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Pipex Communications (FFG)

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Friday 02 April, 2004

Pipex Communications

Recommended Cash Offer

Pipex Communications PLC
02 April 2004

  Not for release, distribution or publication in whole or in part in or into
            Ireland, the United States, Canada, Australia or Japan.

For immediate release                                               2 April 2004

                            PIPEX Communications plc

                   Recommended cash offer for Host Europe plc

                 Proposed placing for approximately £33 million

•      The Boards of PIPEX Communications and Host Europe announce the terms of
a recommended cash offer, to be made by Investec on behalf of PIPEX
Communications, for the entire issued and to be issued ordinary share capital of
Host Europe.

•      The Offer will be unanimously recommended by the Board of Host Europe.

•      The Offer comprises for each Host Europe Share 2.549p in cash, valuing
the entire issued and to be issued share capital at £31.18 million.

•      Host Europe is an Internet services company that offers a broad range of
domain registration and hosting products and services, primarily to small and
medium sized enterprises ("SMEs"), and is one of the leading providers of such
services in the UK and Germany.

•      The Board of Host Europe announced its full year results for the year
ended 31 December 2003 on 2 April 2004. Annual turnover increased by 25% to
£17.1 million and the company recorded a loss before tax of £0.1 million.

•      The acquisition of Host Europe will:

•      give PIPEX Communications additional focus on the hosting and managed
services market;

•      balance the current services that are offered to its customers; and

•      provide a platform for future growth for the hosting operations of the
combined businesses

•      PIPEX Communications also expects to be able to secure additional cost
synergies through shared resources  and by leveraging the hosting expertise of
Host Europe.

•      The Offer represents a premium of 6 per cent. on the closing middle
market quotation of 2.4p per Host Europe Share (as derived from the AIM Appendix
to the Daily Official List) on 23 March 2004, being the last dealing day prior
to the commencement of the Offer Period.

•      PIPEX Communications has received binding irrevocable undertakings to
accept the Offer from the directors of Host Europe and other Host Europe
Shareholders amounting in aggregate to 473,122,141 Host Europe Shares,
representing approximately 40.1 per cent. of Host Europe's existing issued
ordinary share capital.

•      PIPEX Communications proposes to issue 314,285,715 New PIPEX Shares at a
price of 10.5p under the Placing to raise approximately £33 million in order to
provide finance for the cash consideration payable under the Offer.

•      The above summary is to be read in conjunction with the full text of this
announcement.

Commenting on the offer, Peter Dubens, Chairman of PIPEX Communications, said:

"This acquisition will expand our hosting services, further improve the mix of
products that we currently offer our customers and increase our gross margin.
It is an acquisition which reinforces our position in the UK telecommunications
sector."

Abby Hardoon, Chief Executive of Host Europe, said:

"We are delighted that the value of Host Europe is being recognised by PIPEX
Communications through its offer. The acquisition will combine Host Europe's
strengths in hosting and internet services with a strong, ambitious and growing
telecommunications services business. PIPEX Communications' existing data centre
capacity removes a constraint to our growth.

Host Europe and PIPEX Communications share a belief that customers are
increasingly looking to take telecom services from a single supplier and that
broadband connectivity and hosting represent a compelling bundled offering.

Being part of PIPEX Communications will bring added stability, increased data
centre capacity and access to a broader customer base, whilst at the same time
enhance PIPEX Communications' presence in the hosting arena. It is a good
strategic fit and makes sound commercial sense for both companies.

We welcome PIPEX Communications' commitment to our staff and customers and look
forward to fulfilling the potential of the combined group."

Enquiries
PIPEX Communications plc                                       020 7766 6909
Peter Dubens, Chairman

Investec                                                       020 7597 5970
Chris Godsmark

Financial Dynamics (FPR to PIPEX)                              020 7831 3113
Edward Bridges / Juliet Clarke / Ben Way

Host Europe plc                                                0207 628 1114
Stephen Sadler, CFO
Durlacher                                                      020 7459 3600
Aubrey Powell

ICIS (FPR to Host Europe)                                      0207 628 1114
Tom Moriarty



Investec, which is regulated in the United Kingdom by the Financial Services
Authority, is acting for PIPEX Communications and for no one else in connection
with the Offer and will not be responsible to anyone other than PIPEX
Communications for providing the protections afforded to clients of Investec nor
for providing advice in relation to the Offer or any matter referred to herein
or in the Offer Document.

Durlacher, which is regulated in the United Kingdom by the Financial Services
Authority, is acting for Host Europe and for no one else in connection with the
Offer and will not be responsible to anyone other than Host Europe for providing
the protections afforded to customers of Durlacher nor for providing advice in
relation to the Offer or any matter referred to herein or in the Offer Document.

This document does not constitute, or form part of, any offer for, or any
solicitation of any offer for, or an invitation to purchase or subscribe for,
securities.

The Offer is not being, and will not be, made, directly or indirectly, in or
into, or by use of the mails of, or by any means or instrumentality (including,
without limitation, facsimile transmission, telex, telephone or e-mail) of
interstate or foreign commerce of, or by any facilities of a national securities
exchange of, Ireland, the United States, Canada, Australia or Japan and cannot
be accepted by any such use, means, instrumentality or facility or from within
Ireland the United States, Canada, Australia or Japan.  Accordingly, copies of
this announcement are not being and must not be mailed or otherwise distributed
or sent in or into Ireland, the United States, Canada, Australia or Japan.

  Not for release, distribution or publication in whole or in part in or into
            Ireland, the United States, Canada, Australia or Japan.

