
attached notice of EGM. Under this agreement, which amends an agreement made
with Monument on 20 September 2002, the Company will pay a fee of #59,000
inclusive of VAT in consideration of Monument seeking a Reverse Takeover
Transaction. It is a term of the agreement that the Company may require Monument
to subscribe #59,000 in aggregate for a total of 1,182,733 new ordinary shares
of 0.5p each (representing 29.9% of the enlarged share capital of the Company
following the issue of the new shares) and that payment of the fee will be made
upon receipt of the subscription monies, if the Company exercises its right to
require Monument to subscribe. It is the Directors' intention to exercise this
option to require Monument to subscribe.


The Board believes that the proposed arrangements with Monument will align the
interests of the new directors directly with those of existing Shareholders. The
proposed issue of shares requires the approval of shareholders in general
meeting and is dealt with in resolution 2.


(d)     Working capital


Following their appointment as directors Mr Knifton and Mr Weller aim to procure
sufficient funds to be available to the Company as may be required to sustain it
until a Reverse Takeover Transaction can be completed. Approximately #489,000 of
the equity credit line remains available to the Company to be drawn under the
terms already announced on 26 September 2002. Other sources of funding may also
be investigated as deemed necessary from time to time.


(e)     Conditional commitment

Mr Knifton, Mr Weller and Monument have indicated that they must be satisfied
with any termination payments to be made in respect of the current directors and
accordingly the arrangements proposed at (c) and (d) above are dependent upon
satisfactory arrangements being made in this regard by 31 January 2003. "


END



Enquiries:

David Tilston, Finance Director, OverNet Data plc     0845 3308706




                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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