SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission File Number 333-08305
UTG COMMUNICATIONS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3895294
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Limmattalstr. 10, Geroldswil Switzerland 8954
(Address of principal executive offices) (Zip Code)
(011) 411 749 31 03
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
At November 10, 1999, there were 2,132,082 shares of Common Stock, par
value $.00001 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
1
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UTG COMMUNICATIONS INTERNATIONAL, INC.
INDEX
PART I
Item 1 FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults upon Senior Securities
Item 4 Submission of Matters to a Vote of Security-Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, March 31,
ASSETS 1999 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 298,050 $ 402,925
Restricted Cash 336,293
Accounts Receivable, Net of Allowance for
Doubtful Accounts at September 30, 1999 and
March 31, 1999 of $308,976 and $372,314 respectively 1,481,896 1,167,227
Other Receivables 1,093,243 824,602
Prepaid Expenses and Other Current Assets 261,831 117,757
Inventory 519,197 606,140
----------- -----------
TOTAL CURRENT ASSETS 3,654,217 3,454,944
Property and Equipment, at cost, Net of Accumulated
Depreciation at September 30, 1999 and March 31, 1999
of $2,479,378 and $2,158,682 respectively (Note 2) 1,912,011 2,579,646
Organization Costs, at cost, Net of Accumulated
Amortization at March 31, 1999 of $52,660 and $36,160 -- 108,953
Goodwill, at cost, Net of Accumulated Amortization
of $52,689 and $45,925 198,989 205,753
Deferred Taxes (Note 5) -- --
Customer Lists Net of Accumulated Amortization at
September 30, 1999 and March 31, 1999 of $385,240 and
$291,534, respectively 843,917 645,536
Other Assets 118,819 203,283
----------- -----------
TOTAL ASSETS $ 6,727,953 $ 7,198,115
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft $ 732,445 $ 663,925
Notes Payable 371,250 67,649
Due to Related Party (195,730) 14,516
Accounts Payable and Accrued Expenses 3,591,053 3,835,759
Capital Lease Obligation, Current (Note 6) 212,467 253,788
----------- -----------
Total Current Liabilities 4,711,485 4,835,637
Capital Lease Obligation, Long-Term (Note 6) 436,463 473,920
Loans Payable 210,547 371,250
Commitments and Contingencies (Note 6) -- --
----------- -----------
TOTAL LIABILITIES 5,358,495 5,680,807
----------- -----------
STOCKHOLDERS' EQUITY (Note 7)
Common Stock - $.00001 Par Value Authorized
60,000,000 shares; 2,132,082 and 1,711,190
Issued and Outstanding at September , 1999 and
March 31, 1999 respectively 21 16
Additional Paid-in Capital 9,078,143 8,667,784
Accumulated Deficit (7,495,401) (7,222,639)
Treasury Stock (300,000) (300,000)
Cumulative Foreign Currency Translation Adjustment 185,279 365,738
Minority Interest (Note 3) (98,584) 6,409
----------- -----------
Total Stockholders' Equity 1,369,458 1,517,308
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 6,727,953 $ 7,198,115
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the Quarter ended For the six Months ended
September 30, September 30,
(unaudited) (unaudited)
-----------------------------------------------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 3,502,659 $ 764,866 $ 6,201,695 $ 1,345,735
COST OF SALES 2,687,984 494,130 4,814,895 797,387
----------- ----------- ----------- -----------
GROSS PROFIT 814,675 270,736 1,386,800 548,348
----------- ----------- ----------- -----------
SELLING AND TECHNICAL EXPENSES
Consulting Fees -- 43,111 -- 118,672
Technical Fees 150,322 111,413 190,909 156,665
Sales Salaries 33,898 137,541 74,964 294,975
Other Selling Expenses -- 13,672 -- 40,858
----------- ----------- ----------- -----------
Total Selling and Technical Expenses 184,220 305,737 265,873 611,170
----------- ----------- ----------- -----------
PROFIT/LOSS FROM OPERATIONS BEFORE GENERAL AND
ADMINISTRATIVE EXPENSES 630,455 (35,001) 1,120,927 (62,822)
----------- ----------- ----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Management and Consulting Fees 76,420 -- 83,399 6,644
Salaries 526,351 31,527 879,183 57,554
Bad Debt Expenses 4,601 -- 4,601 --
Depreciation and Amortization 359,406 183,041 655,086 347,418
Professional Fees 108,955 79,977 212,204 127,752
Travel Expenses 3,500 22,926 37,952 24,312
Employment Agency Fees 26,800 -- 76,537 --
Rent Expenses 56,586 21,196 86,099 39,956
Association Fees 11,209 -- 11,209 --
Insurance Expenses (4,738) 8,650 4,828 8,650
Other Operating Expenses 293,178 76,732 444,991 123,487
----------- ----------- ----------- -----------
Total General and Administrative Expenses 1,462,268 424,049 2,496,089 735,773
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (831,813) (459,050) (1,375,162) (798,595)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest Income 32 22 112 58
Gain on Sale of Fixed Assets
Gain (Loss) on Sale of Subsidiaries 29,104 29,104
Interest Expenses (21,364) 1,360 (43,054) 1,206
Loss from Foreign Currency (123,786) (14,184) (130,732) (14,184)
Other Expenses (804) (201) 14,432 (222)
----------- ----------- ----------- -----------
Total Other Income (Expenses) (116,818) (13,003) (130,138) (13,142)
----------- ----------- ----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST (948,631) (472,053) (1,505,300) (811,737)
INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
INCOME/(LOSS) BEFORE MINORITY INTEREST (948,631) (472,053) (1,505,300) (811,737)
----------- ----------- ----------- -----------
Extraordinary Income 1,174,590 282,296 1,174,590 282,296
Closing Subsidiary Costs -- (1,049) -- (2,690)
MINORITY INTEREST 31,044 -- 57,948 --
----------- ----------- ----------- -----------
NET INCOME / LOSS $ 257,003 $ (190,806) $ (272,762) $ (532,131)
=========== =========== =========== ===========
PROFIT/LOSS PER COMMON SHARE $ 0.12 $ (0.12) $ (0.13) $ (0.37)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
For the Six Months Ended
September 30,
------------------------
1999 1998
-------- --------
COMPREHENSIVE INCOME (Loss)
Net Loss $(272,762) $(532,131)
Foreign Currency Translation Adjustment (180,459) 14,184
-------- --------
COMPREHENSIVE INCOME (LOSS) $(453,221) $(517,947)
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Foreign Total
----------------- Paid-In Treasury Accumulated Currency Minority Stockholders'
Shares Amount Capital Stock Deficit Adjustment Interest Equity