For immediate release                                               2 April 2004

                            PIPEX Communications plc

                     Recommended Cash Offer for Host Europe

                 Proposed placing for approximately £33 million

1.         Introduction

The Boards of PIPEX Communications and Host Europe announce the terms of a
recommended cash offer, to be made by Investec on behalf of PIPEX
Communications, for the entire issued and to be issued ordinary share capital of
Host Europe.

The Offer values the entire issued and to be issued share capital of Host Europe
Shares at approximately £31.18 million and represents a premium of 6 per cent.
on the closing middle market quotation of 2.4p per Host Europe Share (as derived
from the AIM Appendix to the Daily Official List) on 23 March 2004, being the
last dealing day prior to the commencement of the Offer Period.



2.         Recommendation

The Board of Host Europe, which has been so advised by Durlacher, its financial
adviser, considers the terms of the Offer to be fair and reasonable and
accordingly will unanimously recommend that Host Europe Shareholders accept the
Offer, as they have irrevocably undertaken to do so in respect of their own
beneficial holdings, amounting to, in aggregate, 379,692,141 Host Europe Shares
representing approximately 32.2 per cent. of the current issued ordinary share
capital of Host Europe.  In providing advice to the board of Host Europe,
Durlacher has taken account of the commercial assessments of the Host Europe
Directors.

3.         Irrevocable undertakings

Certain Directors of Host Europe, their family members and one other member of
its staff owning Host Europe Shares have entered into agreements with PIPEX
Communications pursuant to which they have irrevocably undertaken to accept the
Offer in respect of their holdings amounting in aggregate to 463,122,141 Host
Europe Shares, representing approximately 39.3 per cent. of the current issued
ordinary share capital of Host Europe.



In addition, Marlborough Special Situation Fund has undertaken to accept the
Offer in respect of 10,000,000 Host Europe Shares, representing approximately
0.8 per cent. of the current issued ordinary share capital of Host Europe.  The
terms of this undertaking require acceptance of the Offer except in the event of
a competing Offer for Host Europe being made by a third party at a price per
Host Europe Share of 2.931p or more in cash prior to the date on which the offer
becomes unconditional in all respects.



4.         The Offer

On behalf of PIPEX Communications, Investec will offer to acquire, on the terms
and subject to the conditions and further terms set out below and in Appendix I
to this announcement, and the further terms and conditions to be set out in the
Offer Document and the accompanying Form of Acceptance, the entire issued and to
be issued ordinary share capital of Host Europe, on the following basis:

                   for each Host Europe Share 2.549p in cash



The Host Europe Shares will be acquired pursuant to the Offer by, or on behalf
of, PIPEX Communications fully paid up and free from all loans, equities,
charges, encumbrances and any other third party rights of any kind whatsoever,
and together with all rights attaching thereto including all voting rights and
the right to all dividends and other distributions declared, made or paid after
24 March 2004.

Fractions of a penny will not be payable to persons accepting the Offer and the
aggregate consideration payable to a person who validly accepts the Offer will
be rounded down to the nearest whole penny.

5.         Background to and Reasons for the Offer

PIPEX Communications believes that the acquisition of Host Europe will allow
Host Europe's operations to develop and reach their potential due, amongst other
things, to (a) improved access to customers and to data centre infrastructure;
(b) the ability to develop a wider portfolio of services (including DSL
connectivity); and (c) the prospect of further improved customer retention due
to enhanced service offerings.

PIPEX Communications has acquired four companies since the acquisition of
Transigent Limited in October 2002.  These acquisitions have been completed
against the backdrop of consolidation in the alternative telecommunication
providers market which PIPEX Communications expects to continue throughout 2004.
  These acquisitions have given PIPEX Communications an enlarged product
portfolio across DSL and Dial access, hosting, security, VPNs, voice services
and an enlarged business and residential customer base.

The acquisition of Host Europe will give PIPEX Communications additional focus
on the hosting and managed services market, will balance the current services
that are offered to its customers and will provide a platform for future growth
for the hosting operations of the combined businesses.  PIPEX Communications
also expects to be able to secure additional cost savings by consolidating the
operations where appropriate and leveraging the hosting expertise of Host
Europe.

6.         Information relating to the PIPEX Communications Group

PIPEX Communications is one of the leading telecoms network operators and
providers of business broadband solutions in the United Kingdom offering a
comprehensive range of services across a range of market sectors.  Since 31
December 2002, PIPEX Communications has undertaken a number of strategic
acquisitions as part of a structured acquisition programme designed to grow the
company significantly.



XTML and CIX

On 18 July 2003, PIPEX acquired XTML and CIX (by means of the acquisitions of
their holding companies, being respectively XTML Holdings Limited and CIX
Holdings Limited), companies which had previously formed part of the Telenor
Business Holdings UK Limited group.



CIX's principal focus is the provision of connectivity services to a broad UK
customer base, offering leased lines, ADSL, dial-up and conferencing services.
XTML was engaged in the provision of application and hosting solutions to both
the UK public and private sectors, including County Councils and major
multi-sited corporations.



The acquisition of CIX and XTML complemented the existing business of PIPEX
Communications and has provided customers with a greater choice of hosting
locations and new services.



Firstnet

On 28 August 2003 PIPEX Communications acquired Firstnet which provides hosting,
leased lines, DSL, WDSL, and connectivity services to a range of SMEs and major
corporate customers.



