<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNITED TELEGROUP INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4813 13-3895294
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) No.)
</TABLE>
--------------------------
ALTSTEINHAUSERSTRASSE 33
6330 CHAM
ZUG, SWITZERLAND
011-041-729-8282
(Address and Telephone Number of Principal Executive Offices and Principal Place
of Business)
--------------------------
DAVID SCHLECHT
17 CATTANO AVENUE
MORRISTOWN, NJ 07960
(201) 829-1881
(Name, Address and Telephone Number of Agent for Service)
--------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS
SENT TO THE AGENT FOR SERVICE, SHOULD BE SENT TO:
WALTER M. EPSTEIN, ESQ.
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
29th Floor
New York, NY 10112
(212) 698-7758
--------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
--------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT MAXIMUM AGGREGATE AMOUNT
OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING OF REGISTRATION
REGISTERED REGISTERED PER SECURITY (1) PRICE (1) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.00001 per
share................................. 2,756,000 $5.25 $14,469,000 $4,989.32
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 17, 1996
PROSPECTUS
UNITED TELEGROUP INTERNATIONAL, INC.
2,756,000 SHARES OF COMMON STOCK
----------------
This Prospectus relates to 2,756,000 shares (the "Shares") of common stock,
par value $.00001 per Share ("Common Stock"), of United Telegroup International,
Inc., a Delaware corporation (the "Company") which are being offered for sale by
certain selling stockholders (the "Selling Stockholders"). See "Selling
Stockholders."
The Company will not receive any of the proceeds from the sales of the
Shares by the Selling Stockholders. The Shares may be offered from time to time
by the Selling Stockholders through ordinary brokerage transactions in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices.
The Selling Stockholders may be deemed to be "Underwriters" as defined in
the Securities Act of 1933, as amended (the "Act"). If any broker-dealers are
used by the Selling Stockholders, any commissions paid to broker-dealers and, if
broker-dealers purchase any Shares as principals, any profits received by such
broker-dealers on the resales of the Shares may be deemed to be underwriting
discounts or commissions under the Act. In addition, any profits realized by the
Selling Stockholders may be deemed to be underwriting commissions. All costs,
expenses and fees in connection with the registration of the Shares offered by
the Selling Stockholders will be borne by the Company. Brokerage commissions, if
any, attributable to the sale of the Shares will be borne by the Selling
Stockholders.
The Shares offered by this Prospectus may be sold from time to time by the
Selling Stockholders or by transferees, commencing on the date of this
Prospectus. No underwriting arrangements have been entered into by the Company
or, to the Company's knowledge, the Selling Stockholders. The distribution of
the Shares by the Selling Stockholders may be effected in one or more
transactions, privately-negotiated transactions or through sales to one or more
dealers for resale of such Shares as principals, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Stockholders in connection with sales
of the Shares.
Unless otherwise specifically provided, all currency amounts in this
document are expressed in United States dollars and are preceded by "$". See
"Prospectus Summary -- Exchange Rates."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1996
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus. An investment in
the Shares offered hereby involves a high degree of risk. See "Risk Factors."
Each prospective investor is urged to read this Prospectus in its entirety. All
references to the Company include United Telegroup International, Inc., a
Delaware corporation ("UTI"), and its subsidiary United Telegroup Holding, AG, a
Swiss corporation ("UT Holding"), and UT Holding's wholly-owned subsidiary
United Telegroup AG, a Swiss corporation ("UT AG").
THE COMPANY
GENERAL
The Company is a development stage company that provides quality private
voice, fax and data management telecommunication services in Switzerland,
primarily to businesses and business groups at prices which are generally below
those of major telecommunications carriers. As of the date of this Prospectus,
the Company has entered into contracts with approximately 12 customers to
provide customized telecommunications service packages. These customized
packages include telecommunications minutes plus other services selected by
customers. The Company provides local support, round-the-clock customer service
and full network redundancy to all customers. Available services include system
design and installation as well as digital compression, fax transmission
compression, digital data services and wideband digital data services. In the
future, the Company intends to expand its operations though local subsidiaries
or joint ventures into other countries in the European Union (the "EU") as such
countries' telecommunications industries become deregulated and as market
conditions in such other EU counties warrant.
Both the competitive environment and the economic framework in which
international telecommunication companies operate are changing at a rapid pace.
Due to the liberalization of telecommunication markets and technical
improvements, the Company is able to utilize the infrastructure provided by
international telecommunication carriers in connection with the services it
offers. This allows the Company to offer its customers one of Europe's largest
meshed fiber optic networks, which will eventually include more than 90
international points of presence ("POPs"). In providing its services, the
Company connects a customer's telephone installation to the Company's POP in
Switzerland by means of dedicated lines, and such POP then routes such
customer's outgoing voice, fax and data transmissions though leased transmission
lines directly to the Company's switch in the United Kingdom. The communications
are then transferred directly from the Company's switch into the international
networks. All of this is achieved without loss in speech quality or speed during
connection and with the customer dialing his international destination directly,
as he had done prior to becoming a Company customer. The Company is able to
provide its services at attractive prices to its customers due to the large
potential purchasing power of the Company.
SERVICES
The Company sells telecommunications minutes in connection with a broad
range of services which are customized to suit individual customer needs. The
Company does not anticipate that the sale of telecommunications minutes without
other services will be a significant portion of its business. The Company
designs, installs and commissions voice, fax and data transmission equipment
appropriate for each of its customers in a manner similar to that provided by
major telecommunications carriers but at a lower price.
The Company offers services including digital compression techniques, where
usage warrants, at 8, 16 or 64 kbps (which compression allows for substantial
overall cost savings), fax transmission compression, and digital data services
in a full range of transmission support and interface types between 1.2 kbps and
2 mb (which can be point to point or point to multipoint). For customers
2
<PAGE>
requiring additional network bandwidth, the Company is able to provide wideband
digital data services which provide increased capacity and which support
applications such as audio- and videoconferencing, high speed imaging, and
corporate communication networking requirements. With the growing use of Local
Area Networks ("LAN's"), customers will be able to directly connect their LAN
traffic to the Company's network, for access to remote locations and for
applications such as file transfer, remote data access and e-mail. The Company
offers a fully managed network service that includes, management, control and
configuration, remote access for diagnostic and maintenance services, regular
network status reports and controlled access security. The Company is conducting
feasibility studies to identify the market potential and regulatory environment
for offering additional services, including video conferencing, paging,
international call back, Internet access, facsimile and frame relay services,
and expects to introduce Internet access, enhanced travel cards and video
conferencing.
The Company provides all of its customers with a high level of quality
service, including local support, round-the-clock customer service and full
network redundancy. Additionally, the Company's customers receive comprehensive
billing packages. The Company's standard monthly statement will include a
management summary report, a call detail report recording every long distance
call and facsimile call, and a pricing breakdown by call destination. Optional
reports include call summaries by account code, area or city code, international
destination and time-of-day. This information is available to customers in the
form of hard copy, magnetic tape or disk.
STRATEGY
The Company's objective is to grow its long distance telecommunications
customer base in Switzerland and to establish itself in other deregulated
markets in the EU as they develop. With its communication network, the Company
is well positioned to take advantage of telecommunications deregulation in
Switzerland and will be well-prepared for the upcoming full deregulation of the
telecommunication markets in other countries of the EU. The network will provide
the Company with the tools to keep pace with the ongoing technological
development in the telecommunications industry. The Company has positioned
itself between the major full-service and high price telecommunications carriers
and the no service (or limited service) cut rate telecommunications minutes
resellers which it believes will eventually expand into its markets. The Company
offers substantially lower rates to customers compared to the major
telecommunications companies, but believes that it is not required to be the
lowest cost provided of minutes because it will be able to attract new business
and maintain its customers' business by offering broad based solutions to their
telecommunications business needs. The Company believes that by positioning
itself this way, it will retain and add customers who wish to save on their
telecommunications expenses yet who also demand a high level of service with the
availability of a wide array of service offerings.
The Company intends to expand its operations in Switzerland by focusing on
and marketing its principal competitive strengths which are: (1) the Company's
sales and marketing organization and the customized service the Company offers
to its customers; (2) the Company's offering of competitive prices which the
Company believes are generally lower than prices charged by the major carrier in
the Swiss market; (3) the Company's position as an early entrant in the Swiss
market as an alternative carrier; (4) the Company's focus on more profitable
international telecommunications traffic; and (5) the Company's switched-based
networking capabilities. The availability of existing transmission capacity in
the Swiss market makes the leasing of transmission lines attractive to the
Company and enables it to grow network usage without having to incur the
significant capital and operating costs associated with the development and
operation of a transmission line infrastructure.
In the future, as business and regulatory conditions warrant, the Company
hopes to utilize the foregoing competitive strengths to expand into other
countries of the EU. In connection with such expansion the Company may enter
into strategic alliances or make investments in companies that are complementary
to its current operations.
3
<PAGE>
The Company primarily targets customers with between $5,000 and $50,000 of
monthly usage. The Company believes that, in addition to being price sensitive,
these customers tend to be focused on customer service and are more likely to
rely on one or two carriers for their telecommunications needs. The diversity of
the Company's targeted customer base enhances network utilization by combining
business-driven workday traffic with night and weekend off-peak traffic. The
Company strives to be more cost effective, flexible, innovative and responsive
to the needs of its customers than the major carriers, while providing more
service and service offerings than cut rate resellers.
The Company's belief that its prices will generally be lower than those of
the major carriers is based upon informal surveys of the pricing offered by the
major carriers. However, because prices and promotional programs change rapidly
and often in the telecommunications industry, the prices offered by the Company
may not always be as competitive as the prices charged by the major carriers.
ORGANIZATION
UTI was incorporated in the State of Delaware on April 17, 1996. As of April
30, 1996, in exchange for 7,250,000 shares of Common Stock, UTI acquired all of
the outstanding shares, other than qualifying shares, of UT Holding. As of April
30, 1996, UTI also issued 2,750,000 shares of Common Stock to Interfinance Inv.
Co. Ltd., a Panamanian corporation ("Interfinance"), 183,333 of which were
issued in exchange for $200,000 in cash and 2,566,667 of which were issued in
exchange for $26 in cash and a Promissory Note due on April 30, 1997 in the
principal amount of $2,799,974 (the "Interfinance Note"). The Interfinance Note
was secured by 2,566,667 shares of Common Stock. As of June 28, 1996,
Interfinance, which is a Selling Stockholder in this Prospectus, satisfied the
Interfinance Note in full from proceeds received from purchasers of a portion of
its Shares. The Company's mailing address and telephone number are 17 Cattano
Avenue, Morristown, New Jersey 07960; attention David Schlecht; (201) 829-1881.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ 2,756,000 shares of Common Stock by the Selling
Stockholders. See "Selling Stockholders and Plan of
Distribution" and "Description of Securities."
Risk Factors...................... The Shares offered hereby involve a high degree of risk.
See "Risk Factors."
</TABLE>
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FEBRUARY 29, 1996
(DATE OF INCEPTION)
TO
APRIL 30, 1996 (1)
-------------------
<S> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales...................................................................................... $ --
Net Loss................................................................................... $ (317,754)
Loss per share............................................................................. $ (.03)
Weighted average number of Shares outstanding.............................................. 10,006,000
<CAPTION>
APRIL 30, 1996
-------------------
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total Assets............................................................................... $ 3,945,491
Liabilities (all current).................................................................. $ 1,171,915
Stockholders' equity....................................................................... $ 2,773,576
</TABLE>
- ------------------------
(1) UTI was incorporated on April 17, 1996, UT Holding was incorporated on
February 29, 1996 and UT AG was incorporated on March 28, 1996. The
consolidated results include UTI and its subsidiaries, UT Holding and UT AG.
(2) The weighted average number of common shares and common equivalent shares
outstanding for purposes of the loss per share amounts are computed on the
basis of all stock being outstanding for all periods presented.
EXCHANGE RATES
Exchange Rates of the Swiss Franc ("CHF"). The high and low exchange rates
(i.e., the highest and lowest rates at which the CHF closed), and the period end
exchange rate of the United States dollar in exchange for the CHF for the period
February 29, 1996 through April 30, 1996, as reported by the Federal Reserve
System, Washington, D.C. were as follows:
<TABLE>
<CAPTION>
JANUARY 1 TO
APRIL 30,
1996
-------------
<S> <C>
High............................. $ 1.2445
Low.............................. $ 1.1867
March 1, 1996.................... $ 1.1945
April 1, 1996.................... $ 1.2035
April 30, 1996................... $ 1.2142
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Prospectus Summary and under the captions "Risk
Factors," "Plan of Operation," "Business" and elsewhere in this Prospectus may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; industry capacity; industry trends;
demographic changes; competition; material costs and availability; the loss of
any significant customers; changes in business strategy or development plans;
quality of management; availability, terms and deployment of capital; business
abilities and judgment of personnel; availability of qualified personnel;
changes in, or the failure comply with, government regulations; and other
factors referenced in this Prospectus. See "Risk Factors."
5
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock should consider carefully the
following risk factors before purchasing the Shares offered hereby.
NO OPERATING HISTORY; UNCERTAINTY OF NEW BUSINESS. The Company is subject
to all of the risks inherent in the establishment of a new business enterprise,
including limited capital, possible delays, uncertain markets and competition.
The Company commenced operations in April 1996 in Switzerland. The initial
operations of the Company have produced development stage costs through April
30, 1996 which development stage costs will continue in the future. Currently,
the Company operates in Switzerland and has entered into contracts with
approximately 12 customers. The likelihood that the Company will succeed in the
telecommunications business must be considered in light of general economic
conditions and the difficulties, expenses and delays frequently associated with
the development of new businesses. There can be no assurance that the Company
will succeed in its business or that a changing economic environment will not
adversely affect such business. There can be no assurance that the Company will
achieve profitability in the future. The Company will focus in the near term on
the expansion of its service offerings and geographic markets which may
adversely affect cash flow and operating performance. As each of the
telecommunications markets in Switzerland and in the other countries of the EU
continue to mature, the Company's possible revenues and customer base in each
such market is likely to decrease over time. The Company's operating results may
fluctuate significantly in the future as a result of a variety of factors, some
of which are outside of the Company's control, including general economic
conditions, specific economic conditions in the telecommunications industry, the
effects of governmental regulation and regulatory changes, user demand, capital
expenditures and other costs relating to the expansion of operations, the
introduction of new services by the Company or its competitors, the mix of
services sold and the mix of channels through which those services are sold,
pricing changes and new service introductions by the Company and its
competitors, and prices charged by suppliers. As a strategic response to a
changing competitive environment the Company may elect from time to time to make
certain pricing, service or marketing decisions or enter into strategic
alliances or investments that could have a material adverse effect on the
Company.
NEED FOR ADDITIONAL CAPITAL. The Company needs to continue to enhance and
expand its operations in order to maintain its competitive position, expand its
service offerings and geographic markets and continue to meet the increasing
demands for providing quality service at competitive prices. The Company may
need to raise additional capital from public or private equity or debt sources
in order to finance its anticipated growth including local service expansion and
working capital needs. In addition, the Company may need to raise additional
funds in order to take advantage of unanticipated opportunities, including more
rapid international expansion or investments in, or strategic alliances with,
companies that are complementary to the Company's current operations, or to
develop new products or otherwise respond to unanticipated competitive
pressures. If additional funds are raised through the issuance of equity
securities, the percentage ownership of the Company's then current stockholders
would be reduced. There can be no assurance that the Company will be able to
raise such capital on satisfactory terms or at all. If the Company decides to
raise additional funds through the incurrence of debt, the Company would likely
become subject to restrictive financial covenants. In the event that the Company
is unable to obtain such additional capital or is unable to obtain such
additional capital on acceptable terms, the Company may be required to reduce
the scope of its presently anticipated expansion, which could materially
adversely affect the Company's business, results of operations and financial
condition and its ability to compete. See "Plan of Operation."