------ ------ ------- ----- ------- ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1999 1,711,190 $ 16 $ 8,667,784 $ (300,000) $(7,222,639) $ 365,738 $ 6,409 $ 1,517,308
Net Loss - For the six months
Ended September 30, 1999 -- -- -- (272,762) -- -- (272,762)
Issuance of Common Stock 420,892 5 476,226 -- -- -- 476,231
Offering Costs (65,867) (65,867)
Minority Interest -- -- -- -- -- (104,993) (104,993)
Cumulative Foreign
Currency Translation Adjustment -- -- -- -- (180,459) -- (180,459)
--------- ----- ----------- -------- ----------- --------- --------- -----------
Balance at September 30, 1999 2,132,082 $ 21 $ 9,078,143 (300,000) $(7,495,401) $ 185,279 $ (98,584) $ 1,369,458
========= ===== =========== ======== =========== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the six Months ended
September 30,
------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(272,762) $(532,131)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities
Depreciation and Amortization 655,086 347,418
Changes in Certain Assets and Liabilities:
Increase/Decrease in Accounts Receivable (314,669) (89,190)
Decrease in Other Receivables (268,641) (167,375)
Increase in Prepaid Expenses (144,074) (474,469)
Decrease in Inventory 86,943 --
Increase in Organization Costs -- 6,373
Decrease in Other Assets 84,464 (10)
Due To/From Related Party (210,246) --
Increase in Accounts Payable and Accrued Expenses (244,706) 464,325
--------- ---------
Total Cash Used by Operating Activities (628,605) (445,059)
--------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Increase/Decrease in Fixed Assets, Net 221,972 (563,044)
Decrease in Restricted Cash 336,293 --
Investment for Subsidiary Establishment -- (54,544)
Increase in Goodwill -- (24,765)
Increase in Customer Lists (292,087) (81,385)
--------- ---------
Total Cash Provided (Used) by Investing Activities 266,178 (723,738)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Bonds -- 371,250
Increase in Bank Overdraft 68,520 --
Increase/(Decrease) in Capital Lease Payable (78,778) 74,807
Contribution to Capital 410,364 299,998
Proceeds from Loan 142,898 --
Minority Interest (104,993) --
--------- ---------
Total Cash Provided By Financing Activities 438,011 746,055
--------- ---------
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH (180,459) 374,891
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (104,875) (47,851)
CASH AND CASH EQUIVALENTS - BEGINNING 402,925 123,145
--------- ---------
CASH AND CASH EQUIVALENTS - ENDING $ 298,050 $ 75,294
========= =========
CASH PAID DURING THE PERIOD FOR:
Interest Expenses $ (43,054) $ 1,206
========= =========
Income Taxes $ -- $ --
========= =========
</TABLE>
7
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included.
For further information, refer to the consolidated financial statements
and footnotes included in Form 10-KSB for the year ended March 31, 1999.
The accompanying consolidated financial statements include the accounts of
UTG Communications International, Inc. (the "Company"), a holding company
organized under the laws of the state of Delaware on April 17, 1996 and
its majority-owned and/or controlled subsidiaries:
1) Starfon Telecom Services AG, ("Starfon"), formerly UTG Communications
Holding AG, incorporated under the laws of Switzerland on February 29,
1996 (owned 100% by the Company);
2) UTG Communications Belgium N.V., ("UTG Belgium"), incorporated under
the laws of Belgium on June 27, 1996 (owned 100% by Starfon);
3) United Telecom GmbH, ("UTG GmbH"), incorporated under the laws of
Switzerland on May 28, 1996 (owned 100% by Starfon);
4) Telelines International SA, ("Telelines"), incorporated under the laws
of Panama on July 28, 1997 (owned 100% by the Company).
5) Starpoint Card Services Ltd ("Starpoint"), incorporated under the laws
of Great Britain on November 18, 1998, (owned 51% by Telelines).
6) Star Global Ltd, ("StarGlobal"), incorporated under the laws of Jersey,
Great Britain on November 24, 1998, (owned 100% by Telelines).
All significant intercompany accounts and transactions have been
eliminated in consolidation.
See also Management's Discussion and Analysis of Financial Condition
and Results of Operation for additional information regarding
organizational changes of the Company.
b) Line of Business
The Company is a switch-based provider of private voice, fax and
data management telecommunication services throughout Europe.
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 were
capitalized and amortized over a period of five years through March
31, 1999. As of March 31, 1999, these costs were expensed per
Statement of Position No. 98-5, Accounting for Start-Up Costs.
e) Goodwill
Goodwill represents the cost in excess of the fair market value of
the acquisitions of certain subsidiaries. Amortization is being
computed using the straight-line method over a period of forty
years.
f) Customer Lists
Customer lists present the costs of the acquisition of subscriber
names at their fair market value. Amortization is being computed
using the straight-line method over a period of three years.
g) Property and Equipment
8
<PAGE>
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.
h) Bank Overdraft
The Company maintains overdraft facilities at certain banks. Such
overdraft positions are included in current liabilities.
i) Translation of Foreign Currency
The Company translates the foreign currency financial statements of
its Swiss, Belgium and United Kingdom subsidiaries 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 the statement of
operations.
j) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
k) Profit/Loss Per Share
Profit/Loss per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding
during the period. Weighted average common shares outstanding were
1,955,432 and 1,453,154 for the quarters ended September 30, 1999
and September 30, 1998, respectively. Average common equivalent
shares outstanding have not been included, as the computation would
not be dilutive.
l) 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.
m) Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximates fair
value due to the relatively short maturity of these instruments.
n) Stock-Based Compensation
9
<PAGE>
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages, but does not require
companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue
to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related
Interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock.
o) Long-Lived Assets
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", was issued (SFAS No. 121).