The Firstnet data centre located in Leeds further enhances PIPEX Communications'
market position in the North of England and provides an additional 20 points of
presence (PoPs). The acquisition of Firstnet also brought further
diversification to PIPEX Communications' product range including additional
hosting capacity and new wireless products.



PIPEX Internet Limited

On 28 October 2003 PIPEX Communications acquired PIPEX Internet Limited which
has a twelve year track record and is widely recognised in the UK as a leading
Internet Service Provider. PIPEX Internet Limited at the time of the acquisition
was one of the largest DSL connectors having made 6,700 new connections in
September 2003 and having 72,000 DSL customers as at 30 September 2003. PIPEX
Internet Limited provides a portfolio of ISP services to its 119,000 strong
customer base consisting of small corporates, SMEs and residential customers.



Acquisitions summary

PIPEX Communications' acquisitions of PIPEX Internet Limited, Transigent
Limited, XTML, CIX and Firstnet have significantly added to its portfolio of
products and increased the size of its customer base from approximately 550 in
December 2001 to over 150,000 in December 2003. These acquisitions have also
allowed PIPEX Communications to drive synergies by streamlining the cost base of
each acquired company while limiting PIPEX Communications' requirements for
capital expenditure.



7.         Information relating to the Host Europe Group

Host Europe is an Internet services company that offers a broad range of domain
registration and hosting products and services, primarily to SMEs, and is one of
the leading providers of such services in the UK and Germany.



Host Europe commenced its hosting operations in 1997, trading under the Magic
Moments brand. In September 1999, Host Europe reversed into an AIM-listed shell
company and subsequently acquired a leading competitor, WebFusion Internet
Solutions Limited in May 2000. Host Europe established a presence in the German
hosting market through its acquisition of One-2-One Advertising &
Telecommunications GmbH.



In the year ended 31 December 2003, Host Europe's annual turnover increased by
25% to £17.1 million and the company recorded a loss before tax of £0.1 million.



On 23 March 2004, being the last dealing day prior to commencement of the Offer
Period, Host Europe had a market capitalisation of £28.3 million.



8.         Financing of the Offer

PIPEX Communications proposes to issue 314,285,715 New PIPEX Shares at a price
of 10.5p under the Placing to raise approximately £33m in order to provide the
finance for the cash consideration payable under the Offer.



The Placing has been fully underwritten by Collins Stewart and is conditional
upon, inter alia:



(i)                  the approval by PIPEX shareholders of the resolutions to be
proposed at the extraordinary general meeting of PIPEX Communications referred
to in paragraph 12 of the announcement;

(ii)                the Offer having become or being declared unconditional in
all respects (save as to admission to trading on AIM of the New PIPEX Shares
becoming effective and save as to the Placing Agreement having become
unconditional); and

(iii)               admission to trading on AIM of the New PIPEX Shares to be
issued under the Placing becoming effective on or before 22 June 2004 or such
later date as PIPEX Communications and Collins Stewart may agree (subject to the
consent of the Panel) but in any event not later than 6 July 2004.







Investec is satisfied that the necessary financial resources are available to
PIPEX Communications to satisfy acceptance of the Offer in full.



9.         Management and employees



The Host Europe Directors have received assurances from PIPEX Communications
that, following the Offer becoming or being declared unconditional in all
respects, the existing employment rights, including pension rights, of all
employees of Host Europe will be fully safeguarded. Mr Abby Hardoon, a founder
and CEO of Host Europe with considerable experience in the provision of hosting
and related services to small and medium sized companies in the UK, will remain
in employment and continue to utilise his abilities to capitalise on business
opportunities in the UK and in Germany. Uwe Braun, Managing Director of Host
Europe GmBH will continue to run the Group's  German operations.



Mr G Southern and Dr J Willis-Richards, the non-executive directors of Host
Europe, have each confirmed that they are prepared to resign from the board of
Host Europe and Victor Gareh has confirmed that he is prepared to accept notice
of termination of his service contract as an Executive upon the Offer becoming
or being declared unconditional in all respects in each case subject to their
existing rights under their Service Contracts.



10.       Host Europe Share Option Schemes

The Offer will extend to any Host Europe Shares unconditionally allotted or
issued whilst the Offer remains open for acceptance (or by such earlier time and
/or date as PIPEX Communications may, subject to the Code, determine) including
any such shares allotted or issued as a result of the exercise of options under
the Host Europe Share Option Schemes.



In accordance with the rules of the relevant schemes, options granted under the
Host Europe Share Option Schemes will be treated as having vested if the Offer
becomes or is declared unconditional in all respects and will be capable of
exercise.



PIPEX Communications has undertaken to Host Europe that, following the date that
the Offer becomes or is declared unconditional in all respects (if at all), it
will extend the same terms as those of the Offer to holders of shares allotted
or issued pursuant to the exercise of options granted under the Host Europe
Share Option Schemes. This will give holders of options granted under the Host
Europe Share Option Schemes the opportunity to exercise their options and
receive the cash benefit of the Offer.



It is intended that, if the Offer becomes or is declared unconditional in all
respects, PIPEX Communications and/or Host Europe will write to participants in
the Host Europe Share Option Schemes to inform them in more detail of the effect
of the Offer on their rights under the Host Europe Share Option Schemes
(including as to the length of any period option holders have under the various
Host Europe Share Option Schemes to exercise their options) and, as regards
options granted under the Host Europe Share Option Schemes which have value but
are not exercised, to make appropriate proposals to the holders of such options.