DEPENDENCE ON TRANSMISSION FACILITIES-BASED CARRIERS AND SUPPLIERS. The
Company owns a switch in the United Kingdom and a POP in Switzerland. Initially,
the Company is purchasing its telecommunications minutes from Telemedia
International and its subsidiaries ("TMI") pursuant to a five year contract with
TMI (the "TMI Contact"). The TMI Contract may be terminated by either
6
<PAGE>
party upon thirty days written notice. If the TMI Contract is terminated by the
Company the Company must pay TMI certain installation charges to the extent that
they have not been recouped by TMI plus an additional months fee. The Company
believes that the costs associated with termination of the TMI Contract would
not be material to the Company. Due to the large excess capacity in the
telecommunications industry, should the TMI Contract be terminated, the Company
believes that it would be able to replace the services currently provided by TMI
upon substantially the same terms and without incurring material costs or a
disruption of service, however there can be no assurance that termination of the
TMI Contract would not have a material adverse affect on the Company. Resellers
in this industry can own or lease transmission lines. Telephone calls made by
the Company's customers are connected from the Company's POP to its switch
through transmission lines that the Company leases under a variety of
arrangements with transmission facilities-based long distance carriers, some of
which are or may become competitors of the Company. Most of these transmission
lines are leased on a monthly or longer-term basis at rates that are less than
the rates the Company charges its customers for connecting calls through these
lines. Accordingly, the Company is vulnerable to changes in its lease
arrangements, such as price increases and service cancellations. The Company's
operations are highly dependent upon many carriers' leased transmission lines.
The Company's ability to maintain and expand its business is dependent upon
whether the Company continues to maintain favorable relationships with the
transmission facilities-based carriers from which the Company leases
transmission lines. Although the Company believes that its relationship with its
carriers is generally satisfactory, the deterioration or termination of the
Company's relationship with such carriers could have a material adverse effect
upon the Company. Certain of the vendors from whom the Company leases
transmission lines may be subject to tariff controls and other price constraints
which in the future may be changed. The Company purchases or leases its
transmission lines for its convenience, and transmission lines of comparable
quality may be obtained from several alternative suppliers. However, a failure
by a supplier to deliver quality products on a timely basis, or the inability to
develop alternative sources if and as required, could result in delays which
could have a material adverse effect on the Company. See "Business -- Network."
POTENTIAL ADVERSE EFFECTS OF REGULATION.
Currently, since no calls by Company customers originate in the United
States, the Company does not believe that it is subject to any
telecommunications laws or regulations in the United States. In the future, when
and if the Company's services expand, it is possible that the Company may become
subject to the telecommunications laws and regulations of the United States. If
this were to occur, compliance with such laws would involve certain costs, and,
while the Company would make every effort to comply with such laws and
regulations, failure to comply could have a material adverse effect on the
Company. See "Business -- Regulation."
Due to its ownership of a switch in the United Kingdom, the
telecommunications services provided by the Company are indirectly affected by
regulations introduced by the United Kingdom telecommunications regulatory
authority, The Office of Telecommunications ("Oftel"). Since the break up of the
United Kingdom telecommunications duopoly consisting of British
Telecommunications PLC ("British Telecom") and Mercury Communications Ltd.
("Mercury") in 1991 it has been the stated goal of Oftel to create a competitive
marketplace. Oftel has imposed mandatory rate reductions on British Telecom in
the past, which are expected to continue for the foreseeable future. Although
the Company does not believe that any regulations introduced by Oftel will
interfere with or substantially affect its business, there can be no assurance
that future changes in regulation and government in the United Kingdom will not
have a material adverse effect on the Company. See "Business -- Regulation."
In March 1992, the Swiss government, in a federal decree on
telecommunications services, introduced a complete liberalization of the
transmission of messages through leased lines. Pursuant to such decree, the
Swiss Federal Council also authorized subscribers of leased lines to transmit
voice
7
<PAGE>
messages as long as those messages are transmitted for their own purposes. In
order to conform to the evolution of legislation in other countries in the EU,
in July 1995, the Swiss government modified the decree to provide a new
definition of the term "a message transmitted for its own purposes" so as to
make it possible to offer telephone services through leased lines to "closed
user groups." The Swiss authorities have adopted an expansive notion of the
"closed user group" including not only a parent company and its subsidiaries,
but also separate companies which have a strong common economic interest, such
as a manufacturing company and its supplier or important clients. Additionally,
according to this new regulation on telephone services, the subscriber of the
leased line does not necessarily have to be a member of the "closed user group,"
but can also be, for instance, a foreign telephone company. The Company does not
have to obtain a license from the Swiss government in order to provide its
services, and also believes that is in compliance with all material Swiss laws
and regulations. There can be no assurance that future changes in the
telecommunications laws of Switzerland will not adversely affect the Company.
See "Business -- Regulation."
Currently, the Company is operating only in Switzerland, however, when and
if the Company expands into other countries in the EU it will become subject to
the laws and regulations of each such country. If and when the Company becomes
subject to such laws and regulations, compliance with such laws and regulations
will involve certain costs, and, while the Company will make every effort to
comply with such laws and regulations, failure to comply could have a material
adverse effect on the Company.
INCREASING DOMESTIC AND INTERNATIONAL COMPETITION. The telecommunications
industry is highly competitive and is significantly influenced by the marketing
and pricing decisions of the larger industry participants. The industry has
relatively insignificant barriers to entry, numerous entities competing for the
same customers and a high churn rates (customer turnover), as customers
frequently change long distance providers in response to the offering of lower
rates or promotional incentives by competitors. The Company competes on the
basis of price, customer service and its ability to provide a variety of
telecommunications services. The Company believes that while its customers may
be price sensitive they want quality and value added services and therefore,
will remain customers as long as prices are competitive and the quality of
service is high. The Company expects competition on the basis of price and
service offerings to increase. Although many of the Company's customers are
under monthly, yearly or longer term contracts, all of the Company's customers
are particularly price sensitive.
Many of the Company's competitors are significantly larger, have
substantially greater financial technical and marketing resources and larger
networks than the Company, control transmission lines and have long-standing
relationships with the Company's target customers. These competitors include,
among others, Swiss Telecom, Deutsche Telecom AG ("Deutsche Telecom"), AT&T, MCI
Telecommunications Corporation ("MCI"), Sprint Corp. ("Sprint"), British Telecom
and Mercury. As the Company expands into other countries of the EU there will be
additional competition in each of those countries from telecommunications
companies within each of those countries. Other United States carriers are also
expected to enter the EU market. Furthermore, the recently announced proposed
merger of Bell Atlantic Corp. and Nynex Corp., the joint venture between MCI and
Microsoft Corporation ("Microsoft"), under which Microsoft will promote MCI's
services, the recently announced joint venture among Sprint, Deutsche Telecom
and France Telecom, and other mergers, acquisitions and strategic alliances,
could also increase competitive pressures upon the Company and have a material
adverse effect on the Company.
In addition to these competitive factors, recent and pending
telecommunications deregulation in Switzerland and other EU markets may
encourage new entrants. As the Company expands its geographic coverage, it will
encounter increased competition. Moreover, the Company believes that competition
in the EU markets is likely to increase and become more similar to competition
in the United States markets over time as such EU markets continue to experience
deregulatory influences.
8
<PAGE>
Prices in the long distance industry have declined from time to time in recent
years and, as competition increases in the EU, prices are likely to continue to
decrease. The Company's competitors may reduce rates or offer incentives to
existing and potential customers of the Company. To maintain its competitive
position, the Company believes that it must be able to reduce its prices in
order to meet reductions in rates, if any, by others. See "Plan of Operation"
and "Business -- Competition."
RISKS OF GROWTH AND EXPANSION. The Company plans to expand its service
offerings in Switzerland, and, in addition, the Company also intends to
establish a presence in other deregulating EU markets that have high density
telecommunications traffic when the Company believes that business and
regulatory conditions in such EU countries warrant. There can be no assurance
that the Company will be able to add service or expand its markets at the rate
presently planned by the Company or that the existing regulatory barriers will
be reduced or eliminated. The Company's anticipated growth may place a
significant strain on the Company's administrative, operational and financial
resources and increase demands on its systems and controls. As the Company
increases its service offerings and expands its targeted markets, there will be
additional demands on the Company's customer support, sales and marketing and
administrative resources and network infrastructure. There can be no assurance
that the Company's operating and financial control systems and infrastructure
will be adequate to maintain and effectively monitor future growth. The failure
to continue to upgrade the administrative, operating and financial control
systems or the emergence of unexpected expansion difficulties could materially
adversely affect the Company.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. Currently the Company
operates in Switzerland. In the future the Company hopes to expand into other
countries in the EU as regulatory and business conditions in such EU countries
warrant. There are certain risks inherent to doing business on an international
level, such as unexpected changes in regulatory requirements, tariffs, customs,
duties and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, problems in collecting accounts receivable,
political risks, fluctuations in currency exchange rates, foreign exchange
controls which restrict or prohibit repatriation of funds, technology export and
import restrictions or prohibitions, delays from customs brokers or government
agencies, seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world and potentially adverse tax
consequences resulting from operating in multiple jurisdictions with different
tax laws, which could materially adversely impact the success of the Company's
international operations. In many countries, the Company may need to enter into
a joint venture or other strategic relationship with one or more third parties
in order to successfully conduct its operations. Additionally, the Company's
revenues and expenses are denominated in currencies other than United States
dollars, and changes in exchange rates may have a great effect on the Company's
results of operations. The Company may engage in currency swaps or other similar
hedging contracts to offset possible losses. There can be no assurance that such
factors will not have a material adverse effect on the Company's future
operations and, consequently, on the Company's business, results of operations
and financial condition. In addition, there can be no assurance that laws or
administrative practices relating to taxation, foreign exchange or other matters
of countries within which the Company operates will not change. Any such change
could have a material adverse effect on the Company. Additionally, a component
of the Company's strategy is its planned expansion into additional international
markets. There can be no assurance that the Company will be able to obtain the
capital it requires to finance such expansion on satisfactory terms or at all.
In many international markets, protective regulations and long-standing
relationships between potential customers of the Company and their local
providers may create barriers to entry. Pursuit of additional international
growth opportunities may require significant investments for an extended period
before returns, if any, on such investments are realized. In addition, there can
be no assurance that the Company will be able to obtain the permits and
operating licenses required for it to operate, to hire and train employees or to
market, sell and deliver high quality services in these markets.
9
<PAGE>
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS. To complete its billing, the
Company will have to record and process massive amounts of data quickly and
accurately. While the Company believes its management information system is
currently adequate, the Company believes that the successful implementation and
integration of these information systems is important to its growth its ability
to monitor costs, to bill customers and to achieve operating efficiencies. There
can be no assurance that the Company will not encounter delays or cost-overruns
or suffer adverse consequences in implementing and upgrading these systems. In
addition, as the Company's suppliers revise and upgrade their hardware, software
and equipment technology, there can be no assurance that the Company will not
encounter difficulties in integrating the new technology into the Company's
business or that the new systems will be appropriate for the Company's business.
See "Business -- Information Systems."
DEPENDENCE UPON THIRD PARTIES. The Company is dependent upon various third
party carriers and suppliers to provide a portion of its services and
maintenance in a timely and satisfactory manner. Failure by such third party
carriers and suppliers to provide such services or maintenance in a timely or
satisfactory manner, or any interruption in such services or maintenance, could
have a materially adverse effect on the Company. See "Business -- Network."
RISKS ASSOCIATED WITH INVESTMENTS AND STRATEGIC ALLIANCES. As part of its
business strategy, as regulatory and business conditions warrant, the Company
expects to seek to develop strategic alliances in the EU and to make investments
in companies that are complementary to its current operations. Any such future
strategic alliances or investments would be accompanied by the risks commonly
encountered in strategic alliances with, or investments in, companies. Such
risks include, among other things, the difficulty of assimilating the operations
and personnel of the companies, the potential disruption of the Company's
ongoing business, the inability of management to maximize the financial and
strategic position of the Company by the successful incorporation of licensed or
acquired technology and rights into the Company's service offerings, the
maintenance of uniform standards, controls, procedures and policies and the
impairment of relationships with employees and customers as a result of changes
in management. Moreover, any such investment or alliance would involve a
business located outside the United States and therefore, the transaction would
involve the risks associated with international expansion. See "-- Risks
Associated with International Operations." There can be no assurance that the
Company would be successful in overcoming these risks or any other problems
encountered with such strategic alliances or investments. In addition, if the
Company were to consummate one or more significant strategic alliances or
investments in which the consideration consisted of stock, stockholders of the
Company could suffer a significant dilution of their interests in the Company.
The financial impact of investments and strategic alliances could have a
material adverse effect on the Company. See "Business -- Investments and
Strategic Alliances."
TECHNOLOGICAL CHANGES MAY ADVERSELY AFFECT COMPETITIVENESS AND FINANCIAL
RESULTS. The telecommunications industry is characterized by rapid and
significant technological advancements and introductions of new products and
services utilizing new technologies. There can be no assurance that the Company
will maintain competitive services or that the Company will obtain appropriate
new technologies on a timely basis or on satisfactory terms.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
degree upon the continued contributions of its management team, including Thomas
Combrinck, Andreas Popovici and Franco Reinschmidt, and technical, marketing and
sales personnel. While the Company has entered into employment agreements with
Mr. Popovici and Mr. Reinschmidt, the Company's employees may voluntarily
terminate their employment with the Company at any time. Competition for
qualified employees and personnel in the telecommunications industry is intense
and, from time to time, there are a limited number of persons with knowledge of
and experience in particular sectors of the telecommunications industry. The
Company's success also will depend on its ability to attract and retain
qualified management, marketing, technical and sales executives and personnel.
The process of locating such personnel with the combination of skills and
attributes required to carry out the
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<PAGE>
Company's strategies is often lengthy. The loss of the services of key
personnel, including Thomas Combrinck, Andreas Popovici and Franco Reinschmidt,
or the inability to attract additional qualified personnel, could have a
material adverse effect on the Company's results of operations, development
efforts and ability to expand. There can be no assurance that the Company will
be successful in attracting and retaining such executives and personnel. Any
such event could have a material adverse effect on the Company. See
"Management."
HOLDING COMPANY STRUCTURE; RELIANCE ON SUBSIDIARIES FOR DIVIDENDS. UTI is a
holding company, the principal assets of which are its current operating
subsidiaries in Switzerland. As the Company expands, it anticipates that it will
operate through new subsidiaries located in other countries in the EU. The
Company's operating subsidiaries may be subject to corporate law restrictions on
their ability to pay dividends to UTI. There can be no assurance that UTI will
be able to cause its operating subsidiaries to declare and pay dividends or make
other payments to UTI when requested by UTI. The failure to pay any such
dividends or make any such other payments could have a material adverse effect
upon the Company.
POTENTIAL VOLATILITY OF STOCK PRICE. The market price of the Common Stock
following this offering may be highly volatile. Factors such as variations in
the Company's revenue, earnings and cash flow, the difference between the
Company's actual results and the results expected by investors and analysts and
announcements of new service offerings, marketing plans or price reductions by
the Company or its competitors could cause the market price of the Common Stock
to fluctuate substantially. In addition, the stock markets recently have
experienced significant price and volume fluctuations that particularly have
affected telecommunications companies and resulted in changes in the market
prices of the stocks of many companies that have not been directly related to
the operating performance of those companies. Such market fluctuations may
materially adversely affect the market price of the Common Stock.
Trading in the Common Stock will be conducted on the NASD Bulletin Board or
in the over-the-counter market in what is commonly referred to as the "pink
sheets." An investor will find it difficult to dispose of their Common Stock or
to obtain accurate quotations as to the price of the Common Stock and there will
most likely be limited coverage of news concerning the Company. In addition, the
Common Stock will be subject to a rule that imposes additional sales practice
requirements on broker-dealers who sell such Common Stock to persons other than
established customers and accredited investors (accredited investors are
generally persons having net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with a spouse). For transactions covered
by this rule, the broker-dealer must make a special suitability determination
for the purchaser and must have received the purchaser's written consent to the
transaction prior to sale, as well as disclosing certain information concerning
the risks of purchasing low-priced securities on the market for such securities.