SFAS No.121 requires that long-lived assets and certain identifiable
intangibles to be held and used or disposed of by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. The Company has adopted this statement and determined
that no impairment loss need be recognized for applicable assets of
continuing operations.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
September 30, 1999 March 31, 1999
Telecommunications Equipment $ 4,391,389 $ 4,738,328
Computer Equipment & Software
Furniture and Fixtures
Less: Accumulated Depreciation (2,479,378) (2,158,682)
----------- -----------
$ 1,912,011 $ 2,579,646
=========== ===========
Depreciation expense for the quarter ended September 30, 1999 and 1998 was
$295,680 and $164,376, respectively.
NOTE 3 - MINORITY INTEREST
At September 30, 1999 there was a minority interest in the Company's
subsidiary, Starpoint Card Sales Ltd., of 49% of the total stockholders'
equity of $53,097.
NOTE 4 - FOREIGN OPERATIONS
As described in Note 1b, substantially all of the Company's
operations are located throughout Europe and the majority of its identifiable
assets are located in Switzerland, Belgium and the United Kingdom.
10
<PAGE>
NOTE 5 - INCOME TAXES
The components of the provision for income taxes are as follows:
Current Tax Expense
U.S. Federal $ --
State and Local --
----------
Total Current --
----------
Deferred Tax Expense
U.S. Federal $ --
State and Local --
----------
Total Deferred --
----------
Total Tax Provision from Continuing
Operations $ --
==========
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
Federal Income Tax Rate (34.0)%
Deferred Tax Charge (Credit) --
Effect on Valuation Allowance 34.0%
State Income Tax, Net of Federal Benefit --
----------
Effective Income Tax Rate 0.0%
==========
At September 30, 1999, the Company had net carryforward losses of
approximately $7,386,054. Because of the current uncertainty of realizing
the benefit of the tax carryforward, a valuation allowance equal to the
tax benefit for deferred taxes has been established. 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.
Deferred tax assets and liabilities reflect the net tax effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for income
tax purposes. Significant components of the Company's deferred tax assets
and liabilities at June 30, 1999 are as follows:
Deferred Tax Assets
Loss Carryforwards $ 7,495,380
Less: Valuation Allowance (7,495,380)
-----------
Net Deferred Tax Assets $ --
===========
Net operating loss carryforwards expire starting in 2007 through
2011. Per year availability is subject to change of ownership limitations
under Internal Revenue Code Section 382.
11
<PAGE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
a) The Company's future minimum annual aggregate rental
payments required under operating and capital leases that have
initial or remaining non-cancelable lease terms in excess of one
year are as follows as of June 30, 1999:
Operating Capital
Leases Leases
1999 $ 60,852
2000 $ 132,750 226,319
2001 60,000 200,300
2002 60,000 160,031
2003 60,000 65,850
2004 60,000 --
2005 and thereafter --
---------
Total Minimum Lease Payments $ 372,750 $ 713,352
Less: Amounts Representing Interest (64,422)
---------
Present Value of Future Minimum
Lease Payments 648,930
Less: Current Maturities (212,467)
---------
Total $ 436,463
=========
Rent expense under operating leases for the quarter ended September 30, 1999 was
$56,586.
b) The Company is a party to claims and lawsuits arising in
the normal course of operations. Management is of the opinion that these
claims and lawsuits will not have a material effect on the financial
position of the Company. The Company believes these claims and lawsuits
should not exceed $50,000 and accordingly has established a reserve
included in accounts payable and accrued expenses.
NOTE 7 - STOCK OPTIONS
On August 13, 1999, the Company issued to Blacksea Investment Ltd. 3,000
warrants to purchase shares of common stock of the Company at $30 per share,
3,000 warrants to purchase shares of common stock of the Company at $45 per
share, 3,000 warrants to purchase shares of common stock of the Company at CHF50
per share, and 3,000 warrants to purchase shares of common stock of the Company
at CHF75 per share. All of such warrants expire on June 30, 2001.
On August 22, 1999, the Company issued an aggregate of 179,130 shares of common
stock and warrants to purchase an aggregate of 1,103,625 shares of common stock
at a purchase price of $15.00 per share expiring in 2003 to certain stockholders
of record on March 20, 1998. This issuance was made in connection with the
Company's 13:1 reverse stock split effected on March 23, 1998.
Effective September 30, 1999, an investor executed a warrant to purchase 94,561
shares of common stock for a purchase price of $3.00 per share or an aggregate
consideration of $283,683.
NOTE 8 - SUBSEQUENT EVENTS
On October 20, 1999, the Company's stockholders other than Mr. Ernst or persons
affiliated with or associated with him approved, by an affirmative vote of more
than two-thirds of the shares of Common Stock held by such stockholders, the
Stock Purchase Agreement, dated as of August 9, 1999 with Ueli Ernst, the
Company's Chairman and Chief Executive Officer, to aquire a majority of the
capital stock of Music Line AG, a Swiss corporation ("Music Line"), in
consideration for 1,750,000 shares of the Company's common stock, the assignment
to Mr. Ernst of a receivables account in the principal amount of approximately
$790,000, and, if Music Line's net profits reach at least $300,000 during the
fiscal year ending March 31, 2000 or March 31, 2001, an additional 350,000
shares of the Company's common stock. The closing of this transaction occured
November 15, 1999.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis relates to the financial condition and
results of operations of the Company for the quarter ended September 30, 1999.
This information should be read in conjunction with the Company's consolidated
financial statements appearing elsewhere herein. All references herein to the
Company shall, unless the context otherwise requires, be deemed to include UTG
Communications International, Inc. and its subsidiaries.