11.       Compulsory acquisition, de-listing and re-registration

If PIPEX Communications receives acceptances under the Offer in respect of, and/
or otherwise acquires, 90 per cent. or more of the Host Europe Shares to which
the Offer relates, and assuming that all of the other conditions of the Offer
have been satisfied or waived (if capable of being waived), PIPEX Communications
intends to exercise its rights pursuant to the provisions of sections 428 to
430F (inclusive) of the Companies Act to acquire compulsorily the remaining Host
Europe Shares on the same terms as the

Offer.



Assuming the Offer becomes or is declared unconditional in all respects. PIPEX
Communications intends to procure the making of an application by Host Europe to
the London Stock Exchange for cancellation of the admission to trading of Host
Europe Shares on AIM. It is anticipated that cancellation of Host Europe's
admission to trading will take effect no earlier than the expiry of 20 business
days after the Offer becomes or is declared unconditional in all respects.
Cancellation of the admission to trading on AIM will significantly reduce the
liquidity and marketability of any Host Europe Shares which are not the subject
of a valid acceptance under the Offer.



It is also proposed that, following the Offer becoming or being declared
unconditional in all respects and after the trading in Host Europe Shares on AIM
is cancelled, Host Europe will be re-registered as a private company under the
relevant provisions of the Companies Act.



12.       Extraordinary General Meeting



The Offer is conditional on, inter alia, the directors of PIPEX Communications
being granted authority by PIPEX Shareholders to allot the New PIPEX Shares to
be issued pursuant to the Placing.  An extraordinary general meeting of PIPEX
Communications will be convened at which resolutions will be proposed, inter
alia, to grant the required authority.



The directors of PIPEX Communications, consider the Offer to be in the best
interests of PIPEX Shareholders as a whole and will be recommending that PIPEX
Shareholders vote in favour of the resolutions to be proposed at the
extraordinary general meeting as they intend to do in respect of their own
beneficial shareholdings, which amount to 379,692,141 PIPEX Communications
Shares, representing approximately 32.2 per cent. of the issued share capital of
PIPEX Communications.



13.       Further Information



Neither PIPEX Communications, nor any of its directors, nor, so far as PIPEX
Communications is aware, any person deemed to be acting in concert with it, owns
or controls any Host Europe Shares or has any option to acquire any Host Europe
Shares, or has entered into any derivative referenced to securities of Host
Europe which remains outstanding.

The conditions of the Offer are set out in Appendix I.

Appendix II contains the definitions of certain expressions used in this
announcement.

It is intended that the Offer Document (including a letter of recommendation
from the Non-Executive Chairman of Host Europe) and Forms of Acceptance will be
dispatched shortly to Host Europe Shareholders and, for information only, to
holders of options under the Host Europe Share Option Schemes.  The Offer and
acceptances thereof will be governed by English Law.

14.              Responsibility for Information

(a)    The PIPEX Communications Directors accept responsibility for the
information contained in this announcement other than the information relating
to Host Europe, the Host Europe Directors, members of their immediate families,
related trusts and controlled companies and recommendation and associated
opinions of the Host Europe Directors.  To the best of the knowledge and belief
of PIPEX Communications Directors (who have taken all reasonable care to ensure
that such is the case), the information contained in this document for which
they are responsible is in accordance with the facts and does not omit anything
likely to affect the import of that information.

(b)   The Host Europe Directors accept responsibility for the information
contained in this announcement relating to Host Europe, the Host Europe
Directors, members of  their immediate families, related trusts and controlled
companies and for recommendation and associated opinions of the Host Europe
Directors.  To the best of the knowledge and belief of the Host Europe Directors
(who have taken all reasonable care to ensure that such is the case), the
information contained in this document for which they are responsible is in
accordance with the facts and does not omit anything likely to affect the import
of that information.

                                   APPENDIX I

Conditions and certain further terms of the Offer and Form of Acceptance

The Offer, which will be made by Investec on behalf of PIPEX Communications,
will comply with the rules and regulations of the Financial Services Authority,
the London Stock Exchange and the Code.

Part A:                      Conditions of the Offer

The Offer will be subject to the following conditions:



(i) valid acceptances being received (and not, where permitted, withdrawn) by 3
pm on the first closing date of the Offer (or such later time(s) and/or date(s)
as PIPEX Communications may determine, subject to the Code) in respect of not
less than 90 per cent. (or such lesser percentage as PIPEX Communications may
decide) of the Host Europe Shares to which the Offer relates provided that,
unless otherwise agreed by the Panel, this condition will not be satisfied
unless PIPEX Communications has acquired or agreed to acquire (either pursuant
to the Offer or otherwise) shares carrying, in aggregate, over 50 per cent. of
the voting rights normally exercisable at general meetings of Host Europe,
including for this purpose, to the extent (if any) required by the Code, the
voting rights attaching to any Host Europe Shares which may be unconditionally
allotted or issued before the Offer becomes or is declared unconditional as to
acceptances (whether pursuant to the exercise of outstanding conversion, option
or subscription rights or otherwise), and for this purpose:



     (a) ''Host Europe Shares to which the Offer relates'' means the aggregate
of:



(1)   Host Europe Shares which have been allotted or issued as at the date of
the Offer; and



(2)   any Host Europe Shares allotted or issued after that date but on or before
the first closing date of the Offer (or such later time(s) and/or date(s) as
PIPEX Communications may decide)



but excluding Host Europe Shares which, at the date of the Offer, are held by
PIPEX Communications or its associates (within the meaning of Section 430E of
the Companies Act) or which, at that date, PIPEX Communications or its
associates have contracted to acquire (other than shares which are subject to
such a contract as is described in Section 428(5) of the Companies Act); and



(b)   Host Europe Shares which have been unconditionally allotted shall be
deemed to carry the voting rights which they will carry upon issue.