Consequently the non-listing will adversely affect the ability of broker-dealers
to sell the Common Stock and the ability of purchasers in this offering to sell
their Common Stock in the secondary market and will make subsequent financing
difficult.
As of the date of this Prospectus, several brokerage firms have indicated
their interest to engage in market making activities with respect to the Common
Stock. In the event that these market makers and specialists do not function as
such, public trading in the Common Stock will be adversely affected or may cease
entirely.
NO PUBLIC MARKET FOR COMMON STOCK. Prior to this offering, there has been
no public market for the Common Stock. There can be no assurance that an active
market will develop for the Common Stock, or that if it should develop that it
will continue.
SHARES ELIGIBLE FOR FUTURE SALE. Of the Company's 10,006,000 shares of
Common Stock currently outstanding on the date of this Prospectus, 7,250,000
shares are "restricted securities," as defined in Rule 144 of the Securities
Act, and under certain circumstances may be sold without
11
<PAGE>
registration pursuant to Rule 144. The Company is unable to predict the effect
that sales made under Rule 144, or otherwise, may have on the then prevailing
market price of the Common Stock. Any substantial sale of restricted securities
pursuant to Rule 144 may have an adverse effect on the market price of the
Common Stock. The 7,250,000 shares of Common Stock which are "restricted
securities" will become eligible for sale commencing in May 1998. The Company
cannot predict the effect, if any, that market sales of Common Stock or the
availability of such Common Stock for sale will have on the market price
prevailing from time to time. See "Shares Eligible for Future Sale."
NO DIVIDENDS. Since its inception, the Company has not paid any dividends
on the Common Stock. The Company intends to retain future earnings, if any, to
provide funds for the operation of its business and, accordingly, does not
anticipate paying any cash dividends on the Common Stock in the reasonably
foreseeable future. See "Dividend Policy."
DELAWARE ANTI-TAKEOVER LAW. The Company is governed by the provisions of
Section 203 of the General Corporation law of the State of Delaware. In general,
this law prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which such person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" is defined to include mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is defined as a person who, together with affiliates and
associates, owns (or, within the prior three years, did own) 15 percent or more
of the corporation's voting stock.
12
<PAGE>
THE COMPANY
The Company is a development stage company that provides quality private
voice, fax and data management telecommunication services in Switzerland,
primarily to businesses and business groups at prices which are generally below
those of major telecommunications carriers. As of the date of this Prospectus,
the Company has entered into contracts with approximately 12 customers to
provide customized telecommunications service packages. These customized
packages include telecommunications minutes plus other services selected by
customers. The Company provides local support, round-the-clock customer service
and full network redundancy to all customers. Available services include system
design and installation as well as digital compression, fax transmission
compression, digital data services and wideband digital data services. In the
future, the Company intends to expand its operations though local subsidiaries
or joint ventures into other countries in the EU as such countries'
telecommunications industries become deregulated and as market conditions in
such other EU counties warrant.
Both the competitive environment and the economic framework in which
international telecommunication companies operate are changing at a rapid pace.
Due to the liberalization of telecommunication markets and technical
improvements, the Company is able to utilize the infrastructure provided by
international telecommunication carriers in connection with the services it
offers. This allows the Company to offer its customers one of Europe's largest
meshed fiber optic networks, which will eventually include more than 90
international POPs. In providing its services, the Company connects a customer's
telephone installation to the Company's POP in Switzerland by means of dedicated
lines, and such POP then routes such customer's outgoing voice, fax and data
transmissions though leased transmission lines directly to the Company's switch
in the United Kingdom. The communications are then transferred directly from the
Company's switch into the international networks. All of this is achieved
without loss in speech quality or speed during connection and with the customer
dialing his international destination directly, as he had done prior to becoming
a Company customer. The Company is able to provide its services at attractive
prices to its customers due to the large potential purchasing power of the
Company.
DIVIDEND POLICY
Since its inception, the Company has not paid any dividends on the Common
Stock. The Company intends to retain future earnings, if any, that may be
generated from the Company's operations to help finance the operations and
expansion of the Company and, accordingly, does not plan, for the reasonably
foreseeable future, to pay dividends to holders of the Common Stock. Any
decision as to the future payment of dividends will depend on the results of
operations and financial position of the Company and such other factors as the
Company's Board of Directors, in its discretion, deems relevant.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by the
Selling Stockholders.
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CAPITALIZATION
The following table sets forth the capitalization of the Company at April
30, 1996. All information set forth below should be read in conjunction with the
balance sheet of the Company and related notes that appear elsewhere in this
Prospectus.
<TABLE>
<S> <C>
Stockholders' Equity
Common Stock -- $0.00001 Par Value
Authorized 20,000,000 shares;
10,006,000 Issued and Outstanding........................... $ 100
Additional paid-in capital..................................... $3,088,474
Retained Deficit............................................... $ (317,754)
Foreign Currency Translation Adjustment........................ $ 2,739
Minority Interest.............................................. $ 17
----------
Total Stockholders' Equity................................. $2,773,576
----------
----------
</TABLE>
14
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data of The Company with
respect to the period from February 29, 1996 (inception) to April 30, 1996 is
derived from the Company's consolidated financial statements. The consolidated
financial statements of the Company for the period from February 29, 1996
(inception) to April 30, 1996 are included elsewhere in this Prospectus. Such
consolidated financial statements have been audited by Merdinger, Fruchter,
Rosen & Corso, P.C. independent certified accountants. The selected consolidated
financial information provided below should be read in conjunction with "Plan of
Operation" and the consolidated financial statements of the Company and the
notes thereto included elsewhere in this Prospectus. See "Index to Consolidated
Financial Statements."
<TABLE>
<CAPTION>
PERIOD FROM FEBRUARY
29,
1996, (INCEPTION), TO
APRIL 30, 1996 (1)
-----------------------
<S> <C>
Consolidated Statement of Operations Data:
Sales........................................................................ $ --
Net Loss (1)................................................................. $ (317,754)
Loss Per Share (2)........................................................... $ (.03)
Weighted average number of Shares outstanding................................ 10,006,000
<CAPTION>
APRIL 30, 1996
-----------------------
<S> <C>
Consolidated Balance Sheet Data:
Total Assets................................................................. $ 3,945,491
Liabilities (all current).................................................... $ 1,171,915
Stockholders' equity......................................................... $ 2,773,576
</TABLE>
- ------------------------
(1) UTI was incorporated on April 17, 1996, UT Holding was incorporated on
February 29, 1996 and UT AG was incorporated on March 28, 1996. The
consolidated results include UTI and its subsidiaries, UT Holding and UT AG.
(2) The weighted average number of common shares and common equivalent shares
outstanding for purposes of the loss per share amounts are computed on the
basis of all stock being outstanding for all periods presented.
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<PAGE>
PLAN OF OPERATION
During the 12-month period following the date of this Prospectus the Company
intends to focus on expanding its customer base in Switzerland, and intends to
explore the possibility of expanding into other countries of the EU where
business and regulatory conditions warrant. Additionally, the Company intends to
continue to upgrade its network and information systems so that they remain
adequate for its business needs.
The Company believes that its current level of employees is sufficient, and
currently has no plans to significantly change the number of its employees.
However, as the Company expands, it intends to hire additional employees to meet
its needs.
The Company will not receive any proceeds in connection with this offering,
however, the Company raised approximately $3 million from recent private
placements and has begun to generate limited revenues from operations. Although
the Company believes that the Company's current cash and revenue from operations
will be sufficient to fund the Company's anticipated capital needs for the 12
month period following the date of this Prospectus, the Company may be required
to seek additional financing during such period in the event of delays, cost
overruns or unanticipated expenses associated with a company in an early stage
of development. Additionally, if the Company were to expand into other countries
of the EU or pursue any strategic investments or joint ventures during this
period, it might require additional financing to commence such operations or
consummate such investments or joint ventures. There can be no assurance that
the Company's current cash and its anticipated operating revenue will be
sufficient to fund operations during the 12 month period following the date of
this prospectus. If the Company requires additional financing during such 12
month period there can be no assurance that the Company will be able to obtain
such additional financing or that such financing, if available, will be on
acceptable terms. If the Company were to require additional financing but were
unable to arrange for such financing on acceptable terms, the Company would be
materially and adversely affected and could have to cease or substantially
reduce operations. The need for additional financing following this initial 12
month period will depend on the Company's operating revenue and expansion plans
at such time. See "Risk Factors -- No Operating History, Uncertainty of New
Business," "-- Need For Additional Capital," "-- Risks Associated With
International Operations," and "-- Risks Associated with Investments and
Strategic Alliances."
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<PAGE>
BUSINESS
GENERAL
The Company is a development stage company that provides quality private
voice, fax and data management telecommunication services in Switzerland,
primarily to businesses and business groups at prices which are generally below
those of major telecommunications carriers. As of the date of this Prospectus,
the Company has entered into contracts with approximately 12 customers to
provide customized telecommunications service packages. These customized
packages include telecommunications minutes plus other services selected by
customers. The Company provides local support, round-the-clock customer service
and full network redundancy to all customers. Available services include system
design and installation as well as digital compression, fax transmission
compression, digital data services and wideband digital data services. In the
future, the Company intends to expand its operations though local subsidiaries
or joint ventures into other countries in the EU as such countries'
telecommunications industries become deregulated and as market conditions in
such other EU counties warrant.
Both the competitive environment and the economic framework in which
international telecommunication companies operate are changing at a rapid pace.
Due to the liberalization of telecommunication markets and technical
improvements, the Company is able to utilize the infrastructure provided by
international telecommunication carriers in connection with the services it
offers. This allows the Company to offer its customers one of Europe's largest
meshed fiber optic networks, which will eventually include more than 90
international POPs. In providing its services, the Company connects a customer's
telephone installation to the Company's POP in Switzerland by means of dedicated
lines, and such POP then routes such customer's outgoing voice, fax and data
transmissions though leased transmission lines directly to the Company's switch
in the United Kingdom. The communications are then transferred directly from the
Company's switch into the international networks. All of this is achieved
without loss in speech quality or speed during connection and with the customer
dialing his international destination directly, as he had done prior to becoming
a Company customer. The Company is able to provide its services at attractive
prices to its customers due to the large potential purchasing power of the
Company.
INDUSTRY
The global telecommunications industry has dramatically changed in the
United States commencing with AT&T's divestiture of its 22 regional operating
companies ("RBOCs") in 1984 and continuing through the recently enacted
amendments to the United States Communications Act. Significant regulatory
changes have also occurred and are occurring in Switzerland and in other
countries in the EU. Prior to these changes, the long distance
telecommunications markets in the United States, Switzerland and other countries
in the EU consisted of one provider. As a result of fundamental regulatory
changes in the United States, Switzerland and other countries in the EU, coupled
with technological and network infrastructure developments which increased
significantly the voice and data telecommunications transmission capacity of
dominant carriers, the long distance industry in the United States has
developed, and in the EU is developing, into a highly competitive one consisting
of numerous alternative long distance carriers. The Company anticipates that the
further deregulation in the United States and the EU will promote the continued
development of competitive telecommunications markets in the United States and
the EU.
Long distance telecommunications carriers can be differentiated by several
defining operational characteristics. One such defining characteristic is
between transmission facilities-based companies and non-transmission
facilities-based companies (resellers). Transmission facilities-based carriers,
such as AT&T and British Telecom, own their own long distance interexchange or
transmission facilities and originate and terminate calls through local exchange
systems. Profitability for transmission facilities-based carriers is dependent
not only upon their ability to generate revenues but also
17
<PAGE>
upon their ability to manage complex networking and transmission costs. All of
the first- and most of the second-tier long distance companies are transmission
facilities-based carriers and generally offer service over broad geographic
areas. Most transmission facilities-based carriers in the third tier of the
market offer their service only in a limited geographic area. Some transmission
facilities based carriers contract with other transmission facilities-based
carriers to provide transmission where they have geographic gaps in their
facilities. Resellers, such as the Company, carry their long distance traffic
over transmission lines leased from transmission facilities-based carriers,
originate and terminate calls through local exchange systems or "competitive
access providers" ("CAPs") and contract with transmission facilities-based
carriers to provide transmission of long distance traffic either on a fixed rate
lease basis or a call volume basis. Profitability for resellers is dependent
largely on their ability to generate on a continuing basis sufficient revenue
volume which is sufficient in size to permit them to negotiate attractive
pricing with one or more transmission facilities-based carriers.
A second operating characteristic differentiating telecommunications
companies is between switch-based and switchless telecommunications companies.
Switch-based telecommunications companies, such as the Company, own or lease one
or more switches, which are computers that direct telecommunications traffic to
form a transmission path between a caller and the recipient of a call. All
transmission facilities-based carriers are switch-based, as are many resellers,
including the Company. Switchless resellers depend on one or more transmission
facilities-based carriers or switch-based resellers for transmission and
switching facilities. The Company believes that owning its switches reduces its
reliance on other carriers and enables it to efficiently route
telecommunications traffic over multiple leased transmission lines and to
control costs and record data and customer information. The availability of
existing transmission capacity in the Company's markets makes leasing of
transmission lines attractive to the Company and enables it to grow network
usage without having to incur the significant capital and operating costs
associated with the development and operation of a transmission line
infrastructure.
The international, national and local markets for voice telephone services
in Switzerland has grown to approximately $5.6 billion in annual revenue during
1995. In Switzerland, Swiss Telecom historically has dominated the
telecommunications market and was the largest carrier in Switzerland during
1995, with approximately $5.6 billion of revenues from international, national
and local voice telephone services.
The international, national and local markets for voice telephone services
in the EU, other than in Switzerland, has grown to approximately $210 billion in
annual revenue during 1995. In each country in the EU there has historically
been one telephone company which has dominated the telecommunications market. As
a result of deregulatory trends this situation is slowly changing and these
markets are beginning to open up for competition from other telecommunications
providers.
SERVICES
The Company sells telecommunications minutes in connection with a broad
range of services which are customized to suit individual customer needs. The
Company does not anticipate that the sale of telecommunications minutes without
other services will be a significant portion of its business.
The Company designs, installs and commissions voice, fax and data
transmission equipment appropriate for each of its customers in a manner similar
to that provided by major telecommunications carriers but at a lower price.
The Company offers services including digital compression techniques, where
usage warrants, at 8, 16 or 64 kbps (which compression allows for substantial
overall cost savings), fax transmission compression, and digital data services
in a full range of transmission support and interface types between 1.2 kbps and
2 mb (which can be point to point or point to multipoint). For customers
requiring additional network bandwidth, the Company is able to provide wideband
digital data
18
<PAGE>
services which provide increased capacity and which support applications such as
audio- and videoconferencing, high speed imaging, and corporate communication
networking requirements. With the growing use of LAN's, customers will be able
to directly connect their LAN traffic to the Company's network, for access to
remote locations and for applications such as file transfer, remote data access
and e-mail. The Company offers a fully managed network service that includes,
management, control and configuration, remote access for diagnostic and
maintenance services, regular network status reports and controlled access
security. The Company is conducting feasibility studies to identify the market
potential and regulatory environment for offering additional services, including
video conferencing, paging, international call back, Internet access, facsimile
and frame relay services, and expects to introduce Internet access, enhanced
travel cards and video conferencing.
The Company provides all of its customers with a high level of quality
service, including local support, round-the-clock customer service and full
network redundancy. Additionally, the Company's customers receive comprehensive
billing packages. The Company's standard monthly statement will include a
management summary report, a call detail report recording every long distance
call and facsimile call, and a pricing breakdown by call destination. Optional
reports include call summaries by account code, area or city code, international
destination and time-of-day. This information is available to customers in the
form of hard copy, magnetic tape or disk.