General
The Company commenced operations in April 1996 and is a holding company for a
number of operating subsidiaries organized at various times since February 1996.
Through its operating subsidiaries, the Company is operating in Switzerland,
Belgium and the United Kingdom.
The Company has received an aggregate of approximately $9,078,143 in equity
capital. Since inception, the Company's operations have been focused on
establishing and enhancing its switch-based European communications network and
expanding its European customer base.
The Company's revenue is generated from long distance telecom services provided
to retail corporate customers and wholesale customers. The Company's wholesale
customers comprise international telecom carriers and national telecoms, and the
Company's retail customers comprise medium-sized companies located in
Switzerland, Belgium and the United Kingdom. In Switzerland, the Company has
entered into an interconnection agreement with Swisscom, the national Swiss
telecommunications carrier. The Company intends to enter into interconnection
agreements with telecommunications carriers in the United Kingdom, Belgium and
other European countries into which the Company may expand in the future. The
interconnection with national telecommunication carriers, which became possible
as a result of the deregulation of the European telecommunications markets in
January 1998, enables the Company to offer both domestic and international
telecommunications services to its customers and eliminates the need to route
all outgoing calls through London. Management believes that entering into
interconnection agreements with national telecommunications carriers will result
in an increase in traffic volume for the Company and will allow the Company to
reduce fixed overhead costs considerably.
The Company holds an International Simple Resale ("ISR") license in the United
Kingdom and, during the fiscal year ended March 31, 1999, was granted an
International Facility License ("IFL") by the United Kingdom. The ISR license
permits the Company to engage in the resale of international telecom services in
the United Kingdom and the IFL license enables the Company to own facilities for
international services such as circuits. By operating its own facilities, the
Company can avoid the costs associated with leased line charges and,
accordingly, reduce its operating expenses.
During the fiscal year ended March 31, 1999, the Company entered into a joint
venture agreement with eight individual distributors for the purpose of
establishing a distribution network for telecommunication cards in the United
Kingdom. The Company and its eight distribution partners formed StarPoint Card
Services Ltd, located in London with the Company holding 51% of StarPoint's
equity and the Company's partners holding the remaining 49%. In addition, during
the fiscal year ended March 31, 1999, the Company formed StarGlobal Ltd., a
wholly-owned indirect subsidiary organized under the laws of the United Kingdom,
with the intent to resume the Company's wholesale and carrier-to-carrier
business. StarGlobal's new equipment can handle traffic worth USD 25 million per
year with a gross margin of about 5 to 8% depending on the destination.
On July 5, 1999, the Company sold its subsidiary, Multicom Commmunication NV, to
an unaffiliated Liechtenstein investor for BEF 25,000 to streamline the
activities of UTG Belgium.
The Company entered into a Stock Purchase Agreement dated as of August 9, 1999
with Ueli Ernst, the Company's Chairman and Chief Executive Officer, to aquire a
majority of the capital stock of MusicLine AG, a Swiss corporation ("Music
Line"), in consideration for 1,750,000 shares of the Company's common stock, the
assignment to Mr. Ernst of a receivables account in the principal amount of
approximately $790,000, and, an additional 350,000 shares of the Company's
common stock if Music Line's net profits reach at least $300,000 during the
fiscal year ending March 31, 2000 or March 31, 2001. At a stockholders meeting
held on October 22, 1999, the Company's stockholders other than Mr. Ernst or
persons affiliated or associated with him approved such stock purchase agreement
by an affirmative vote of more than two-thirds of the shares of common stock
held by such stockholders. The closing of this transaction has occured November
15, 1999.
During the quarter ended September 30, 1999, the Company has completed its
development of a credit card based phone service for the Swiss market. The
Company launched this product together with the Manor Group, a large department
store chain in Switzerland on July 19, 1999. This product allows holders of
credit cards issued by Manor to use the credit card as a post-paid phonecard and
to benefit from discounts for international and national long distance
telecommunication services.
On August 13, 1999, the Company issued a note in the principal amount of
$200,000, due June 30, 2003, and a note in the principal amount of CHF250,000,
due June 30, 2003 to Blacksea Investment Ltd. The CHF250,000 note carries 8%
interest and the CHF250,000 note carries 5% interest. Such notes were issued by
the Company in lieu of a loan agreement, dated August 13, 1998, which provided
for loans in the principal amounts of the notes. In addition, the Company issued
to Blacksea Investment Ltd. 3,000 warrants to purchase shares of common stock of
the Company at $30 per share, 3,000 warrants to purchase shares of common stock
of the Company at $45 per share, 3,000 warrants to purchase shares of common
stock of the Company at CHF50 per share, and 3,000 warrants to purchase shares
of common stock of the Company at CHF75 per share. All of such warrants expire
on June 30, 2001.
On August 22, 1999, the Company issued an aggregate of 179,130 shares of common
stock and warrants to purchase an aggregate of 1,103,625 shares of common stock
at a purchase price of $15.00 per share expiring in 2003 to certain stockholders
of record on March 20, 1998. This issuance was made in connection with the
Company's 13:1 reverse stock split effected on March 23, 1998. In connection
with the reverse stock split, the Board of Directors of the Company authorized
the issuance of one warrant for each share of Company common stock held by each
stockholder of record on March 20, 1998. In addition, the Board of Directors of
the Company authorized the distribution to stockholders who continuously held
shares of Company common stock from March 20, 1998 through September 21, 1998 a
number of shares of Company common stock equal to not more than 20% of the
amount of shares of Company common stock continuously held by stockholders
during that time period to compensate such stockholders for a decrease in the
market value of the Company's shares of Common Stock following the reverse stock
split.
In order to be able to continue to provide its customers with state of the art
communication services and to benefit from the opportunities created by the
Internet, the Company has developed an Internet strategy. The Company intends to
become an Internet services provider (ISP) to take advantage of the efficiencies
created by its existing switches and its access to the Internet backbone. The
Company intends to offer these services (and related consulting and support
servcies), to retail and other Internet services providers in Europe. The
Company also intends to diversify into e-commerce and to operate Internet
shopping platforms for its telecommnications services and other retail
industries, including music, media and software distribution.