(ii)   the passing at an extraordinary general meeting of PIPEX Communications
(or any adjournment thereof) of such resolutions as may be necessary or, in the
opinion of the PIPEX Communications Directors, desirable to, implement the
Placing;



(iii) the London Stock Exchange agreeing to admit the New PIPEX Shares to
trading on AIM and such admission becoming effective in accordance with the AIM
Rules;



(iv) PIPEX Communications not having discovered or otherwise become aware prior
to the date upon which the Offer would otherwise have become unconditional in
all respects that the Secretary of State for Trade and Industry intends to refer
the proposed acquisition of Host Europe by PIPEX Communications or any matters
arising there from or related thereto to the Competition Commission in the UK;



(v) the Placing Agreement having become unconditional (save for any condition
relating to the Offer becoming unconditional in all respects and to admission to
trading on AIM of the New PIPEX Shares having become effective) and not being
terminated prior to the Offer becoming, or being declared, unconditional in all
respects;



(vi) all authorisations, orders, recognitions, grants, consents, licences,
confirmations, clearances, permissions and approvals necessary or appropriate
for, or in respect of, the Offer, its implementation or any acquisition of any
shares in, or control of, Host Europe or any of its subsidiary undertakings or
associated undertakings or any company of which 20 per cent. or more of the
voting capital is held by the Host Europe Group or any partnership, joint
venture, firm or company in which any member of the Host Europe Group may be
interested (together the ''wider Host Europe Group'') (to the extent that Host
Europe owns any such shares in or has any such control of any such other member
of the wider Host Europe Group) by PIPEX Communications having been obtained in
terms and in a form satisfactory to PIPEX Communications from appropriate
governments, governmental, quasi-governmental, supra-national, statutory or
regulatory bodies or trade agencies, associations, institutions or courts, or
professional or environmental bodies, or persons or bodies with whom any member
of the wider Host Europe Group has entered into contractual arrangements and all
such authorisations, orders, recognitions, grants, consents, licences,
confirmations, clearances, permissions and approvals necessary to carry on the
business of any member of the wider Host Europe Group remaining in full force
and effect and there being no intimation of any intention to revoke or not to
renew the same and all necessary filings having been made and all necessary
waiting periods having expired, lapsed or been terminated and all necessary
statutory or regulatory obligations in any jurisdiction having been complied
with;



(vii) no government or governmental, quasi-governmental, supranational,
statutory or regulatory body or any trade agency or professional association or
court or any environmental body or other person or body in any jurisdiction
having instituted, implemented or threatened any action, suit, proceedings or
investigation or enquiry or enacted, made or proposed any statute or regulation
or order or decision or taken any other step that would or might:



(a) make the Offer, its implementation or the acquisition or proposed
acquisition of             any shares in, or control over, Host Europe by PIPEX
Communications illegal, void or unenforceable or otherwise directly or
indirectly restrict, restrain, prohibit, delay or interfere in the
implementation of or impose additional conditions or obligations with respect to
or otherwise challenge the Offer or the proposed acquisition of Host Europe by
PIPEX Communications or any acquisition of shares in Host Europe by PIPEX
Communications; or



(b) result directly or indirectly in a delay in the ability of PIPEX
Communications, or render PIPEX Communications unable, to acquire some or all of
the shares in Host Europe; or



(c) impose any material limitation on the ability of PIPEX Communications or any
of its subsidiary undertakings or associated companies or any company of which
20 per cent. or more of the voting capital is held by the PIPEX Communications
Group or any partnership, joint venture, firm or company in which any member of
the PIPEX Communications Group may be interested (together the ''wider PIPEX
Communications Group'') or Host Europe or any member of the wider Host Europe
Group to acquire or hold or exercise effectively, directly or indirectly, any
rights of ownership of shares or the equivalent in any member of the wider Host
Europe Group or management control over any member of the wider Host Europe
Group; or



(d) require or prevent the divestiture by PIPEX Communications or any member of
the wider PIPEX Communications Group or require the divestiture by any member of
the wider Host Europe Group of all or any portion of their respective
businesses, assets or properties or impose any limitation on the ability of any
of them to conduct their respective businesses or own their respective assets or
properties; or



(e) otherwise affect any or all of the businesses, assets, prospects or profits
of any member of the wider PIPEX Communications Group or the wider Host Europe
Group in a manner which is material and adverse to the relevant group; and all
applicable waiting and other time periods during which any such government,
governmental, quasi-governmental, supra-national, statutory or regulatory body,
trade agency, court or other person or body could institute, or implement or
threaten any proceedings, suit, investigation or enquiry having expired, lapsed
or been terminated;



(viii)     there being no provision of any arrangement, agreement, licence,
permit or other instrument to which any member of the wider Host Europe Group is
a party, or by or to which any such member, or any of its assets, may be bound,
entitled or subject, which could as a consequence of the Offer or of the
proposed acquisition of all or any part of the issued share capital of, or
control of, Host Europe, result in:



(a)   any assets of any member of the wider Host Europe Group falling to be
disposed of other than in the ordinary course of business; or



(b)   any moneys borrowed by or other indebtedness actual or contingent of any
member of the wider Host Europe Group becoming repayable or being capable of
being declared repayable immediately or earlier than the repayment date stated
in such arrangement, agreement or other instrument or the ability of such member
of the wider Host Europe Group to incur any indebtedness becomes or is capable
of being or becoming withdrawn or prohibited; or