BUSINESS STRATEGY
The Company's objective is to grow its long distance telecommunications
customer base in Switzerland and to establish itself in other deregulated
markets in the EU as they develop. With its communication network, the Company
is well positioned to take advantage of telecommunications deregulation in
Switzerland and will be well-prepared for the upcoming full deregulation of the
telecommunication markets in other countries of the EU. The network will provide
the Company with the tools to keep pace with the ongoing technological
development in the telecommunications industry. The Company has positioned
itself between the major full-service and high price telecommunications carriers
and the no service (or limited service) cut rate telecommunications minutes
resellers which it believes will eventually expand into its markets. The Company
offers substantially lower rates to customers compared to the major
telecommunications companies, but believes that it is not required to be the
lowest cost provided of minutes because it will be able to attract new business
and maintain its customers' business by offering broad based solutions to their
telecommunications business needs. The Company believes that by positioning
itself this way, it will retain and add customers who wish to save on their
telecommunications expenses yet who also demand a high level of service with the
availability of a wide array of service offerings.
The Company intends to expand its operations in Switzerland by focusing on
and marketing its principal competitive strengths which are: (1) the Company's
sales and marketing organization and the customized service the Company offers
to its customers; (2) the Company's offering of competitive prices which the
Company believes are generally lower than prices charged by the major carrier in
the Swiss market; (3) the Company's position as an early entrant in the Swiss
market as an alternative carrier; (4) the Company's focus on more profitable
international telecommunications traffic; and (5) the Company's switched-based
networking capabilities. The availability of existing transmission capacity in
the Swiss market makes the leasing of transmission lines attractive to the
Company and enables it to grow network usage without having to incur the
significant capital and operating costs associated with the development and
operation of a transmission line infrastructure.
In the future, as business and regulatory conditions warrant, the Company
hopes to utilize the foregoing competitive strengths to expand into other
countries of the EU. In connection with such expansion the Company may enter
into strategic alliances or make investments in companies that are complementary
to its current operations.
19
<PAGE>
The Company's belief that its prices will generally be lower than those of
the major carriers is based upon informal surveys of the pricing offered by the
major carriers. However, because prices and promotional programs change rapidly
and often in the telecommunications industry, the prices offered by the Company
may not always be as competitive as the prices charged by the major carriers.
SALES AND MARKETING
The Company markets its services through a variety of channels, including
the Company's internal sales forces and independent sales agents. The Company
has a total of approximately 5 internal sales personnel and approximately 8
independent sales agents and partnerships serving its markets. Although it has
not experienced significant turnover, a loss of a significant number of
independent sales agents and partnerships could have a significant adverse
effect on the Company's ability to generate additional revenue. The Company
maintains sales offices in Switzerland.
Currently, no customer accounts for 10% or more of the Company's projected
total revenue.
The Company generally utilizes its internal sales force to target medium and
large business customers. The Company markets its services to small and
medium-sized businesses through independent sales agents. Telemarketers also are
used to market services to small business customers and residential customers
and to generate leads for the other members of the Company's internal sales
force and independent sales agents.
The Company primarily targets customers with between $5,000 and $50,000 of
monthly usage. The Company believes that, in addition to being price sensitive,
these customers tend to be focused on customer service and are more likely to
rely on one or two carriers for their telecommunications needs. The diversity of
the Company's targeted customer base enhances network utilization by combining
business-driven workday traffic with night and weekend off-peak traffic. The
Company strives to be more cost effective, flexible, innovative and responsive
to the needs of its customers than the major carriers, while providing more
service and service offerings than cut rate resellers.
NETWORK
The Company has established its own POP in Switzerland and owns a switch in
the United Kingdom. Lines leased from transmission facilities-based carriers
link the Company's POP to its switch. Customers access the Company's network
through direct access lines or by dial-up access using auto dialing equipment,
indirect access code dialing or least cost routing software integrated in the
customer's telephone equipment.
The Company utilizes a network of lines leased under volume discount
contracts with transmission facilities-based carriers, much of which are fiber
optic cable. The selection of any particular circuit for the transmission of a
call is controlled by routing software, located in the Company's switch, that is
designed to cause the most efficient use of the Company's network. In the
future, the Company will evaluate opportunities to install POPs in selected
markets where the volume of its customer traffic makes such an investment
economically viable. Utilization of the Company's switch allows the Company to
route customer calls over multiple networks to reduce costs.
The Company has entered into the TMI Contact, pursuant to which the Company
purchases telecommunication minutes from TMI. The TMI Contract contains
under-utilization provisions. These provisions which require the Company to pay
fees to TMI if the Company does not meet minimum periodic usage requirements.
There can be no assurance that such charges would not be assessed in the future.
The TMI Contract may be terminated by either party upon thirty days written
notice. If the TMI Contract is terminated by the Company the Company must pay
TMI certain installation charges to the extent that they have not been recouped
by TMI plus an additional months fee. The Company believes that the costs
associated with termination of the TMI Contract would not be material to the
Company. Due to the large excess capacity in the telecommunications industry,
should the TMI Contract be terminated, the Company believes that it would be
able to replace the
20
<PAGE>
services currently provided by TMI upon substantially the same terms and without
incurring material costs or a disruption of service, however, there can be no
assurance that termination of the TMI Contract would not cause a material
adverse affect on the Company.
The Company generally utilizes redundant, highly automated advanced
telecommunications equipment in its network and has diverse alternate routes
available in cases of component or facility failure. Automatic traffic rerouting
enables the Company to provide a high level of reliability for its customers.
Computerized automatic network monitoring equipment facilitates fast and
accurate analysis and resolution of network problems. The Company provides
customer service and support, 24-hour network monitoring, trouble reporting and
response, service implementation coordination, billing assistance and problem
resolution. The Company controls all of its billing services through its switch
in the United Kingdom.
Network costs are the single largest expense incurred by the Company. The
Company strives to control its network costs and its dependence on other
carriers by leasing transmission lines on an economical basis. The Company may
also negotiate leases of private line circuits with carriers that operate fiber
optic transmission systems at rates independent of usage, particularly on routes
over which the Company carries high volumes of calls. The Company also has
various third party carriers and suppliers provide some of its services and
maintenance, which saves an estimated 25% of costs. The Company attempts to
maximize the efficient utilization of its network by marketing to a mix of
customers, including internet, most of whom tend to use its services most
frequently on weekdays during normal business hours, and some of whom use its
services most often during night and weekend off-peak hours.
INFORMATION SYSTEMS
The Company believes that maintaining sophisticated and reliable billing and
customer services information systems that integrate billing, accounts
receivables and customer support is a core capability necessary to record and
process the data generated by a telecommunications service provider. The Company
believes its management information system is currently adequate for its needs.
In the future the Company will strive to enhance and grow such system so that it
continues to be adequate. There can be no assurance that the Company will not
suffer adverse consequences or cost over-runs in implementing new information
systems. See "Risk Factors -- Dependence on Effective Information Systems."
REGULATION
UNITED STATES
Currently, since no calls by Company customers originate in the United
States, the Company does not believe that it is subject to any
telecommunications laws or regulations in the United States. In the future, when
and if the Company's services expand, it is possible that the Company may become
subject to the telecommunications laws and regulations of the United States. If
this were to occur, compliance with such laws would involve certain costs, and,
while the Company would make every effort to comply with such laws and
regulations, failure to comply could have a material adverse effect on the
Company.
UNITED KINGDOM
Due to its ownership of a switch in the United Kingdom, the
telecommunications services provided by the Company are indirectly affected by
regulations introduced by Oftel. Since the break up of the United Kingdom
telecommunications duopoly consisting of British Telecom and Mercury in 1991 it
has been the stated goal of Oftel to create a competitive marketplace. Oftel has
imposed mandatory rate reductions on British Telecom in the past, which are
expected to continue for the
21
<PAGE>
foreseeable future. Although the Company does not believe that any regulations
introduced by Oftel will interfere with or substantially affect its business,
there can be no assurance that future changes in regulation and government in
the U.K will not have a material adverse effect on the Company.
SWITZERLAND
In March 1992, the Swiss government, in a federal decree on
telecommunications services, introduced a complete liberalization of the
transmission of messages through leased lines. Pursuant to such decree, the
Swiss Federal Council also authorized subscribers of leased lines to transmit
voice messages as long as those messages are transmitted for their own purposes.
In order to conform to the evolution of legislation in other EU countries, in
July 1995, the Swiss government modified the decree to provide a new definition
of the term "a message transmitted for its own purposes" so as to make it
possible to offer telephone services through leased lines to "closed user
groups." The Swiss authorities have adopted an expansive notion of the "closed
user group" including not only a parent company and its subsidiaries, but also
separate companies which have a strong common economic interest, such as a
manufacturing company and its suppliers or important clients. Additionally,
according to this new regulation on telephone services, the subscriber of the
leased line does not necessarily have to be a member of the "closed user group,"
but can also be, for instance, a foreign telephone company. The Company does not
have to obtain a license from the Swiss government in order to provide its
services, and also believes that is in compliance with all material Swiss laws
and regulations. There can be no assurance that future changes in the
telecommunications laws of Switzerland will not adversely affect the Company.
THE EU
Currently, the Company is operating only in Switzerland, however, when and
if the Company expands into other countries in the EU it will become subject to
the laws and regulations of each such country. If and when the Company becomes
subject to such laws and regulations, compliance with such laws and regulations
will involve certain costs, and, while the Company will make every effort to
comply with such laws and regulations, failure to comply could have a material
adverse effect on the Company.
COMPETITION
The telecommunications industry is highly competitive and is significantly
influenced by the marketing and pricing decisions of the larger industry
participants. In each of its markets, the Company will compete on the basis of
price and customer service and its ability to provide a broad array of
telecommunications services. The industry has relatively insignificant barriers
to entry, numerous entities competing for the same customers and a high average
churn rate, as customers frequently change long distance providers in response
to the offering of lower rates or promotional incentives by competitors.
Although many of the Company's customers are under monthly, yearly or longer
term contracts, all of the Company's customers are price sensitive. However, the
Company believes that while its customers may be price sensitive they want
quality and value added services and therefore, will remain customers as long as
the Company's prices are competitive, the quality of the Company's service is
high and the Company continues to offer a wide array of service offerings. The
industry has experienced and will continue to experience rapid regulatory and
technological change. Many competitors in each of the Company's current and
proposed markets are significantly larger than the Company, have substantially
greater resources than the Company, control transmission lines and larger
networks than the Company and have long-standing relationships with the
Company's target customers. There can be no assurance that the Company will
remain competitive in this environment. Regulatory trends have had, and may have
in the future, significant effects on competition in the industry. As the
Company expands its geographic coverage, it will encounter increased
competition. See "Risk Factors -- Potential Adverse Effects of Regulation,"
"Risk Factors -- Increasing Domestic and International Competition" and "--
Regulation."
22
<PAGE>
Competition in the long distance industry is based upon pricing, customer
service, network quality, value-added services and customer relationships. The
success of a non-transmission facilities-based carrier, such as the Company,
depends largely upon the amount of traffic that it can commit to the
transmission facilities-based carrier and the resulting volume discount it can
obtain. Subject to contract restrictions and customer brand loyalty, resellers
like the Company may competitively bid their traffic among other national long
distance carriers to gain improvement in the cost of service. The relationship
between resellers and the larger transmission facilities-based carriers is
twofold. First, a reseller is a customer of the services provided by the
transmission facilities-based carriers, and that customer relationship is
predicated primarily upon the pricing strategies of the first tier companies.
The reseller and the transmission facilities-based carriers are also
competitors. The reseller will attract customers to the extent that its pricing
for customers is generally more favorable than the pricing offered the same size
customers by larger transmission facilities-based carriers. However,
transmission facilities-based carriers have been aggressive in developing
discount plans which have had the effect of reducing the rates they charge to
customers whose business is sought by the reseller. Thus the business success of
a reseller is significantly tied to the pricing policies established by the
larger transmission facilities-based carriers.
Currently, the Company's principal competitor in Switzerland is Swiss
Telecom, which is the dominant suppliers of telecommunications services in
Switzerland. In the future, the Company may also face competition from other
facilities based carriers or other resellers. The Company believes its services
will be competitive, in terms of price and quality with the service offerings of
Swiss Telecom primarily because of the Company's advanced network-related
hardware and software systems and the network configuration and traffic
management expertise employed by it in Switzerland.
In addition to these competitive factors, recent and pending
telecommunications deregulation in Switzerland and other EU markets may
encourage new entrants. As the Company expands its geographic coverage, it will
encounter increased competition. Moreover, the Company believes that competition
in the EU markets is likely to increase and become more similar to competition
in the United States markets over time as such EU markets continue to experience
deregulatory influences. Prices in the long distance industry have declined from
time to time in recent years and, as competition increases in the EU, prices are
likely to continue to decrease. The Company's competitors may reduce rates or
offer incentives to existing and potential customers of the Company. To maintain
its competitive position, the Company believes that it must be able to reduce
its prices in order to meet reductions in rates, if any, by others.
INVESTMENTS AND STRATEGIC ALLIANCES
As the Company expands its service offerings, geographic focus and its
network, the Company anticipates that it will seek to make investments in or
enter into strategic alliances with, companies providing services complementary
to the Company's existing business. The Company believes that, as the global
telecommunications marketplace becomes increasingly competitive, expands and
matures, such transactions will be critical to maintaining a competitive
position in the industry.
The Company's ability to effect strategic alliances and make investments may
be dependent upon its ability to obtain additional financing. While the Company
may in the future pursue an active strategic alliance or investment policy, no
specific strategic alliances, or investments are currently in negotiation and
the Company has no immediate plans to commence such negotiations. If the Company
were to proceed with one or more significant strategic alliances or investments
in which the consideration consists of cash, a substantial portion of the
Company's available cash could be used to consummate investments. If the Company
were to consummate one or more significant strategic alliances or investments in
which the consideration consists of stock, stockholders of the Company could
suffer a significant dilution of their interests in the Company.
23
<PAGE>
In connection with investments or strategic alliances, the Company could
incur substantial expenses, including the fees of financial advisors, attorneys
and accountants, and any expenses associated with registering shares of the
Company's capital stock, if such shares are issued. The financial impact of such
investments or strategic alliances could have a material adverse effect on the
Company's business, financial condition and results of operations and could
cause substantial fluctuations in the Company's quarterly and yearly operating
results. See "Risk Factors -- Need for Additional Capital," "-- Risks Associated
with Investment and Strategic Alliances" and "Plan of Operation."
FACILITIES
The Company currently leases approximately 3,000 square feet in Zug,
Switzerland for approximately 3,900 CHF per month. Such lease expires on June
30, 1997. The Company believes that its facilities are adequate for its current
administration and business needs.
EMPLOYEES
As of the date of this Prospectus, the Company had 7 full-time employees in
Switzerland. The Company has never experienced a work stoppage and its employees
are not represented by a labor union or covered by a collective bargaining
agreement. The Company considers its employee relations to be good.
LEGAL PROCEEDINGS
As of the date of this prospectus the Company is not a party to any material
legal proceedings.
24
<PAGE>
MANAGEMENT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- --------------------------------------------------------
<S> <C> <C>
Thomas Combrinck 38 Chairman of the Board and Director of the Company and
Director of UT Holding and UT AG
David Schlecht 42 President, Chief Executive Officer and Director
Ronald Kuzon 51 Treasurer, Secretary and Director
Andreas Popovici 42 Managing Director and Director of UT AG
Franco Reinschmidt 35 Chief Financial Officer and Director of UT AG
</TABLE>
THOMAS COMBRINCK has served as Chairman of the Board and as a director of
the Company since July 1, 1996. Mr. Combrinck also serves as a director of UT
Holding and UT AG, which positions he has held since February 1996 and March
1996, respectively. Mr. Combrinck also serves as Chief Executive of United
Telegroup Ltd. UK, a telecommunications company located in the United Kingdom,
which position he has held since March 1994. From March 1993 through March 1994
Mr. Combrinck was an independent consultant to a number of large
telecommunications companies in various countries of the EU. From 1990 to March
1993 Mr. Combrinck was a Manager at Swiftcall, one of the largest
telecommunications resellers in the United Kingdom. See "Certain Transactions."