13
<PAGE>
The Company deems an expansion into Internet-related services, such as
e-commerce, with its expected high growth potential, a competive necessitiy in
the markets in which it currently operates. The Company believes that
establishing an e-commerce business would synergistically supplement its
conventional telecommnications services and its newly developed Internet
services.
The Company is currently exploring several appropriate opportunities in its core
markets and in Germany as well as in other countries. The Company will carefully
evaluate expansion of its operation into other European countries as and when
business, market and regulatory conditions permit.
There can be no assurance that any of the Company's new activities commenced
during the quarter ended September 30, 1999 or any of its efforts to expand its
business in its core markets or any other countries will result in successful
commercial operations.
Financial Condition
At September 30, 1999, the, Company had a negative working capital of $1,057,268
and an accumulated deficit of $7,495,401, as compared to a negative working
capital of $1,380,693 and an accumulated deficit of $ 7,222,639, respectively,
at March 31, 1999.
In its quarterly report on Form 10QSB for the quarter ended June 30, 1999, the
Company reported that it issued 67,593 shares to an investor following the
exercise of a call option under a subscription agreement, dated January 17,
1998. As such issuance would have exceeded the aggregate number of shares of
common stock available under such call option by 5,629 shares of the Company`s
common stock, the Company and such investor agreed that in lieu of issuing such
shares pursuant to the exercise of the Company`s call option, the investor would
exercise 5,629 warrants previously issued to it at an exercise price of $3.00
per share and pay the Company additional consideration in the amount of $5,629
for such shares. In addition, during the quarter ended September 30, 1999, the
same investor exercised an additional 96,437 warrants to purchase shares of the
Company's common stock at $3.00 per share, bringing the aggregate number of
warrants exercised by such investor and the number of shares issued by the
Company pursuant to the exercise of such warrants to 98,314. The agrregate gross
proceeds received by the Company from the exercise of such warrants during the
quarter ended September 30, 1999 was $283,684. In connectiohn with the exercise
of such warrants, Interfinance Investment Co. Ltd, a company controlled by Mr.
Ueli Ernst, the Chairman and CEO of the Corporation, is entitled to a commission
of $8,509, which commision has not yet been paid.
Based upon the Company's current plan of operation, the Company estimates that
its existing financing resources (including the available resources under the
call right under the above-mentioned subscription agreement), together with
funds generated from operations, will be sufficient to fund the Company's
current working capital requirements. However, there can be no assurance in that
regard.
An expansion of the Company's business through the acquisition of other
telecommunication providers or companies in other industries, the planned
expansion of the Company's business into the Internet or significant investments
in infrastructure and marketing require additional debt or equity financing from
third parties. There can be no assurance that any such financing will be timely
available. Accordingly, the Company may have to forego opportunities for
expanding its business.
The Company believes that its network has adequate switching capacity to serve
its projected volume of traffic through the end of calender 1999. The Company
plans to upgrade its Switches to increase capacity and to meet its increase of
the demand of the telecommnicaiton services. The Company estimates the costs for
such upgrade to be approximately $500,000. As in the past, the Company intents
to finance such upgrades through equipment leasing arrangements. There can be no
assurance that the Company will be able to obtain such financing on a timely
basis, for commercially reasonable conditions or at all. A failure or delay to
obtain such financing could have a material advserve effect on the company.
The Company's network is designed to take advantage of deregulation across
Europe. It can perform distributive least-cost routing by using its hub sites in
European cities to direct traffic to carriers within a country, across its
network to another country for termination, or back to the switches in Zurich,
Belgium and London for routing to the desired destination. The selected path is
based on the least cost.
This provides a large amount of flexibility to the Company and ensures the
quality of the connections and lowest cost. With this distributive architecture,
the capacity of the Company`s switches is not expected to be a limiting factor
for the expansion of the Company's business. The opening of the European
telecommunications markets is expected to allow the Company to take full
advantage of its network flexibility.
Accounts payable and accrued expenses amounted to approximately $3,591,053 at
September 30, 1999 compared to $3,835,759 at March 31, 1999.
14
<PAGE>
Results of operations
During the quarter ended September 30, 1999, the Company could generally achieve
the expected gross margins in its business except from sales of the Company's
wholesale products which have not met managements expectations.
Quarter Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Sales $3,502,659 $ 764,866 $6,201,695 $1,345,735
During the quarter ended September 30, 1999, the Company recorded net sales of
$3,502,659, compared to $764,866 during the quarter ended September 30, 1998 and
during the six-month period ended September 30, 1999, the Company recorded net
sales of $6,201,695 compared to $1,345,735 during the same period of the
previous year. This increase in net sales is the result of increased revenue in
Switzerland, Belgium, the addition of the Company's distribution business in the
United Kingdom and the commencement of the sale of the Company's
pre-and-post-paid calling card products in Switzerland. Management expects an
additional increase in the Company's net sales as a result of the increase in
revenues from the new pre-paid and post-paid calling card services in
Switzerland, and the addition of internet services and the operations of
MusicLine.
Quarter Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
Gross Profit $814,675 $270,736 $1,386,800 $548,348
Gross profit for the six months ended September 30, 1999 increased to $1,386,800
(or 22.36% of the Company's sales) as compared to a gross profit of $548,348 (or
40.75% of the Company's sales) during the same period in 1998 and gross profit
for the quarter ended September 30, 1999 increased to $814,675 (or 23.25%) of
the Company's sales as compared to a gross profit of $270,736 (or 35.40% of
sales) during the same period in 1998. The absolute increase of the Company's
gross profit resulted from the increase of the Company's net sales. The relative
decrease of the Company's gross profit is the result of the fact that a
significant part of the Company's sales was generated in the Company's
distribution business in the United Kingdom which has a relatively low margin.