(c)   any such arrangement, agreement or other instrument being terminated or
modified or any action being taken or any onerous obligation arising thereunder;
or



(d)   the business or interests of any member of the wider Host Europe Group or
its or their financial or trading position or its value being prejudiced or
adversely affected; or



(e)   the interest of any member of the wider Host Europe Group in or with any
partnership, joint venture, firm or company (or any arrangements relating to
such interest) being terminated, modified or adversely affected; or



(f)    the creation of any mortgage, charge or other security interest over the
whole   or any part of the business, property or assets of any member of the
wider Host Europe Group or any such security (whenever arising or having arisen)
becoming enforceable; or



(g)   any member of the wider Host Europe Group ceasing to be able to carry on
business under any name under which it currently does so; and no event having
occurred which, under any provision of any arrangement, agreement or other
instrument to which any member of the wider Host Europe Group is a party, or by
or to which any such member, or any of its assets, may be bound, entitled or
subject, could result, to an extent which is material in the context of the
wider Host Europe Group taken as a whole, in any of the events or circumstances
as are referred to in items (a) to (g) inclusive of this paragraph;



(ix) no litigation or arbitration prosecution or other legal business or
proceedings having been instituted or threatened against any member of the wider
Host Europe Group in the period since 31 December 2003 which could have a
material and adverse effect on the wider Host Europe Group taken as a whole;



(x)    no material adverse change or deterioration having occurred in the
business or financial or trading position or prospects or profits of any member
of the wider Host Europe Group which is material in the context of the wider
Host Europe Group taken as a whole in the period since 31 December 2003;



(xi)     no investigation by any government or quasi-governmental,
supra-national, regulatory or investigative body against or in respect of any
member of the wider Host Europe Group having been threatened, announced or
instituted or remaining outstanding by, against, or in respect of any member of
the wider Host Europe Group in the period since 31 December 2003;



(xii) neither Host Europe nor any other member of the wider Host Europe Group,
since 31 December 2003, save as already publicly disclosed in the audited
preliminary results of Host Europe for the year ended 31 December 2003 or as
otherwise publicly announced prior to or in the announcement of the Offer
having:



(a)   issued or authorised or proposed the issue or grant of additional shares
of any class, or securities convertible into, or rights, warrants or options to
subscribe for or acquire any such shares or convertible securities or redeemed,
purchased or reduced or proposed the redemption, purchase or reduction of any
part of its share capital (save pursuant to the Host Europe Share Option
Schemes); or



(b)   declared, paid or made or proposed to declare, pay or make any dividend,
bonus or other distribution in respect of shares whether payable in cash or
otherwise (other than to Host Europe Shares or a wholly owned subsidiary of Host
Europe); or



(c)   merged with any body corporate or acquired or disposed of any assets which
are material to the business of the wider Host Europe Group taken as a whole
(including shares in subsidiaries and trade investments) or made any change in
its share (save pursuant to the Host Europe Share Option Schemes) or loan
capital, or authorised or proposed or announced any intention to propose any
merger, acquisition, disposal or change as aforesaid; or



(d)   issued or proposed the issue of any debentures or incurred or increased
any indebtedness or liability or contingent liability of any aggregate amount
which is or might be expected to be material in the context of the wider Host
Europe Group taken as a whole; or



(e)   entered into any arrangement, contract or commitment (whether in respect
of capital expenditure or otherwise) which is of a long term or unusual nature
or which involves or could involve an obligation of a nature and magnitude which
is material in the context of the wider Host Europe Group taken as a whole or
which is or could be restrictive to the existing business of any member of the
wider Host Europe Group which is material in the context of the wider Host
Europe Group as a whole; or



(f)    entered into any contract or commitment otherwise than in the ordinary
course of business which is material in the context of the wider Host Europe
Group taken as a whole; or



(g)   entered into or made an offer to enter into any legally binding agreement,
contract or commitment or passed any resolution with respect to any of the
transactions or events referred to in this paragraph; or



(h)    disposed of or transferred, mortgaged, charged or encumbered or created
any security interest over any asset or right, title or interest in any asset;
or



(i)    waived or compromised any claim which is material in the context of the
wider Host Europe Group; or



(j)    proposed any voluntary winding up or taken any corporate action or had
any legal proceedings started or threatened against it for its winding-up,
dissolution or reorganisation or for the appointment of a receiver, trustee or
similar officer of all or any of its assets and revenues; or



(k) passed any resolution in general meeting to sanction, approve or  implement
any such issue, merger, acquisition, disposal, charge, transaction, agreement,
contract or commitment as is referred to in this paragraph; and



(xiii) PIPEX Communications not having discovered:



(a)   that any past or present member of the wider Host Europe Group has not
complied in a material respect with all applicable legislation or regulations of
any jurisdiction with regard to the treatment, keeping, disposal, discharge,
spillage, leak or emission of any waste or hazardous substance or any substance
likely to impair the environment or harm human health, which non-compliance
would be likely to give rise to any liability (whether actual or contingent) on
the part of any member of the wider Host Europe Group which is material in the
context of the wider Host Europe Group taken as a whole;



(b)   that there has been a material emission, discharge, disposal, spillage or
leak of waste or hazardous substance or any substance likely to impair the
environment or harm human health on or from any land or other asset now or
previously owned, occupied or made use of by any past or present member of the
wider Host Europe Group which would be likely to give rise to any liability
(whether actual or contingent) on the part of any member of the wider Host
Europe Group which is material in the context of the wider Host Europe Group
taken as a whole;