DAVID E. SCHLECHT has served as President, Chief Executive Officer and as a
director of the Company since its inception. Mr. Schlecht also serves as
President of Product Development & Packaging, Inc., a packaging brokerage firm,
which position he has held since 1989. See "Executive Compensation."
RONALD W. KUZON has served as Treasurer and a director of the Company since
its inception, and has served as the Company's Secretary since July 1, 1996. Mr.
Kuzon also served as President of Needham Capital Group, Inc., a venture capital
company, which position he has held since 1993. From 1990 to 1993 Mr. Kuzon was
self employed as a private investor.
ANDREAS POPOVICI has served as Managing Director and a director of UT AG
since March 1996. Mr. Popovici also served as General Manager of Callcom, a
Swiss telecommunications service company, from October 1995 to March 1996. Prior
to that time, Mr. Popovici served as Director of the systems department at
Swissphone, a Swiss telecommunications company ("Swissphone"), from 1991 through
October 1995. See "Executive Compensation."
FRANCO REINSCHMIDT has served as Chief Financial Officer and a director of
UT AG since March 1996. Mr. Reinschmidt has served as head of strategic planning
at Zurich Insurance of Switzerland since 1995 and will continue in such position
through September 1996. From March 1996 through September 1996 he has been and
will be devoting less time to Zurich Insurance of Switzerland and has, and will,
receive only half of his salary from such company. During 1995 Mr. Reinschmidt
worked as a consultant and helped with the start up activities of Alpage, an
Austrian paper company. From 1992 to 1995 Mr. Reinschmidt was the head of
corporate development at Swissphone and from 1989 to 1992 he worked as project
manager of mergers and acquisitions for Vontebel Bank. See "Executive
Compensation."
Directors of the Company hold office until the next annual meeting of
stockholders of the Company and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal. No family
relationships exist among any of the directors or executive officers of the
Company.
25
<PAGE>
The Company pays its non-employee directors a fee of $500 for each meeting
of the Board of Directors attended in person and $200 for each telephonic board
meeting or committee meeting, in cash, plus reasonable out-of-pocket expenses.
Pursuant to Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation provides that the Company shall, to the
fullest extent permitted by law, indemnify all directors, officers,
incorporators, employees and agents of the Company against liability for certain
of their acts. The Company's Certificate of Incorporation also provides that,
with certain exceptions, no director of the Company will be liable to the
Company for monetary damages as a result of certain breaches of fiduciary duties
as a director. Exceptions to this include a breach of the director's duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, improper declaration of dividends and
transactions from which the director derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any arrangement, provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
26
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the number of shares of
Common Stock beneficially owned as of the date of this Prospectus by (i) each
beneficial owner of more than five percent of the outstanding Common Stock, (ii)
each current executive officer and director and (iii) all current executive
officers and directors of the Company as a group. All shares are owned both of
record and beneficially unless otherwise indicated.
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF SHARES OF
COMMON STOCK OWNED
----------------------------------
NAME AND ADDRESS SHARES OWNED PERCENTAGE OWNED
- ------------------------------------------------------------ ------------- -------------------
<S> <C> <C>
Thomas Combrinck ........................................... 7,250,000 72.5%
Baarerstrasse 75
6302 Zug, Switzerland
Interfinance Inc. Co. Ltd. ................................. 2,044,000 20.4%
Steinhaldenring 8, CH-8954
Geroldswil, Switzerland
Ronald W. Kuzon ............................................ 2,000 *
300 Park Avenue, Suite 1940
New York, NY 10022
David E. Schlecht .......................................... 4,000 *
17 Cattano Avenue
Morristown, NJ 07960
All directors and executive officers as a group (three 7,256,000 72.5%
persons)...................................................
</TABLE>
- ------------------------
* Less than 1%
EXECUTIVE COMPENSATION
UT Holding was incorporated in February 1996, UT AG was incorporated in
March 1996 and UTI was incorporated in April 1996. UT AG has entered into
Management Agreements with several individuals, however, only two of these
individuals make significant contributions to the Company and have contracts
which provide for salaries in 1996 in excess of $100,000. Mr. Andreas Popovici
has entered into a three year Management Agreement with UT AG dated June 3, 1996
(the "Popovici Agreement"), pursuant to which he serves as the Managing Director
and a director of UT AG. Pursuant to the Popovici Agreement Mr. Popovici will
devote 200 working days to the Company at an annual salary of 260,000 CHF
(approximately $208,000) and will receive an additional 1,000 CHF (approximately
$800) for each new Company customer during the first year and an additional 750
CHF (approximately $600) for each new Company customer during the second and
third year of the Popovici Agreement. Mr. Franco Reinschmidt has entered into a
three year Management Agreement with UT AG dated April 4, 1996 (the "Reinschmidt
Agreement") pursuant to which Mr. Reinschmidt will devote 200 working days to
the Company at an annual salary of 195,000 CHF (approximately $156,000) and will
receive an additional 1,000 CHF (approximately $800) for each new Company
customer during the first year and an additional 750 CHF (approximately $600)
for each new Company customer during the second and third year of the
Reinschmidt Agreement. Mr. Reinschmidt is currently receiving only one half of
his salary and will begin to receive his full salary commencing in October 1996.
Both the Popovici Agreement and the Reinschmidt Agreement will automatically be
renewed for successive one year terms, unless terminated by either party at
least six months prior to the end of their terms, and each also provides for
certain benefits including insurance, business expense accounts and a company
car. Both agreements also contain certain confidentiality provisions.
27
<PAGE>
Since May 1, 1996 David Schlecht has been compensated at a rate of $60,000
per annum. Mr. Schlecht devotes only a portion of his time to the business of
the Company. It is anticipated that certain other executives of the Company,
including Mr. Thomas Combrinck, will enter into employment agreements with the
Company in the future. See "Management."
As of the date of this Prospectus, the Company has not issued any options.
The Company pays its non-employee directors a fee of $500 for each meeting
of the Board of Directors attended in person and $200 for each telephonic board
meeting or committee meeting attended, in cash, plus reasonable out-of-pocket
expenses.
Pursuant to Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation provides that the Company shall, to the
fullest extent permitted by law, indemnify all directors, officers,
incorporators, employees and agents of the Company against liability for certain
of their acts. The Company's Certificate of Incorporation also provides that,
with certain exceptions, no director of the Company will be liable to the
Company for monetary damages as a result of certain breaches of fiduciary duties
as a director. Exceptions to this include a breach of the director's duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, improper declaration of dividends and
transactions from which the director derived an improper personal benefit.
CERTAIN TRANSACTIONS
As of April 30, 1996, in exchange for 7,250,000 shares of Common Stock, the
Company acquired all of the outstanding shares, other than qualifying shares, of
UTI Holding from Thomas Combrinck. At such time Thomas Combrinck, who is
currently a director of the Company, was not a director of the Company but was,
and currently still is, a director of UT Holding. The Company believes that this
transaction was fair from a financial point of view.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that sales of the Shares
may be effected from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Shares or a combination of such methods of
sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares directly to purchasers or through
broker-dealers that may act as agents or principals. Such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders and/or the purchasers of Shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). David E. Schlecht and Ronald Kuzon, director of the
Company, have advised the Company that they have not entered into any agreement
with respect to the sale of their Shares.
The Selling Stockholders and any broker-dealers that act in connection with
the sale of the Shares as principals may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act and any commission received by them and
any profit on the resale of the Shares and/or as principals might be deemed to
be underwriting discounts and commissions under the Act. The Selling
Stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the Shares against certain
liabilities, including liabilities arising under the Act. The Company will not
receive any proceeds from sales of the Shares by the Selling Stockholders. Sales
of the Shares by the Selling Stockholders, or even the potential of such sales,
would likely have an adverse effect on the market price of the Common Stock.
28
<PAGE>
Interfinance has advised the Company that it has made arrangements for the
distribution or sale of a portion of its Shares. There can be no assurance that
Selling Stockholders will be able to sell some or all of the Shares listed for
sale herein. There is no established public trading market for the Common Stock
as of the date of this Prospectus. See "Risk Factors -- Marketability of
Securities."
The following table sets forth certain information with respect to the
Selling Stockholders for whom the Company is registering the Shares for resale
to the public. The Company will not receive any of the proceeds from the sale of
the Shares. There are no material relationships between any of the Selling
Stockholders and the Company except as otherwise indicated. Beneficial ownership
of the Shares by each Selling Stockholder after the sale will depend on the
number of Shares sold by each Selling Stockholder. The Shares offered by the
Selling Stockholders are not being underwritten.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
AFTER
OFFERING
BENEFICIAL OWNERSHIP IF MAXIMUM IS
PRIOR TO OFFERING MAXIMUM SOLD
NAME OF ------------------------ AMOUNT TO BE -------------
SELLING STOCKHOLDER AMOUNT PERCENT SOLD AMOUNT
- ----------------------------------------------------------------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Interfinance Inv. Co. Ltd........................................ 2,044,000 20.4% 2,044,000 0
Alain Ballmer.................................................... 10,000 * 10,000 0
Andre Brugger.................................................... 30,000 * 30,000 0
Joseph Drescher.................................................. 5,000 * 5,000 0
Gemarfin SA...................................................... 50,000 * 50,000 0
Jacquet Bernard.................................................. 10,000 * 10,000 0
Kurt Martin Consulting........................................... 75,000 * 75,000 0
Mario Reinschmidt................................................ 34,000 * 34,000 0
Josef A. Schwyter................................................ 10,000 * 10,000 0
Triaxis Trust AG................................................. 200,000 1.9% 200,000 0
Joseph Ulrich.................................................... 1,000 * 1,000 0
Union Bacaire Prive.............................................. 75,000 * 75,000 0
Andreas Weinberg................................................. 10,000 * 10,000 0
Ambrosius Stiflung............................................... 10,000 * 10,000 0
ATAG AG.......................................................... 10,000 * 10,000 0
Banque Scandinave en Suisse SA................................... 25,000 * 25,000 0
Myrta Brugger.................................................... 20,000 * 20,000 0
Credit Suisse.................................................... 60,000 * 60,000 0
Alain Dettling................................................... 10,000 * 10,000 0
Aurelio Ferrari.................................................. 15,000 * 15,000 0
Hanspeter Iselin................................................. 2,000 * 2,000 0
Bernard Jaquet................................................... 10,000 * 10,000 0
Carlos Perez..................................................... 1,000 * 1,000 0
Martin Sieber.................................................... 2,000 * 2,000 0
Sok Chung Long................................................... 1,000 * 1,000 0
Robert Speri..................................................... 20,000 * 20,000 0
VPM Verwaltungs AG............................................... 10,000 * 10,000 0
David Schlecht (1)............................................... 4,000 * 4,000 0
Ronald Kuzon (1)................................................. 2,000 * 2,000 0
<CAPTION>
NAME OF
SELLING STOCKHOLDER PERCENT
- ----------------------------------------------------------------- -------------
<S> <C>
Interfinance Inv. Co. Ltd........................................ 0%
Alain Ballmer.................................................... 0%
Andre Brugger.................................................... 0%
Joseph Drescher.................................................. 0%
Gemarfin SA...................................................... 0%
Jacquet Bernard.................................................. 0%
Kurt Martin Consulting........................................... 0%
Mario Reinschmidt................................................ 0%
Josef A. Schwyter................................................ 0%
Triaxis Trust AG................................................. 0%
Joseph Ulrich.................................................... 0%
Union Bacaire Prive.............................................. 0%
Andreas Weinberg................................................. 0%
Ambrosius Stiflung............................................... 0%
ATAG AG.......................................................... 0%
Banque Scandinave en Suisse SA................................... 0%
Myrta Brugger.................................................... 0%
Credit Suisse.................................................... 0%
Alain Dettling................................................... 0%
Aurelio Ferrari.................................................. 0%
Hanspeter Iselin................................................. 0%
Bernard Jaquet................................................... 0%
Carlos Perez..................................................... 0%
Martin Sieber.................................................... 0%
Sok Chung Long................................................... 0%
Robert Speri..................................................... 0%
VPM Verwaltungs AG............................................... 0%
David Schlecht (1)............................................... 0%
Ronald Kuzon (1)................................................. 0%
</TABLE>
- ------------------------
* Less then 1%.
(1) Is a director of the Company.
All expenses of this registration will be borne by the Company. Previous
sales of shares of Common Stock were made pursuant to private placements which
the Company believes were exempt
29
<PAGE>
from registration under the Act. As of April 30, 1996, in exchange for 7,250,000
shares of Common Stock, the Company acquired all of outstanding shares, other
than qualifying shares, of UT Holding. As of April 30, 1996, the Company also
issued 2,750,000 shares of Common Stock to Interfinance, 183,333 of which were
issued in exchange for $200,000 in cash and 2,566,667 of which were issued in
exchange for $26 in cash and the Interfinance Note, which was repaid as of June
28, 1996.
The Company has been informed that, other than David Schlecht and Ronald
Kuzon, the Selling Stockholders reside outside of the United States.
DESCRIPTION OF SECURITIES
AUTHORIZED STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, par value $.00001 per share.
COMMON STOCK
Subject to the prior rights of the holders of any shares of any Preferred
Stock which may be authorized and issued in the future, the holders of the
Common Stock are entitled to receive dividends from funds of the Company legally
available therefor when, as and if declared by the Board of Directors of the
Company, and are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon the liquidation,
dissolution or winding-up of the affairs of the Company. Holders of the Common
Stock do not have any preemptive, subscription, redemption or conversion rights.
Holders of the Common Stock are entitled to one vote per share on all matters
which they are entitled to vote upon at meetings of stockholders or upon actions
taken by written consent pursuant to Delaware corporate law. The holders of
Common Stock do not have cumulative voting rights, which means that a plurality
of such outstanding shares can elect all of the directors of the Company. All of
the shares of the Common Stock currently issued and outstanding are, fully-paid
and nonassessable. No dividends have been paid to holders of the Common Stock
since the inception of the Company, and no dividends are anticipated to be
declared or paid in the reasonably foreseeable future. See "Dividend Policy."
There is no established public trading market for the Common Stock as of the
date of this Prospectus. See "Risk Factors -- Marketability of Securities."
DELAWARE ANTI-TAKEOVER LAW
The Company is governed by the provisions of Section 203 of the General
Corporation law of the State of Delaware. In general, this law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which such person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" is defined to include mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is defined as a person who, together with affiliates and associates, owns (or,
within the prior three years, did own) 15% or more of the corporation's voting
stock.
TRANSFER AGENT AND WARRANT AGENT
American Stock Transfer & Trust Company will serve as the transfer agent and
registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
On the date of this Prospectus, the Company has outstanding 10,006,000
shares of Common Stock, 2,756,000 of which are freely tradable without
restriction or further registration under the Securities Act except for any
shares purchased by any person who is or thereby becomes an affiliate of the
Company, which shares will be subject to the resale limitations contained in
Rule 144 promulgated under the Securities Act.
30
<PAGE>
All of the 7,250,000 currently outstanding shares of Common Stock not being
registered hereby are restricted securities within the meaning of Rule 144 under
the Securities Act and, in general, if held for at least two years, will be
eligible for sale in the public market in reliance upon and subject to the
limitations of Rule 144.