The Company's revenue has been generated primarily from long distance and
international telecom services provided to retail corporate customers in
Switzerland and Belgium and its wholesale customers, as well as its prepaid card
distribution in the United Kingdom and the first sales of its pre-paid and
post-paid calling card products in Switzerland. As the Company's retail and
wholesale customer base grows and the Company's own prepaid and postpaid card
services as well as Internet and e-commerce services are added to the Company's
range of products and services, management believes its gross margin will
increase in line with the increase in sales from these products and services.
Quarter Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
Cost of Sales $2,687,984 $494,130 $4,814,895 $797,387
Cost of sales was $2,687,984 for the quarter ended September 30, 1999 and
$4,814,895 for the six-month period ended September 30, 1999, as compared to
$494,130 and $797,387, respectively, for the same periods in 1998. Of such costs
approximately 87% was attributable to carrier charges and the balance was
attributable to costs for leased lines and related activities. Carrier charges
and transport (leased lines) charges per unit are ultimately dependent on the
Company's ability to generate high volumes of traffic. Management expects that
the relative amount of cost of sales will decrease with the introduction of its
new calling card services in Switzerland, Belgium and the United Kingdom.
Quarter Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
Selling and
Technical Expenses $184,220 $305,737 $265,873 $611,170
15
<PAGE>
Selling and technical expenses were $184,220 for the quarter ended September 30,
1999 and $265,873 for the six-month period ended September 30, 1999 compared to
$305,737 and $611,170, respectively for the corresponding periods in 1998. The
primary reasons for this decrease is the fact that the Company now employs
certain persons who previously had performed technical and sales services as
independent contractors to the Company. This shift resulted in a decrease in
technical and sales-related expenses paid to third parties.
Quarter Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
General and
Administrative Expenses $1,462,268 $424,049 $2,496,089 $735,773
General and administrative expenses were $1,462,268 for the quarter ended
September 30, 1999 and $2,496,089 for the six-month period ended September 30,
1999 compared to $424,049 and $735,773, respectively, for the corresponding
periods in 1998. This increase is due to the increase in the Company's
activities, in particular the addition of new employees (including individuals
who previously performed technical and sales services as independent
contractors), increased depreciation and amortization expenses related to newly
acquired equipment and increased travel and other administrative expenses.
However, the growth of the Company's sales during the quarter and the six-month
period ended September 30, 1999 exceeded the increase of general and
administrative expenses by approximately 120% and 121% respectively.
Quarter Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
Net Income/(Loss) $257,003 $(190,806) $(272,762) $(532,131)
In the quarter ended September 30, 1999, the Company realized net sales of
$3,502,659 and net income of $257,003 compared to net sales of $764,866 and a
net loss of $190,806 during the quarter ended September 30, 1998. During the
six-month period ended September 30, 1999 the Company's net sales and net loss
were $6,201,695 and $272,762, respectively, compared to $1,345,735 and $532,131,
respectively, for the same periods in 1998. The net income and the decrease in
the Company's net loss during the three-month period and the six-month period
ended September 30, 1999 is primarily attributable to the extraordinary gain
achieved from the sale of Multicom. Without such extraordinary gain, the
Company's net loss would have increased in absolute terms because of the
Company's higher operating expenses and lower gross profit resulted from the
increase in sales and the relative decrease in operating expenses.
As a result of the addition of the Company's pre-paid and post-paid calling card
products in Switzerland and the planned internet services and e-commerce
business, reorganization of the Company's wholesale business, management expects
a further increase in revenues in the quarter ending December 31, 1999 and a
reduction of the Company's operating loss, although no assurances can be given
in this regard.
Year 2000
The Company has reviewed its computer systems to protect against catastrophic
failures in connection with the change in the calendar on January 1, 2000, but
has not expended material amounts in this respect. The Company has upgraded most
of its computer software and has received confirmation from the manufacturers of
its essential equipment (including its switches) that such equipment is year
2000 compliant. The Company believes that all of the Company's significant
computer systems will be year 2000 compliant. The Company currently believes
that the cost of year 2000-related corrections will not have a material effect
on the Company's business, operations or financial condition. The Company may
also be exposed in the event any of the carriers with whom the Company currently
(or in the future) is contracting for network access or any services providers
or utilities experiences a catastrophic failure in connection with the change of
calendar on January 1, 2000. While the Company is attempting to obtain
assurances from its carriers, other service providers or utilities in this
respect, there can be no assurance that it will be successful in its attempts or
that such assurances, if obtained, will provide the Company with sufficient
protection in the event one of its carriers experiences a catastrophic year 2000
problem.
FORWARD-LOOKING STATEMENTS
Investment in the Company's securities involves a high degree of risk. In
evaluating an investment in the Company's securities, Company stockholders and
prospective investors should carefully consider the risk factors discussed in
the Company's Registration Statement on Form S-3/A, Registration No. 333-8305,
which was declared effective on June 11, 1999, the information detailed in the
Company's Form 10-KSB for the fiscal year ended March 31, 1999 and this Form
10-QSB under Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations," as well as information contained in the
Company's other filings with the Securities and Exchange Commission.
Certain statements in this Report under Item 1 and Item 6 regarding the
Company's estimates, present view of future circumstances or events and
statements containing words such as "estimates," "anticipates," "intends" and
"expects" or words of similar import, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
including, without limitation, statements regarding the Company's ability to
meet future working capital requirements and future cash requirements. 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. Forward-looking statements speak only as of their
dates. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information future events
or otherwise. Risk factors include, among others, delays in expanding the
Company's network; need for additional financing; failure to receive or delays
in receiving regulatory approval; 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 to comply with,
government regulations including changes in industry regulations; and other
factors referenced in this Report.
16
<PAGE>
Part II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No changes have occurred in the status of the legal proceedings previously
disclosed by the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 13, 1999, the Company issued a note in the principal amount of
$200,000, due June 30, 2003, and a note in the principal amount of CHF250,000,
due June 30, 2003 to Blacksea Investment Ltd. The CHF250,000 note carries 8%
interest and the CHF250,000 note carries 5% interest. Such notes were issued by
the Company in lieu of a loan agreement, dated August 13, 1998, which provided
for loans in the principal amounts of the notes. In addition, the Company issued
to Blacksea Investment Ltd. 3,000 warrants to purchase shares of common stock of
the Company at $30 per share, 3,000 warrants to purchase shares of common stock
of the Company at $45 per share, 3,000 warrants to purchase shares of common
stock of the Company at CHF50 per share, and 3,000 warrants to purchase shares
of common stock of the Company at CHF75 per share. All of such warrants expire
on June 30, 2001. The Company received no proceeds from such issuance.