(c)   that there is any liability (whether actual or contingent) to make good,
repair, reinstate or clean up any property now or previously owned, occupied or
made use of by any past or present member of the wider Host Europe Group under
any environmental legislation, regulation, notice, circular or order of any
government, quasi-governmental, state or local government, supra-national,
statutory or regulatory body, court, agency or association or any other person
or body in any jurisdiction which is material in the context of the wider Host
Europe Group taken as a whole;



(d) that circumstances exist (whether as a result of the making of the Offer
or otherwise):



(1) which would be likely to lead to any government, quasi-governmental, state
or local government, supra-national, statutory or regulatory body, court,
agency, association or any other person or body in any jurisdiction instituting;
or



(2)   whereby any past or present member of the wider Host Europe Group would be
likely to be required to institute;



an environmental audit or take any steps which would in any such case be likely
to result in any actual or contingent liability to improve or install new plant
or equipment or make good, repair, reinstate or clean up any land or other asset
now or previously owned, occupied or made use of by any past or present member
of the wider Host Europe Group which is material in the context of the wider
Host Europe Group taken as a whole;



(e)   that circumstances exist whereby a person or class of persons would be
likely to have any claim or claims in respect of any product or process of
manufacture or materials used therein now or previously manufactured, sold or
carried out by any past or present member of the wider Host Europe Group, which
claim or claims would be likely to be material in the context of the wider Host
Europe Group taken as a whole;



(f)    that any financial, business or other information concerning the Host
Europe Group disclosed publicly at any time, or disclosed to PIPEX
Communications or its advisers by any member of the wider Host Europe Group
either contained a material misrepresentation of fact or omitted to state a fact
necessary to make the information therein not materially misleading and which
was not, in the case of information publicly disclosed, corrected by subsequent
public announcement made on the London Stock Exchange on or before 1 April 2004
(being the last dealing day prior to the announcement of the Offer) or that any
contingent liability disclosed in such information would or might materially and
adversely affect, directly or indirectly, the business, profits or prospects of
the wider Host Europe Group;



(g)   that any partnership or company in which any member of the Host Europe
Group has a significant economic interest and which is not a subsidiary
undertaking of Host Europe is subject to any material liability, contingent or
otherwise, which is not disclosed in the preliminary audited results of Host
Europe for the year ended 31 December 2003 and which is material in the context
of the wider Host Europe Group; and



(h)   any information which materially affects (in the context of Host Europe
Group as a whole) the import of any information disclosed prior to 1 April 2004
(being the last dealing day prior to the announcement of the Offer) by any
member of Host Europe Group to PIPEX Communications.



Subject to the requirements of the Panel, PIPEX Communications reserves the
right to waive all or any of the conditions (other than those set out in
paragraphs (i) and (ii)) in whole or in part. Conditions (iii) to (xiii)
inclusive if not waived (where permitted) must be fulfilled within 21 days after
the later of the first closing date of the Offer and the date on which condition
(i) is fulfilled (or in each case such later date as the Panel may agree).
PIPEX Communications shall be under no obligation to waive or treat as fulfilled
any of the conditions (iii) to (xiii) inclusive by a date earlier than the date
specified above for the fulfilment thereof notwithstanding that the other
conditions of the Offer may at such earlier date have been fulfilled and that
there are as at such earlier date no circumstances indicating that any of such
conditions may not be capable of fulfilment.



If PIPEX Communications is required by the Panel to make an offer for the Host
Europe Shares under the provisions of Rule 9 of the Code, PIPEX Communications
may make such alterations to the conditions as are necessary to comply with the
provisions of that Rule.



The Offer will lapse if it is referred to the Competition Commission by 3.00 pm
on the first closing date of the Offer or, if later, the date on which the Offer
becomes or is declared unconditional as to acceptances.



The conditions are inserted for the benefit of PIPEX Communications and no Host
Europe Shareholders shall be entitled to waive any of the conditions without the
prior consent of PIPEX Communications.



The Offer is not being made, directly or indirectly, in or into, Ireland, the
United States of America, Canada, Australia, or Japan.



If the Offer lapses, it will cease to be capable of further acceptances and
persons accepting the Offer and PIPEX Communications will cease to be bound by
any acceptances delivered on or before the date on which the Offer lapses.



APPENDIX II

Definitions

The following definitions apply throughout this document and the accompanying
documents, unless the context otherwise requires:



                                                                              
  ''AIM''                                 a market operated by the London     
                                          Stock Exchange plc                  
                                                                              
  ''AIM Rules''                           the rules of AIM                    
                                                                              
  ''Australia''                           the Commonwealth of Australia, its  
                                          states, territories and possessions 
                                                                              
  ''Board'' or ''Directors''              as the context requires, the board  
                                          of directors of PIPEX               
                                          Communications or the board of      
                                          directors of Host Europe            
                                                                              
  ''business days''                       any day, other than a Saturday,     
                                          Sunday or public or bank holiday,   
                                          on which banks are generally open   
                                          for business in the City of London  
                                                                              
  ''Canada''                              Canada, its provinces, territories  
                                          and all areas subject to its        
                                          jurisdiction and any political      
                                          sub-division thereof                
                                                                              
  ''Capita IRG plc                        Capita IRG plc, The Registry, 34    
                                          Beckenham Road, Beckenham, Kent BR3 
                                          4TH                                 
                                                                              
  ''CIX''                                 Computerlink Information Exchange   
                                          Limited                             
                                                                              