In general under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
affiliate of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three month period, a number of shares beneficially
owned for at least two years that does not exceed the greater of (i) one percent
of the number of the then outstanding shares of Common Stock or (ii) the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public information about the Company. Furthermore, a person who is not deemed to
have been an affiliate of the Company during the ninety days preceding a sale by
such person and who has beneficially owned such shares for at least three years
is entitled to sell such shares without regard to the volume, manner of sale or
notice requirements. All 7,250,000 shares of restricted Common Stock outstanding
on the date of this Prospectus are held by affiliates of the Company. All
7,250,000 restricted shares of Common Stock will become eligible for sale under
Rule 144 commencing in May 1998.
Prior to the date of this Prospectus, there has been no public market for
the Company's securities. Following the date of this Prospectus, the Company
cannot predict the effect, if any, that market sales of the Common Stock, or the
availability or such shares for sale, will have on the market price prevailing
from time to time. Nevertheless, sales by the existing stockholders of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices for the Company's securities.
LEGAL MATTERS
The validity of the Shares offered by this Prospectus is being passed upon
for the Company and the Selling Stockholders by Rubin Baum Levin Constant &
Friedman, 30 Rockefeller Plaza, 29th Floor, New York, New York 10112.
EXPERTS
The consolidated financial statements of the Company for the period from
February 29, 1996 (Inception) to April 30, 1996, included herein and elsewhere
in the Registration Statement have been audited by Merdinger, Fruchter, Rosen &
Corso, P.C., independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance thereon and upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-B2 under the Act, covering the
Shares offered by this Prospectus. For further information with respect to the
Company and the Shares offered hereby, reference is made to the Registration
Statement and the exhibits filed as part of thereof, which may be examined at
the Public Reference Section maintained by the Commission at its principal
office in Washington, D.C. at 450 Fifth Street, N.W., Washington, D.C. 20549 and
copies of such material can be obtained from the Public Reference Section of the
Commission at prescribed rates. Statements contained in this Prospectus as to
the contents of any contract or other document referred to herein are not
necessarily complete. In each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement.
31
<PAGE>
Information can also be obtained at the Northeast Regional Office of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
the Midwest Regional Office of the Commission at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.
Subsequent to this offering, the Company will be a reporting company under
the Exchange Act. The Company intends to distribute to its stockholders annual
reports containing audited financial statements with a report therein by
independent public accountants after the end of each fiscal year. In addition,
if the Company is required to prepare such reports, the Company will make
available to its stockholders, upon request, quarterly reports for the first
three quarters of each fiscal year containing unaudited financial statements and
other information after the end of each fiscal quarter, upon written request to
the Secretary of the Company or otherwise as required by law.
32
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Independent Auditors' Report............................................................................ F-2
Consolidated Balance Sheet.............................................................................. F-3
Consolidated Statement of Operations.................................................................... F-4
Consolidated Statement of Stockholders' Equity.......................................................... F-5
Consolidated Statement of Cash Flows.................................................................... F-6
Notes to Consolidated Financial Statements.............................................................. F-7 - 9
Independent Auditors' Report on Consolidating Supplementary Information................................. F-10
Consolidating Balance Sheet............................................................................. F-11
Consolidating Statement of Operations................................................................... F-12
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Shareholders of
United Telegroup International, Inc.
We have audited the accompanying consolidated balance sheet of United
Telegroup International, Inc. and Subsidiaries as of April 30, 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the period from February 29, 1996 (inception) to April 30, 1996. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of United
Telegroup International, Inc. and Subsidiaries as of April 30, 1996, and the
results of its operations and its cash flows for the period from February 29,
1996 (inception) to April 30, 1996 in conformity with generally accepted
accounting principles.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
July 12, 1996
F-2
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
APRIL 30, 1996
ASSETS
<TABLE>
<S> <C>
Current Assets
Cash and Cash Equivalents.................................................... $ 780,960
Subscription Receivable...................................................... 3,000,000
Prepaid Expenses............................................................. 10,203
----------
Total Current Assets....................................................... 3,791,163
Property and Equipment, at Cost, Net of Accumulated Depreciation of $2,337 at
April 30, 1996................................................................ 137,903
Organization Costs, Net of Accumulated Amortization of $169 at April 30,
1996.......................................................................... 9,997
Deferred Taxes................................................................. --
Other Assets................................................................... 6,428
----------
Total Assets............................................................... $3,945,491
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses........................................ $ 171,915
Loan Payable................................................................. 1,000,000
----------
Total Current Liabilities.................................................. 1,171,915
----------
Commitments and Contingencies.................................................. --
Stockholders' Equity
Common Stock -- $0.00001 Par Value Authorized; 20,000,000 Shares; 10,006,000
Issued and Outstanding...................................................... 100
Additional Paid-in-Capital................................................... 3,088,474
Retained Deficit............................................................. (317,754)
Foreign Currency Translation Adjustment...................................... 2,739
Minority Interest............................................................ 17
----------
Total Stockholders' Equity................................................. 2,773,576
----------
Total Liabilities and Stockholders' Equity................................. $3,945,491
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-3
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
<TABLE>
<S> <C>
Revenue
Sales......................................................................... $ --
---------
Total Revenue............................................................... --
---------
Expenses
Salaries and Consulting Fees.................................................. 171,932
Travel Expenses............................................................... 65,776
Professional Fees............................................................. 23,005
Rent.......................................................................... 3,437
Telephone..................................................................... 3,159
Depreciation and Amortization................................................. 2,559
Office Expenses............................................................... 2,517
Bank Fees..................................................................... 355
---------
Total Operating Expenses.................................................... 272,740
---------
Loss From Operations............................................................ (272,740)
Other (Income) Expenses
Interest Income............................................................... (449)
Interest Expense.............................................................. 4,804
Loss From Foreign Currency.................................................... 40,659
---------
Total Other Expenses........................................................ 45,014
---------
Net Loss........................................................................ (317,754)
---------
---------
Loss Per Common Share
Primary....................................................................... $(.03)
---------
---------
Fully Diluted................................................................. $(.03)
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-4
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL FOREIGN TOTAL
--------------------------- PAID-IN ACCUMULATED CURRENCY MINORITY STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT INTEREST EQUITY
-------------- ----------- ------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Inception (February
29, 1996)...................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Net Loss........................ -- -- -- (317,754) -- -- (317,754)
Issuance of Common Stock........ 10,006,000 100 3,088,474 -- -- -- 3,088,574
Foreign Currency Translation
Adjustment..................... -- -- -- -- 2,739 -- 2,739
Minority Interest............... -- -- -- -- -- 17 17
-------------- ----- ------------- ------------ ----------- --- -------------
Balance at April 30, 1996....... $ 10,006,000 $ 100 $ 3,088,474 $ (317,754) $ 2,739 $ 17 $ 2,773,576
-------------- ----- ------------- ------------ ----------- --- -------------
-------------- ----- ------------- ------------ ----------- --- -------------
</TABLE>
The accompanying notes are integral part of the financial statement.
F-5
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
<TABLE>
<S> <C>
Cash Flow From Operating Activities
Net Loss..................................................................... $ (317,754)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Depreciation and Amortization................................................ 2,559
Changes in Certain Assets and Liabilities:
Increase in Subscription Receivable........................................ (3,000,000)
Increase in Prepaid Expenses............................................... (10,203)
Increase in Organization Costs............................................. (10,166)
Increase in Other Assets................................................... (6,428)
Increase in Accounts Payable and Accrued Expenses.......................... 171,915
-----------
Total Cash (Used) by Operating Activities................................ (3,170,077)
-----------
Cash Flows From Investing Activities:
Purchase of fixed assets..................................................... (140,240)
-----------
Total Cash (Used) By Investing Activities................................ (140,240)
-----------
Cash Flows From Financing Activities:
Contribution to Capital...................................................... 3,088,574
Proceeds From Loan........................................................... 1,000,000
Minority Interest............................................................ 17
-----------
Total Cash Provided by Financing Activities.............................. 4,088,591
-----------
Effects of Exchange Rate Changes on Cash....................................... 2,686
-----------
2,686
-----------
Net Increase in Cash and Cash Equivalents...................................... 780,960
Cash and Cash Equivalents -- Beginning of Year................................. --
-----------
Cash and Cash Equivalents -- End of Year....................................... $ 780,960
-----------
-----------
Cash Paid During the Year For:
Interest expense............................................................. $ --
-----------
-----------
Income Taxes................................................................. $ --
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-6
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of United Telegroup International, Inc. ("The Company"), a holding company
organized under the laws of the state of Delaware on April 17, 1996 and two
99.9% owned subsidiaries; United Telegroup Holding AG, ("UTH"),incorporated
under the laws of Switzerland on February 29, 1996, and United Telegroup AG,
("UTAG"), incorporated under the laws of Switzerland on March 28, 1996. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
b) LINE OF BUSINESS
The Company is a switch-based provider of private voice, fax and data
management telecommunication services in Switzerland.
c) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
d) ORGANIZATION COSTS
Organization costs consist of legal and other administrative costs
incurred relating to the formation of the Company. These costs have been
capitalized and will be amortized over a period of five years.
e) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of the
various classes of assets. Maintenance and repairs are charged to expense as
incurred.
f) TRANSLATION OF FOREIGN CURRENCY
The Company translates the foreign currency financial statements of its
Switzerland subsidiaries, UTH and UTAG, in accordance with the requirements
of Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation". Assets and liabilities are translated at current exchange
rates, and related revenues and expenses are translated at average exchange
rates in effect during the period. Resulting translation adjustments are
recorded as a separate component in stockholders' equity. Foreign currency
transaction gains and losses are included in determining net income.
g) LOSS PER SHARE
Loss per share is based on the weighted average number of shares of
common stock outstanding during the period.
h) INCOME TAXES
Income taxes are provided for based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes". The liability method requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the reported amount of
assets and liabilities and their tax basis.
F-7
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
NOTE 2 -- LOAN PAYABLE
Financing for the start-up operations of UTH was provided by a loan
agreement between UTH and Hedag AG (HAG) dated March 27, 1996, for $1,000,000
bearing interest at 7% per annum payable semi-annually on September 30, 1996 and
March 31, 1997.
The Company shall pay to HAG the entire principal balance of the loan, plus
any unpaid accrued interest by March 31, 1997.
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment at April 30, 1996 is summarized as follows:
<TABLE>
<S> <C>
Computer Equipment....................................... $ 89,270
Telephone Equipment...................................... 18,809
Furniture and Fixtures................................... 32,161
---------
140,240
Less: Accumulated Depreciation........................... 2,337
---------
$ 137,903
---------
---------
</TABLE>
NOTE 4 -- MINORITY INTEREST
Minority interest represents less than a 1% share of the common equity and
net loss of the Company's two subsidiaries UTH and UTAG.
NOTE 5 -- FOREIGN OPERATIONS
Substantially all of UTH's and UTAG's operations take place in the country
of Switzerland.
Substantially all of UTH's and UTAG's identifiable assets are located in the
country of Switzerland.
NOTE 6 -- SUBSCRIPTION RECEIVABLE
As of April 30, 1996, the Company entered into two stock subscription
agreements with Interfinance Inv. Co., Ltd. (ITC) to sell common stock of the
Company as follows:
1) The sale of 183,333 shares of the Company's common stock for an
aggregate purchase price of $200,000. Payment for the shares was
subsequently received by the Company on May 21, 1996.
2) The sale of 2,566,667 shares of the Company's common stock in exchange
for $26 in cash and a promissory note due on April 30, 1997 in the
principal amount of $2,799,974, bearing interest at 7% per annum. The
note is secured by the 2,566,667 shares of common stock.
NOTE 7 -- INCOME TAXES
Deferred income taxes are determined based upon differences between the tax
basis of the Company's assets and liabilities and their financial statement
carrying amounts, multiplied by the applicable statutory income tax rate.
F-8
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
NOTE 7 -- INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<S> <C>
Deferred Tax Assets
Net Operating Loss Carryforwards...................... $ 106,166
Less: Valuation Allowance............................. (106,166)
---------
Total Deferred Tax Assets........................... $ --
---------
---------
</TABLE>
As April 30, 1996, the Company had a net operating loss which will be
available to reduce future taxable income. The full realization of the tax
benefit associated with the carryforward depends predominantly upon the
Company's ability to generate taxable income during the carryforward period.
Because of the current uncertainty of realizing such tax asset in the future, a
valuation allowance has been recorded equal to the amount of the net deferred
tax asset.
NOTE 8 -- RELATED PARTY TRANSACTIONS
The Company has related party transactions with United Telegroup Ltd. UK
(UTK), a company with which they share a common director.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
The Company has several employment agreements, the terms of which expires at
various times through April 1999.
NOTE 10 -- SUBSEQUENT EVENTS
On June 28, 1996, subsequent to the date of the balance sheet, the Company
received from ITC the sum of $2,799,974, relating to their promissory note for
the sale of stock. See also Note 6.
On July 4, 1996, subsequent to the date of the balance sheet, the Company
repaid the entire principal balance of $1,000,000 plus accrued interest of
$19,444, relating to their loan from HAG. See also Note 2.
F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATING
SUPPLEMENTARY INFORMATION
To the Board of Directors and Shareholders of
United Telegroup International, Inc.
We have audited the accompanying consolidated financial statements of UNITED
TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES as of April 30, 1996 and for the
period from February 29, 1996 (Inception) to April 30, 1996 and issued our
report then ended July 12, 1996. Our audit was conducted for the purpose of
forming an opinion on the basic financial statements taken as a whole.
The consolidating supplementary information is presented only for analysis
purposes and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
MERDINGER, FRUCHTER, ROSEN, & CORSO, P.C.
Certified Public Accountants
New York, N.Y.