On August 22, 1999, the Company issued an aggregate of 179,130 shares of common
stock and warrants to purchase an aggregate of 1,103,625 shares of common stock
at a purchase price of $15.00 per share expiring in 2003 to certain stockholders
of record on March 20, 1998. This issuance was made in connection with the
Company's 13:1 reverse stock split effected on March 23, 1998. In connection
with the reverse stock split, the Board of Directors of the Company authorized
the issuance of one warrant for each share of Company common stock held by each
stockholder of record on March 20, 1998. In addition, the Board of Directors of
the Company authorized the distribution to stockholders who continuously held
shares of Company common stock from March 20, 1998 through September 21, 1998 a
number of shares of Company common stock equal to not more than 20% of the
amount of shares of Company common stock continuously held by stockholders
during that time period to compensate such stockholders for a decrease in the
market value of the Company's shares of Common Stock following the reverse stock
split.
In its quarterly report on Form 10-QSB for the quarter ended June 30, 1999, the
Company reported that it issued 67,593 shares to an investor following the
exercise of a call option under a subscription agreement, dated January 17,
1998. As such issuance would have exceeded the aggregate number of shares of
common stock available under such call option by 5,629 shares of the Company`s
common stock, the Company and such investor agreed that in lieu of issuing such
shares pursuant to the exercise of the Companys call option, the investor would
exercise 5,629 warrants previously issued to it at an exercise price of $3.00
per shares and pay the Company additional consideration in the amount of $5,629
for such shares. In addition, during the quarter ended September 30, 1999, the
same investor exercised an additional 92,685 warrants to purchase shares of the
Comapny's common stock at $3.00 per shares, bringing the aggregate number of
warrants exercised by such investor and the number of shares issued by the
Company pursuant to the exercise of such warrants to 98,314. The aggregate gross
proceeds received by the Compnay from the exercise of such warrants during the
quarter ended September 30, 1999 was $283,684. In connection with the exercise
of such warrants, Interfinance Investment Co. Ltd., a compnay controlled by Mr.
Ueli Ernst, the Chairman and CEO of the Corporation, is entitled to a commission
of $8,509, which commission has not yet been paid.
These transactions were exempt from the registration requirements of the
Securities Act of 1933 by reason of the exemption provided by Section 4(2)
thereunder and Regulation S promulgated thereunder on the basis of certain
representations provided by the subscriber including that it is an "accredited
investor" and that it is not a "U.S. person." The Company's use of the proceeds
from exercise of such warrants is for general working capital purposes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
17
<PAGE>
Part II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.38 Purchase Contract between Reintasan Establishment and UTG
Communications Belgium NV, dated July 5, 1999
10.39 5% Note issued to Blacksea Investment Ltd. due June 30,
2003
10.40 8% Note issued to Blacksea Investment Ltd. due June 30,
2003
10.41 Warrant issued to Blacksea Investment Ltd., dated August
13, 1999
10.42 Warrant issued to Blacksea Investment Ltd., dated August
13, 1999
10.43 Warrant issued to Blacksea Investment Ltd., dated August
13, 1999
10.44 Warrant issued to Blacksea Investment Ltd., dated August
13, 1999
10.45 Form of Warrant issued to stockholders of record on March
23, 1998
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended September 30, 1999, the Company filed a Current
Report on Form 8-K on July 30, 1999 regarding the launch of the Company's
calling card in Switzerland.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UTG COMMUNICATIONS INTERNATIONAL, INC.
Date: November 19, 1999 By: /s/ Ueli Ernst
----------------------------------------
Ueli Ernst, Chairman and CEO
(Principal Executive Officer)
EXHIBIT INDEX
Exhibit No. Description
10.38 Purchase Contract between Reintasan Establishment and UTG
Communications Belgium NV, dated July 5, 1999
10.39 5% Note issued to Blacksea Investment Ltd. due June 30, 2003
10.40 8% Note issued to Blacksea Investment Ltd. due June 30, 2003
10.41 Warrant issued to Blacksea Investment Ltd., dated August 13, 1999
10.42 Warrant issued to Blacksea Investment Ltd., dated August 13, 1999
10.43 Warrant issued to Blacksea Investment Ltd., dated August 13, 1999
10.44 Warrant issued to Blacksea Investment Ltd., dated August 13, 1999
10.45 Form of Warrant issued to stockholders of record on March 23, 1998
18
EXHIBIT 10.38
Purchase contract
between
Revitasan Establishment as buyer
Postfach 266
9485 Nendeln
and
UTG Communications Belgium NV as seller
Ruggefeldlaan 814
2100 Antwerp
Preamble
Die Multicom Communications NV , Spoorweglaan 3, 2610 Antwerp is presently
offering Telecom Services in Belgium since 1997. It is a known carrier for
serving the retail business.
1. The buyer acquires 2500 shares of Multicom Communications NV nom. 1000 BEF
for the total buying price of BFR 25.000.--(twenty five thousend BEF)
2. The selling price was paid at the time of the signature of this contract in
cash. The receipt of the amount is herewith confirmed.
3. The buyer confirms that he is aware and has received a copy of all existing
contracts, balancesheets as well as P/L account during the process of due
diligence. The Seller confirms that he is aware of any legal cases or
discussions if any, and that no other non balance sheets transactions are
existing.
4. The seller agrees to cooperate for the delivery of minutes as well as for
other work to be provided, to provde these under separate contracts or orders.
5. With the signature of this contract, the legal binding start will be the date
of the contract.