  ''Code''                                the City Code on Takeovers and      
                                          Mergers                             
                                                                              
  ''Collins Stewart''                     Collins Stewart Limited, 9th Floor, 
                                          88 Wood Street, London EC2V 7QR     
                                                                              
  ''Companies Act''                       the Companies Act 1985 (as amended) 
                                                                              
  ''Daily Official List''                 the Daily Official List published   
                                          by the London Stock Exchange        
                                                                              
  ''Durlacher''                           Durlacher Limited, the investment   
                                          banking subsidiary of Durlacher     
                                          Corporation plc                     
                                                                              
  ''Financial Services Authority''        the Financial Services Authority    
                                          Limited                             
                                                                              
  ''Form of Acceptance''                  the form of acceptance and          
                                          authority relating to the Offer     
                                          accompanying the Offer Document     
                                                                              
  ''Host Europe''                         Host Europe plc                     
                                                                              
  ''Host Europe Directors''               the directors of Host Europe        
                                                                              
  ''Host Europe Group''                   Host Europe and its subsidiary and  
                                          associated undertakings             
                                                                              
  ''Host Europe Shareholders''            the holders of Host Europe Shares   
                                                                              
  ''Host Europe Share Option Schemes''    the Host Europe plc 1999 Inland     
                                          Revenue Approved Executive Option   
                                          Scheme, the Host Europe plc (No. 2) 
                                          Executive Share Option Scheme and   
                                          the Host Europe plc Unapproved      
                                          Executive Share Option Scheme (as   
                                          amended)                            
                                                                              
  ''Host Europe Shares''                  the existing unconditionally        
                                          allotted or issued and fully paid   
                                          (or credited as fully paid)         
                                          ordinary shares of 1 pence each in  
                                          the capital of Host Europe and any  
                                          further such shares which are       
                                          unconditionally allotted or issued  
                                          on or prior to the date on which    
                                          the Offer closes or, subject to the 
                                          provisions of the Code, such        
                                          earlier date or dates as PIPEX      
                                          Communications may decide           
                                                                              
  ''Group''                               as the context requires, the PIPEX  
                                          Communications Group or the Host    
                                          Europe Group                        
                                                                              
  ''Investec''                            Investec Investment Banking, a      
                                          division of Investec Bank (UK)      
                                          Limited                             
                                                                              
  ''Japan''                               Japan, its cities, prefectures,     
                                          territories and possessions         
                                                                              
  ''London Stock Exchange''               London Stock Exchange plc           
                                                                              
  ''New PIPEX Shares''                    the PIPEX Communications Shares to  
                                          be issued credited as fully paid in 
                                          connection with the Placing         
                                                                              
  ''Offer''                               the recommended cash offer to be    
                                          made by Investec on behalf of PIPEX 
                                          Communications to acquire all of    
                                          the Host Europe Shares on the terms 
                                          and subject to the conditions set   
                                          out the Offer Document and the Form 
                                          of Acceptance and, where the        
                                          context so requires, any subsequent 
                                          revision, variation, extension or   
                                          renewal thereof                     
                                                                              
  ''Offer Document''                      the document to contain the Offer   
                                          for Host Europe by Investec on      
                                          behalf of PIPEX Communications      
                                                                              
  "Offer Period"                          the period commencing on 24 March   
                                          2004 (being the date an             
                                          announcement was made pursuant to   
                                          Rule 2.4 of the Code which involved 
                                          a confirmation that Host Europe     
                                          Directors were discussing a         
                                          possible offer by PIPEX             
                                          Communications)                     
                                                                              
  ''Panel''                               the Panel on Takeovers and Mergers  
                                                                              
  ''PIPEX Communications'' or             PIPEX Communications plc            
  ''PIPEX''                                                                   
                                                                              
  ''PIPEX Communications Directors''      the directors of PIPEX              
  ''PIPEX Communications Shares''         the issued ordinary shares of 1p    
                                          each in the share capital of PIPEX  
                                          Communications                      
                                                                              
  ''PIPEX Group''                         PIPEX Communications and its        
                                          subsidiary and associated           
                                          undertakings                        
                                                                              
  ''PIPEX Shareholders''                  holders of PIPEX Communications     
                                          Shares                              
                                                                              
  ''Placing''                             the conditional placing of          
                                          314,285,715 New PIPEX Shares by     
                                          Collins Stewart pursuant to the     
                                          Placing Agreement                   
                                                                              
  "Placing Agreement"                     the agreement dated 2 April 2004    
                                          made between PIPEX Communications   
                                          and Collins Stewart pursuant to     
                                          which Collins Stewart has           
                                          conditionally agreed on behalf of   
                                          PIPEX Communications to effect the  
                                          Placing.                            
                                                                              
  ''pounds'', ''£'', ''pence'' or ''p''   the lawful currency of the United   
                                          Kingdom                             
                                                                              
                                                                              
  ''Securities Act''                      the United States Securities Act of 
                                          1933, as amended                    
                                                                              
  ''United Kingdom'' or ''UK''            the United Kingdom of Great Britain 
                                          and Northern Ireland                
                                                                              
  ''United States'' or ''US''             the United States of America, its   
                                          possessions and territories, all    
                                          areas subject to its jurisdiction   
                                          and any sub-division thereof, any   
                                          state of the United States and the  
                                          District of Columbia                
                                                                              
  ''US person''                           a US person as defined in           
                                          Regulation S under the Securities   
                                          Act                                 
                                                                              
  ''XTML''                                XTML Limited                        
                                                                              


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

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