July 12, 1996
F-10
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
APRIL 30, 1996
ASSETS
<TABLE>
<CAPTION>
UNITED TELEGROUP
INTERNATIONAL UNITED TELEGROUP UNITED TELEGROUP
INC. HOLDING AG AG SUBTOTAL ELIMINATION
----------------- ----------------- ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and Cash Equivalents......... $ -- $ 718,838 $ 62,122 $ 780,960 $ --
Subscription Receivable........... 3,000,000 -- -- 3,000,000 --
Prepaid Expenses.................. -- -- 10,203 10,203 --
Due From Affiliate................ -- 239,635 -- 239,635 (239,635)
----------------- ----------------- ----------------- ------------- ------------
Total Current Assets............ 3,000,000 958,473 72,325 4,030,798 (239,635)
Property and Equipment.............. -- -- 137,903 137,903 --
Organization Costs.................. -- 4,501 5,496 9,997 --
Investment in Subsidiaries.......... 83,074 83,717 -- 166,791 (166,791)
Other Assets........................ -- -- 6,428 6,428 --
----------------- ----------------- ----------------- ------------- ------------
Total Assets.................... $ 3,083,074 $ 1,046,691 $ 222,152 $ 4,351,917 $ (406,426)
----------------- ----------------- ----------------- ------------- ------------
----------------- ----------------- ----------------- ------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued
Expenses......................... $ -- $ 8,186 $ 163,729 $ 171,915 $ --
Due to Affiliate.................. -- -- 239,635 239,635 (239,635)
Loan Payable...................... -- 1,000,000 -- 1,000,000 --
----------------- ----------------- ----------------- ------------- ------------
Total Current Liabilities....... -- 1,008,186 403,364 1,411,550 (239,635)
----------------- ----------------- ----------------- ------------- ------------
Stockholders' Equity
Common Stock...................... 100 83,091 83,717 166,908 (166,808)
Additional Paid-in Capital........ 3,088,474 -- -- 3,088,474 --
Retained Deficit.................. (5,500) (45,325) (266,929) (317,754) --
Foreign Currency Translation
Adjustment....................... -- 739 2,000 2,739 --
Minority Interest................. -- -- -- -- 17
----------------- ----------------- ----------------- ------------- ------------
Total Stockholders' Equity...... 3,083,074 38,505 (181,212) 2,940,367 (166,791)
----------------- ----------------- ----------------- ------------- ------------
Total Liabilities and
Stockholders' Equity........... $ 3,083,074 $ 1,046,691 $ 222,152 $ 4,351,917 $ (406,426)
----------------- ----------------- ----------------- ------------- ------------
----------------- ----------------- ----------------- ------------- ------------
<CAPTION>
TOTAL
-------------
<S> <C>
Current Assets
Cash and Cash Equivalents......... $ 780,960
Subscription Receivable........... 3,000,000
Prepaid Expenses.................. 10,203
Due From Affiliate................ --
-------------
Total Current Assets............ 3,791,163
Property and Equipment.............. 137,903
Organization Costs.................. 9,997
Investment in Subsidiaries.......... --
Other Assets........................ 6,428
-------------
Total Assets.................... $ 3,945,491
-------------
-------------
Current Liabilities
Accounts Payable and Accrued
Expenses......................... $ 171,915
Due to Affiliate.................. --
Loan Payable...................... 1,000,000
-------------
Total Current Liabilities....... 1,171,915
-------------
Stockholders' Equity
Common Stock...................... 100
Additional Paid-in Capital........ 3,088,474
Retained Deficit.................. (317,754)
Foreign Currency Translation
Adjustment....................... 2,739
Minority Interest................. 17
-------------
Total Stockholders' Equity...... 2,773,576
-------------
Total Liabilities and
Stockholders' Equity........... $ 3,945,491
-------------
-------------
</TABLE>
F-11
<PAGE>
UNITED TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
<TABLE>
<CAPTION>
UNITED TELEGROUP
INTERNATIONAL UNITED TELEGROUP UNITED TELEGROUP
INC. HOLDING AG AG SUBTOTAL ELIMINATION TOTAL
---------------- ---------------- ---------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Sales...................... $ -- $ -- $ -- $ -- $ -- $ --
------- -------- ---------------- ------------ ----------- ------------
Total Revenues............. -- -- -- -- -- --
------- -------- ---------------- ------------ ----------- ------------
Operating Expenses
Salaries and Consulting
Fees...................... 5,500 -- 166,432 171,932 -- 171,932
Travel Expenses............ -- -- 65,7766 5,776 -- 65,776
Professional Fees.......... -- -- 23,005 23,005 -- 23,005
Rent....................... -- -- 3,437 3,437 -- 3,437
Telephone.................. -- -- 3,159 3,159 -- 3,159
Depreciation and
Amortization Expense...... -- 78 2,481 2,559 -- 2,559
Office Expenses............ -- -- 2,517 2,517 -- 2,517
Bank Fees.................. -- 233 122 355 -- 355
------- -------- ---------------- ------------ ----------- ------------
Total Operating
Expenses................ 5,500 311 266,929 272,740 -- 272,740
------- -------- ---------------- ------------ ----------- ------------
Loss From Operations......... (5,500) (311) (266,929) (272,740) -- (272,740)
Other (Income) Expenses
Interest Income............ -- (449) -- (449) -- (449)
Interest Expense........... -- 4,804 -- 4,804 -- 4,804
Loss From Foreign
Currency.................. -- 40,659 -- 40,659 -- 40,659
------- -------- ---------------- ------------ ----------- ------------
Total Other Expenses..... -- 45,014 -- 45,014 -- 45,014
------- -------- ---------------- ------------ ----------- ------------
Net Loss..................... $ (5,500) $ (45,325) $ (266,929) $ (317,754) $ -- $ (317,754)
------- -------- ---------------- ------------ ----------- ------------
------- -------- ---------------- ------------ ----------- ------------
</TABLE>
F-12
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THE OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR THE FACTS
HEREIN SET FORTH SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 2
Risk Factors................................... 6
The Company.................................... 13
Dividend Policy................................ 13
Use of Proceeds................................ 13
Capitalization................................. 14
Selected Financial Data........................ 15
Plan of Operation.............................. 16
Business....................................... 17
Management..................................... 25
Principal Stockholders......................... 27
Executive Compensation......................... 27
Certain Transactions........................... 28
Selling Stockholders & Plan of Distribution.... 28
Description of Securities...................... 30
Shares Eligible For Future Sale................ 30
Legal Matters.................................. 31
Experts........................................ 31
Additional Information......................... 31
Index to Consolidated Financial Statements..... F-1
</TABLE>
------------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
UNITED TELEGROUP
INTERNATIONAL, INC.
2,756,000
SHARES OF COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
<S> <C>
SEC Registration Fee...................................................... $ 4,989.32
Printing and Engraving Costs.............................................. $ 20,000.00
Accounting Fees and Expenses.............................................. $ 10,000.00
Legal Fees and Expenses................................................... $ 75,000.00
Blue-Sky Fees and Expenses................................................ $ 5,000.00
Transfer Agent's Fees and Expenses........................................ $ 3,500.00
Miscellaneous Expenses.................................................... $ 6,510.68
--------------
Total................................................................... $ 125,000.00
--------------
--------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and the By-Laws of the Registrant provide
that the Registrant shall indemnify its officers, directors and certain others
to the fullest extent permitted by the Delaware General Corporation Law. Section
145 of the General Corporation Law of Delaware (the "GCL") provides in pertinent
part as follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of he corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other Court
shall deem proper.
II-1
<PAGE>
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsection (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsection (a) and (b) of this section (unless
ordered by a court shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by he board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer of director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board deems appropriate.
(f) The indemnification and advancement of expense provided by, or granted
pursuant to, the subsections of this section shall not be deemed exclusive of
any other right to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors of otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under his section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporations as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans' references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
reference to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation, which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
II-2
<PAGE>
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a persons.
In accordance with Section 102(b)(7) of the GCL, Article Seven of the
Certificate of Incorporation of the Registrant eliminates the personal liability
of the Company's directors to the Company or its stockholders for monetary
damages for breach of their fiduciary duties as a director, with certain
exceptions set forth in said Section 102(b)(7).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Registrant has sold the following unregistered securities during the three
years preceding the filing of this Registration Statement:
As of April 30, 1996, in exchange for 7,250,000 shares of Common Stock, the
Company acquired all of outstanding shares of UT Holding. As of April 30, 1996,
the Company also issued 2,750,000 shares of Common Stock to Interfinance,
183,333 of which were issued in exchange for $200,000 in cash and 2,566,667 of
which were issued in exchange for $26 in cash and the Interfinance Note, which
was repaid as of June 28, 1996.
No underwriter was utilized in these transactions. The Company relied upon
Regulation S and/or Section 4(2) of the Act and the rules and regulations
promulgated thereunder, for its exemption the issuance of such shares from
registration under the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<C> <S>
3.1 Certificate of Incorporation of the Company
3.2 By-laws of the Company
5.1 Opinion of Rubin Baum Levin Constant & Friedman*
10.1 Contract between Registrant and Telemedia International*
10.2 Lease of Registrant*
10.3 Management Agreement dated June 3, 1996 between Registrant and Andreas Popovici*
10.4 Management Agreement dated April 4, 1996 between Registrant and Franco
Reinschmidt*
21.1 List of Subsidiaries
23.1 Consent of Merdinger, Fruchter Rosen & Corso, P.C.
23.2 Consent of Rubin Baum Levin Constant & Friedman (contained in Exhibit 5.1)*
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES OF REGISTRANT.
Financial statement schedules have been omitted because they are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
UNDERTAKINGS REQUIRED BY REGULATION S-B, ITEM 512(A).
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) To, for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
BONA FIDE offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of this offering.
UNDERTAKINGS REQUIRED BY REGULATION S-B, ITEM 512(E).
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
UNDERTAKINGS REQUIRED BY REGULATION S-B, ITEM 512(F).
The undersigned registrant hereby undertakes that:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial BONA FIDE
offering of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York on July 16, 1996.
UNITED TELEGROUP INTERNATIONAL, INC.
By: /s/ DAVID /SCHLECHT
------------------------------------
David Schlecht
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints David Schlecht and Ronald Kuzon
and each of them, his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone
full power and authority to do and perform each and every act and thing
necessary or advisable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -----------------------
/s/ THOMAS COMBRINCK
--------------------------------- Chairman of the Board and Director July 16, 1996
Thomas Combrinck
/s/ DAVID SCHLECHT
--------------------------------- President, Chief Executive Officer and July 16, 1996
David Schlecht Director (Principal Executive Officer)
/s/ RONALD KUZON
--------------------------------- Treasurer, Secretary (Principal Financial July 16, 1996
Ronald Kuzon Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
EXHIBIT NO. DESCRIPTION NUMBERS
- ------------- ------------------------------------------------------------------------------------- -----------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company
3.2 By-laws of the Company
21.1 List of Subsidiaries
23.1 Consent of Merdinger, Fruchter, Rosen & Corso, P.C.
27.1 Financial Data Schedule
</TABLE>
<PAGE>
CERTIFICATE OF INCORPORATION
OF
UNITED TELEGROUP INTERNATIONAL, INC.
A Delaware corporation
FIRST: The name of the Corporation is:
United Telegroup International, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 15 East North Street, City of Dover, County of Kent.
The name of its registered agent at such address is United Corporate Services,
Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of capital stock which may
be issued by the Corporation is 20,000,000 all of which shares shall be Common
Stock, having a par value of $.00001 per share.
(b) The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions of the shares of
each class of stock of the Corporation are as follows:
1. Dividends may be paid upon the Common Stock as and
when declared by the Board of Directors out of any funds legally available
therefor.
2. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of the Common Stock shall be entitled to receive
any and all assets of the Corporation remaining to be paid or distributed.
3. Except as otherwise provided by statute or by any
express provision of this Certificate, all rights to vote and all voting power
shall be exclusively vested in the Common Stock and the holders thereof shall be
entitled to one vote for each share of Common Stock for the election of
directors and upon all other matters.
4. The Corporation shall be entitled to treat the
person in whose name any share, right or option is registered as the owner
thereof, for all purposes, and shall not be bound to recognize any equitable or
other claim to or interest in such share, right or option on the part of any
other person,
<PAGE>
whether or not the Corporation shall have notice thereof, save as may be
expressly provided by the laws of the State of Delaware.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
Pia Bosca, Esq. 30 Rockefeller Plaza, 29th Floor
New York, New York 10112
SIXTH: (a) The number of directors of the Corporation which shall
constitute the whole Board of Directors of the Corporation shall be such as from
time to time may be fixed by or in the manner provided in the By-laws, but in no
case shall the number of directors be less than one. Except as may otherwise be
required by law, vacancies in the Board of Directors of the Corporation and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director.
(b) All corporate powers of the Corporation shall be
exercised by the Board of Directors except as otherwise provided herein or by
law. In furtherance of the powers conferred by statute and by law, the Board of
Directors shall have the power to adopt, alter, amend or repeal the By-laws of
the Corporation, without any action on the part of the Corporation's
stockholders.
SEVENTH: (a) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breaches
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit; it being the intention of the foregoing
provision to eliminate the liability of the Corporation's directors to the
fullest extent permitted by Section 102(b)(7) of the General Corporation Law of
the State of Delaware, as amended from time to time.
(b) Any repeal or modification of the foregoing
subparagraph (a) by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
-2-
<PAGE>
(c) If the General Corporation Law of the State of Delaware
is amended after approval by the stockholders of this paragraph SEVENTH to
authorize corporate action further eliminating or limiting the personal
liability of directors, then a director of the Corporation, in addition to the
circumstances in which he is not now personally liable, shall be free of
liability to the fullest extent permitted by the General Corporation Law of the
State of Delaware as so amended.
(d) Each director, officer, employee and agent, past or
present, of the Corporation, and each person who serves or may have served at
the request of the Corporation as a director, trustee, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, and their respective heirs, administrators and executors, shall be
indemnified by the Corporation in accordance with, and to the fullest extent
permitted by, the provisions of the General Corporation Law of the State of
Delaware as it may from time to time be amended. The provisions of this
subparagraph (d) shall apply to any member of any committee appointed by the
Board of Directors as fully as though such person shall have been an officer or
director of the Corporation.
(e) The provisions of this paragraph SEVENTH shall be in
addition to and not in limitation of any other rights, indemnities, or
limitations of liability to which any director or officer may be entitled, as a
matter of law or under the By-laws of the Corporation or any agreement, vote of
stockholders or otherwise.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders
-3-
<PAGE>
or class of stockholders, of this Corporation, as the case may be, and also on
this Corporation.
NINTH: Elections of directors need not be by written ballot unless
the By-laws of the Corporation so provide.
IN WITNESS WHEREOF, the undersigned hereby executed this instrument and
affirms, under penalties of perjury, that this instrument is the act and deed of
the undersigned and that the facts stated herein are true, this 16th day of
April, 1996.
/S/ Pia Bosca
-----------------
Pia Bosca
Sole Incorporator
<PAGE>
BY-LAWS
OF
UNITED TELEGROUP INTERNATIONAL, INC.
A Delaware corporation
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation within the State of Delaware shall be located at United Corporate
Services, Inc., 15 East North Street, in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for
the election of directors or for any other purpose shall be held at any such
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of meeting
or in a duly executed waiver thereof.
SECTION 2. ANNUAL MEETING. The annual meeting of stockholders shall
be held at such date and time as shall be designated from time to time by the
Board of Directors and stated in the notice of meeting or in a duly executed
waiver thereof. At such annual meeting, the stockholders shall elect, by a
plurality vote, a Board of Directors and shall transact such other business as
may properly be brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders,
unless otherwise prescribed by statute, may be called at any time by the Board
of Directors or by the Chairman of the Board, if one shall have been elected.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise expressly
required by statute, written notice of each annual and special meeting of
stockholders stating the place, date and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which such meeting is called,
shall be given to each stockholder of record entitled to vote thereat not less
than ten nor more than sixty days before the date of the
<PAGE>
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purpose or purposes stated in the notice. Notice shall be given
personally or by mail and, if by mail, shall be sent in a postage prepaid
envelope, addressed to each stockholder at such stockholder's address as it
appears on the records of the Corporation. Notice by mail shall be deemed given
at the time when the same shall be deposited in the United States mail, postage
prepaid. Notice of any meeting shall not be required to be given to any person
who attends such meeting, except when such person attends the meeting in person
or by proxy for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, or who, either before or after the meeting, shall submit a
signed written waiver of notice, in person or by proxy. Neither the business to
be transacted at, nor the purpose of, an annual or special meeting of
stockholders need be specified in any written waiver of notice.
SECTION 5. LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 6. QUORUM, ADJOURNMENTS. The holders of a majority of the
capital stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, until a quorum
shall be present or represented. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which adjournment is taken. At any such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if
-2-
<PAGE>
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 7. ORGANIZATION. At each meeting of stockholders, the
Chairman of the Board, if one shall have been elected, or, in his or her absence
or if one shall not have been elected, the President, shall act as chairman of
the meeting. The Secretary or, in his or her absence or inability to act, the
person whom the chairman of the meeting shall appoint secretary of the meeting,
shall act as secretary of the meeting and keep the minutes thereof.
SECTION 8. ORDER OF BUSINESS. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. VOTING. Except as otherwise provided by statute, by the
Certificate of Incorporation or by any agreement to the contrary between the
Corporation and all its stockholders, each stockholder of the Corporation having
the right to vote shall be entitled to one vote in person or by proxy for each
share of the capital stock having voting power held by such stockholder. When a
quorum is present at any meeting, directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. In all matters other than
the election of directors, the affirmative vote of the majority of shares
present in person or represented by proxy and entitled to vote on the subject
matter shall be the act of the stockholders except where the General Corporation
Law of the State of Delaware, the Corporation's Certificate of Incorporation or
any agreement between the Corporation and all its stockholders prescribes a
different percentage of votes and/or a different exercise of voting power. In
the election of directors, voting need not be by written ballot. Unless
required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question need not be by written ballot. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his or her
proxy, if there be such proxy, and shall state the number of shares voted.
Section 10. PROXY REPRESENTATION. Each stockholder entitled to vote
at any meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by a proxy signed by such stockholder or his or her attorney-in-
fact, but no proxy shall be voted after three years from its date, unless the
proxy provides for a longer period. Any such proxy shall be delivered to the
secretary of the meeting at or
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prior to the time designated in the order of business for so delivering such
proxies.
SECTION 11. INSPECTORS. The Board of Directors shall, in advance of
any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof and make a written report thereof. The Board
of Directors may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall: ascertain
the number of shares outstanding and the voting power of each; determine the
shares represented at a meeting and the validity of proxies and ballots; count
all votes and ballots; determine and retain for a reasonable period of time a
record of the disposition of any challenges made to any determination by the
inspectors; and certify their determination of the number of shares represented
at the meeting, and their count of all votes and ballots. The inspectors may
appoint or retain other persons or entities to assist the inspectors in the
performance of the duties of inspectors. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No director or candidate for the office of director shall act as
an inspector of an election of directors. Inspectors need not be stockholders.
SECTION 12. ACTION BY CONSENT. Whenever the vote of stockholders at
a meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or any provision of the
Certificate of Incorporation or of these By-laws, the meeting and vote of
stockholders may be dispensed with, and the action taken without such meeting
and vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of stock of the Corporation entitled to vote thereon
were present and voted, and shall be delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of business
or to an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The Board of Directors may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by statute or
the Certificate of Incorporation directed or required to be exercised or done by
the stockholders.
SECTION 2. NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE.
The number of directors constituting the initial Board of Directors shall be
one. Thereafter, the number of Directors may be fixed, from time to time, by
the affirmative vote of a majority of the entire Board of Directors or by action
of the stockholders of the Corporation. Any decrease in the number of directors
shall be effective at the time of the next succeeding annual meeting of
stockholders unless there shall be vacancies in the Board of Directors, in which
case such decrease may become effective at any time prior to the next succeeding
annual meeting to the extent of the number of such vacancies. Directors need
not be stockholders of the Corporation. Except as otherwise provided by
statute, these By-laws or any agreement to the contrary between the Corporation
and all its stockholders, the directors (other than members of the initial Board
of Directors) shall be elected at the annual meeting of stockholders. Each
director shall hold office until his or her successor shall have been elected
and qualified, or until his or her death, or until he or she shall have
resigned, or have been removed, as hereinafter provided in these By-laws.
SECTION 3. PLACE OF MEETINGS. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of Delaware,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
SECTION 4. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place as shall be specified in a notice thereof given as
hereinafter provided in Section 7 of this ARTICLE III.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held each fiscal year at such time
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and place as the majority of the Board of Directors may from time to time
designate. If any day designated for a regular meeting shall be a legal holiday
at the place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day. Notice of regular meetings of the Board of Directors
need not be given except as otherwise required by statute or these By-laws.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if one shall have been
elected, or by two or more Directors of the corporation or by the President.
SECTION 7. NOTICE OF MEETINGS. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice is required)
shall be given by the Secretary as hereinafter provided in this Section 7, in
which notice shall be stated the place, date and hour of the meeting. Except as
otherwise required by these By-laws, such notice need not state the purposes of
such meeting. Notice of each such meeting shall be mailed, postage prepaid, to
each director, addressed to such director at such director's residence or usual
place of business, by first class mail, at least two days before the day on
which such meeting is to be held, or shall be sent addressed to him at such
place by telegraph, cable, telex, telecopier or other similar means, or be
delivered to him personally or be given to him by telephone or other similar
means, at least twenty-four hours before the time at which such meeting is to be
held. Notice of any such meeting need not be given to any director who shall,
either before or after the meeting, submit a signed waiver of notice or who
shall attend such meeting, except when he or she shall attend for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the total
number of directors shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors. Except as otherwise expressly required
by statute, the Certificate of Incorporation, these By-laws or any agreement to
the contrary between the Corporation and all its stockholders, the act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and
place of any such adjourned meeting shall be given to all the directors unless
such time and place were announced at the meeting at which the adjournment was
taken, in which case such notice shall only be given to the directors who were
not present thereat. At any adjourned meeting at which a quorum is
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present, any business may be transacted which might have been transacted at the
meeting as originally called. The directors shall act only as a Board and the
individual directors shall have no power as such.
SECTION 9. ORGANIZATION. At each meeting of the Board of Directors,
the Chairman of the Board, if one shall have been elected, or, in the absence of
the Chairman of the Board or if one shall not have been elected, the President
(or, in his or her absence, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and preside thereat.
The Secretary or, in his or her absence, any person appointed by the chairman of
the meeting shall act as secretary of the meeting and keep the minutes thereof.
SECTION 10. RESIGNATIONS. Any director of the Corporation may resign
at any time by giving written notice of his or her resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 11. VACANCIES. Except as may otherwise be required by law
and subject to the terms of any agreement to the contrary between the
Corporation and all its stockholders, any vacancy in the Board of Directors,
whether arising from death, resignation, removal or any other cause, and any
newly created directorship resulting from any increase in the authorized number
of directors of the Corporation, may be filled by the vote of a majority of the
Directors then in office, though less than a quorum, or by the sole remaining
director or by the stockholders at the next annual meeting thereof or at a
special meeting thereof. Each director so elected shall hold office until his
or her successor shall have been elected and qualified.
SECTION 12. REMOVAL OF DIRECTORS. Subject to the terms of any
agreement to the contrary between the Corporation and all its stockholders, any
director may be removed, either with or without cause, at any time, by the
holders of a majority of the voting power of the issued and outstanding capital
stock of the Corporation entitled to vote at an election of directors.
SECTION 13. COMPENSATION. The Board of Directors shall have [NO]
authority to fix the compensation, including fees and reimbursement of expenses,
of directors for services to the Corporation as directors.
SECTION 14. COMMITTEES. The Board of Directors shall have the
authority to appoint any temporary or standing committee to exercise any powers
or authority as the Board of Directors may
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see fit, subject to such conditions as may be prescribed by the Board of
Directors. All committees so appointed shall keep regular minutes of their
meetings and shall cause such minutes to be recorded in books kept for that
purpose in the principal office of the Corporation and shall report the same to
the Board of Directors as required by it. The Board of Directors may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In addition, in
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Except to the extent restricted by
statute or the Certificate of Incorporation, each such committee, to the extent
provided in the resolution creating it, shall have and may exercise all the
powers and authority of the Board of Directors and may authorize the seal of the
Corporation to be affixed to all papers which require it. Each such committee
shall serve at the pleasure of the Board of Directors and have such name as may
be determined from time to time by resolution adopted by the Board of Directors.
SECTION 15. ACTION BY CONSENT. Unless restricted by the Certificate
of Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.
SECTION 16. TELEPHONIC MEETING. Unless restricted by the Certificate
of Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting by such means shall
constitute presence in person at a meeting.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the
Corporation shall be elected by the Board of Directors and shall include the
President, one or more Vice-Presidents, the Secretary and the Treasurer. If the
Board of Directors wishes,
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it may also elect as an officer of the Corporation a Chairman of the Board and
may elect other officers (including one or more Assistant Treasurers and one or
more Assistant Secretaries) as may be necessary or desirable for the business of
the Corporation. Any two or more offices may be held by the same person, and no
officer except the Chairman of the Board need be a director. Each officer shall
hold office until his or her successor shall have been duly elected and shall
have qualified, or until his or her death, or until he or she shall have
resigned or have been removed, as hereinafter provided in these By-laws.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign
at any time by giving written notice of his or her resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon receipt. Unless otherwise specified therein, the
acceptance of any such resignation shall not be necessary to make it effective.
SECTION 3. REMOVAL. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. He or she shall advise and confer with the
President, and in the President's absence with other executives of the
Corporation, and shall perform such other duties as may from time to time be
assigned to him by the Board of Directors.
SECTION 5. THE PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation. The President shall, in the absence of the Chairman
of the Board or if a Chairman of the Board shall not have been elected, preside
at each meeting of the Board of Directors or the stockholders. The President
shall perform all duties incident to the office of President and Chief Executive
Officer and such other duties as may from time to time be assigned to him by the
Board of Directors.
SECTION 6. VICE-PRESIDENT. Each Vice-President shall perform all
such duties as from time to time may be assigned to him by the Board of
Directors or the President. At the request of the President or in his or her
absence or in the event of his or her inability or refusal to act, the Vice-
President, or if there shall be more than one, the Vice-Presidents in the order
determined by the Board of Directors (or if there be no such determination, then
the Vice-Presidents in the order of their election), shall perform the duties of
the President, and, when so acting, shall have the powers of and be subject to
the
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restrictions placed upon the President in respect of the performance of such
duties.
SECTION 7. TREASURER. The Treasurer shall
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of Directors
or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of
Directors may require, an account of the financial condition of the Corporation;
and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 8. SECRETARY. The Secretary shall
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-laws and as required by law;
(c) be custodian of the records and the seal of the Corporation
and affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a facsimile,
as hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to
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be kept and filed by the Corporation are properly kept and filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 9. THE ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his or her inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as from time to time
may be assigned by the Board of Directors.
SECTION 10. THE ASSISTANT SECRETARY. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his
or her inability or refusal to act, perform the duties and exercise the powers
of the Secretary and shall perform such other duties as from time to time may be
assigned to him by the Board of Directors.
SECTION 11. OFFICERS' BONDS OR OTHER SECURITY. If required by the
Board of Directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his or her duties, in such amount and
with such surety as the Board of Directors may require.
SECTION 12. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that such person is also a
director of the Corporation.
ARTICLE V
STOCK CERTIFICATES AND THEIR TRANSFER
SECTION 1. STOCK CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board or the President or a Vice-
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation. If the Corporation shall
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be authorized to issue more than one class of stock or more than one series of
any class, the designations, preferences and relative, participating, optional
or other special rights of each class of stock or series thereof and the
qualifications, limitations or restriction of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in Section 202 of the General
Corporation Law of the State of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to give the Corporation a
bond in such sum as the Board of Directors may direct sufficient to indemnify
the Corporation against any claim that may be made against the Corporation on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or certificates.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, to cancel the old certificate and to record the
transaction upon its records; PROVIDED, HOWEVER, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
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it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars.
SECTION 6. REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-laws, as it may
deem expedient concerning the issue, transfer and registration of certificates
for shares of stock of the Corporation.
SECTION 7. FIXING THE RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 8. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its records
as the owner of shares of stock to receive dividends and to vote as such owner,
shall be entitled to hold liable for calls and assessments a person registered
on its records as the owner of shares of stock, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares of
stock on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. GENERAL. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the
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Corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expenses
(including, without limitation, attorneys' fees and expenses), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, in and of itself, create a presumption that the person did not act in
good faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, create a presumption that the person had
reasonable cause to believe that his or her conduct was unlawful.
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against all expenses (including, without limitation, attorneys'
fees and expenses) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation; PROVIDED, HOWEVER, that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. INDEMNIFICATION IN CERTAIN CASES. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2 of this ARTICLE VI, or in defense of any claim, issue or
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matter therein, he or she shall be indemnified against all expenses (including,
without limitation, attorneys' fees and expenses) actually and reasonably
incurred by him in connection therewith.
SECTION 4. PROCEDURE. Any indemnification under Sections 1 and 2 of
this ARTICLE VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in such Sections 1 and 2. Such determination shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders of the Corporation.
SECTION 5. ADVANCES FOR EXPENSES. The right to indemnification
conferred in this ARTICLE VI upon a director or officer shall include the right
to be paid by the Corporation all the expenses (including, without limitation,
attorneys' fees and expenses) incurred in defending an action, suit or
proceeding of the types set forth in Sections 1 and 2 of this ARTICLE VI in
advance of the final disposition of such action, suit or proceeding; PROVIDED,
HOWEVER, that if the General Corporation Law of the State of Delaware requires,
an advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined that such indemnitee is not
entitled to be indemnified for such expenses under this ARTICLE VI or otherwise.
Expenses (including, without limitation, attorneys' fees and expenses) incurred
by an employee or agent in defending an action, suit or proceeding of the types
set forth in Sections 1 and 2 of this ARTICLE VI may be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such employee or agent to repay
such amount if it shall ultimately be determined that he or she is not entitled
to be indemnified for such expenses by the Corporation under this ARTICLE VI or
otherwise.
SECTION 6. RIGHTS NOT EXCLUSIVE. The indemnification and advancement
of expenses provided by, or granted pursuant to, the other sections of this
ARTICLE VI shall not be deemed exclusive of any other rights to which those
seeking
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<PAGE>
indemnification or advancement of expenses may be entitled under any law, by-
law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his or her official capacity and as to action in another
capacity while holding such office.
SECTION 7. INSURANCE. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him against such liability under the provisions of
this ARTICLE VI.
SECTION 8. DEFINITION OF CORPORATION. For the purposes of this
ARTICLE VI, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this ARTICLE VI with respect to the resulting or surviving corporation as he
or she would have with respect to such constituent corporation if its separate
existence had continued.
SECTION 9. DEFINITIONS WITH RESPECT TO EMPLOYEE BENEFIT PLANS. For
purposes of this ARTICLE VI, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed upon a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any services as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and the person
who acted in good faith and in manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this ARTICLE VI.
-16-
<PAGE>
SECTION 10. SURVIVAL OF RIGHTS. The indemnification and advancement
of expenses provided by, or granted pursuant to, this ARTICLE VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors. Dividends may be paid in cash, in property
or in shares of stock of the Corporation, unless otherwise provided by statute
or the Certificate of Incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserves in the manner in which it was created.
SECTION 3. SEAL. The seal of the Corporation shall be in such form
as shall be approved by the Board of Directors.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of
Directors may authorize any officer or officers, agent or agents, in the name
and on behalf of the Corporation to enter into or execute and deliver any and
all deeds, bonds, mortgages,
-17-
<PAGE>
contracts and other obligations or instruments, and such authority may be
general or confined to specific instances.
SECTION 7. VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President, from time to time, may (or may appoint one or more attorneys or
agents to) cast the votes which the Corporation may be entitled to cast as a
stockholder or otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. If one or more attorneys
or agents are appointed, the Chairman of the Board or the President may instruct
the person or persons so appointed as to the manner of casting such votes or
giving such consent. The Chairman of the Board or the President may, or may
instruct the attorneys or agents appointed to, execute or cause to be executed
in the name and on behalf of the Corporation and under its seal or otherwise,
such written proxies, consents, waivers or other instruments as may be necessary
or proper in the circumstances.
ARTICLE VIII
AMENDMENTS
These By-Laws may be altered, amended or repealed or new by-laws
adopted (a) by action of the stockholders entitled to vote thereon at any annual
or special meeting of stockholders or (b) if the Certificate of Incorporation so
provides, by action of the Board of Directors at a regular or special meeting
thereof. Any by-law made by the Board of Directors may be amended or repealed
by action of the stockholders at any annual or special meeting of stockholders.
-18-
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
1) United Telegroup Holding, AG*
2) United Telegroup AG**
* Wholly-owned, other than for qualifying shares.
** Wholly-owned by United Telegroup Holding, AG.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
United Telegroup International, Inc.:
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in this prospectus.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
July 16, 1996
New York, New York
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
TELEGROUP INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO
APRIL 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> FEB-29-1996
<PERIOD-END> APR-30-1996
<CASH> 780,960
<SECURITIES> 0
<RECEIVABLES> 3,000,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,791,163
<PP&E> 140,240
<DEPRECIATION> 2,337
<TOTAL-ASSETS> 3,945,491
<CURRENT-LIABILITIES> 1,171,915
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 2,773,476
<TOTAL-LIABILITY-AND-EQUITY> 3,945,491
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 272,740
<OTHER-EXPENSES> 40,210
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,804
<INCOME-PRETAX> (317,754)
<INCOME-TAX> 0
<INCOME-CONTINUING> (317,754)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (317,754)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>