4
<PAGE>
6. The Buyer has no obligation to change the company name.
7. If there are credits from Multicom to UTG Belgium or to the group companies
of UTG , all credits must be paid back within a reasonable time such as 6 month
after the signature of this contract.
UTG Belgium NV Revitasan Establishment
/s/ Ueli Ernst /s/ K. Kranz
U. Ernst K. Kranz
Date 5.7.1999
EXHIBIT 10.39
UTG COMMUNICATIONS INTERNATIONAL, INC.
5% NOTE DUE JUNE 30, 2003
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT (A) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (B) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR ANOTHER THEN-AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND
STATE SECURITIES LAWS, (C) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION
UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR (D) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER).
August 13, 1999 CHF 250,000
FOR VALUE RECEIVED, UTG COMMUNICATIONS INTERNATIONAL, INC., a corporation
organized under the laws of the State of Delaware (the "Company"), hereby
promises to pay to Blacksea Inv. Ltd. (the "Holder"), a corporation organized
under the laws of Switzerland, or registered assigns, the principal sum of Two
Hundred Fifty Thousand Swiss Francs (CHF 250,000) on June 30, 2003 (the
"Maturity Date"), and to pay interest thereon in the manner set forth herein at
the rate of 5% per annum, payable annually on June 30 of each year (the
"Interest Payment Date"), until the principal hereof is paid or made available
for payment in the manner set forth herein. Simultaneously with this Note, the
Company is executing a debenture in favor of the Holder, for $200,000 due on
June 30, 2003, at an annual interest rate of 8% (the $200,000 Note"). This Note
and the $200,000 Note shall replace that certain Loan Agreement dated August 13,
1998 between the Company and the Holder (the "Loan Agreement"), which upon the
execution of this Note and the $200,000 Note, shall cease to be effective.
1. INTEREST. The Company promises to pay interest on the principal amount
of this Note at the rate of 5% per annum. Interest on this Note will accrue from
the date hereof until payment in full of the principal amount hereof has been
made or duly provided for. Interest shall be payable in arrears on each Interest
Payment Date on or prior to the Maturity Date. Interest on this Note is payable
to the Holder at the option of the Company in the form of either such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
2. PRINCIPAL. On the Maturity Date, upon surrender of this Note by the
Holder to the Company, the Company shall pay to the Holder the outstanding
principal amount hereof in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, together with accrued interest on such outstanding principal amount as
set forth in Section 1.
<PAGE>
3. REDEMPTION. The Note may be redeemed in whole or in part by the Company
at 100% of the principal plus accrued interest through and including the date of
redemption at any time by giving the Holder at least thirty (30) days prior
notice in writing.
4. NO AMENDMENT. No provision of this Note may be amended, altered or
modified without the written agreement of the Holder and the Company.
5. NO VOTING RIGHTS. This Note shall not entitle the Holder hereof to any
of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to attend any
meetings of stockholders or any other proceedings of the Company.
6. LOST OR DESTROYED DEBENTURE. If this Note shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such Note, and of the
ownership thereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
7. CONFIDENTIALITY. The Company and the Holder agree that the terms and
existence of this Note and any other information provided by the parties to each
other in connection with execution of this Note, the Loan Agreement and the
$200,000 Note, shall be confidential and shall not be, without the prior consent
of the other party or unless required by law, be disclosed or otherwise made
accessible, in any manner whatsoever, in whole or in part.
8. INDEMNIFICATION. The Company hereby agrees to indemnify the Holder for
and hold it harmless against any loss, liability, damage, claim or expense
(including reasonable attorneys' fees) incurred by or asserted against Lender,
arising out of or in connection with this Note, except as to matters in respect
of which the Holder is determined to have acted with gross negligence or in bad
faith.
9. SALES AND TRANSFER. The Holder of this Note, by acceptance hereof,
agrees that it will not offer, sell, transfer, assign or otherwise dispose of
this Note except with the written consent of the Company and under circumstances
which will not result in a violation of the Securities Act, including Regulation
S promulgated under the Securities Act, or any applicable state blue sky laws
relating to the sale of securities and the Holder agrees to provide the Company
with such documentation as the Company shall deem necessary in accordance with
this Note to demonstrate that such offer, sale, transfer, assignment or
disposition complies with applicable securities laws.
10. GOVERNING LAW. This Note shall be governed by, enforced under and
construed in accordance with the laws of Switzerland, without giving effect to
the principles of conflicts of laws thereof. Any controversy or claim arising
under this Note shall be settled by arbitration in accordance with the Rules of
the American Arbitration Association and judgment upon the award rendered by the
arbitrator(s) may be entered in any court or tribunal having jurisdiction
thereof. The arbitration shall be [completed] within 60 days of the commencement
of the arbitration. The findings of such arbitration shall be final and binding
on all parties thereto and neither party shall
2
<PAGE>
have the right to appeal such findings to any other forum. The place of
arbitration shall be New York, New York, USA.
11. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in
Switzerland.
12. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be given by registered or certified mail, postage prepaid
and return receipt requested or by personal service at the following addresses:
If to the Company: If to the Holder:
Limmattalstrasse 10 Blacksea Inv. Ltd.
8954 Geroldswil
Switzerland
Facsimile: 411-749-3109
Notice shall be deemed given upon personal delivery or three (3) days after
depositing in the U.S. Mail, postage prepaid.
13. WAIVER.
(a) The Company hereby waives presentment for payment, notice of dishonor,
protest and notice of protest and, in the event of default hereunder, the
Company agrees to pay all costs of collection, including reasonable attorneys'
fees.
(b) Any waiver by the Company or the Holder hereof of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder hereof to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. Any waiver must be
in writing.
14. UNENFORCEABLE PROVISIONS. If any provision of this Note is invalid,
illegal or unenforceable, the remaining provisions of this Note shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
[signature page to follow]
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
UTG COMMUNICATIONS INTERNATIONAL, INC.
By: /s/ Ueli Ernst
Name:
Title:
Acknowledged and Accepted:
BLACKSEA INV. LTD.
By: ____________________________
Name:
Title:
EXHIBIT 10.40
UTG COMMUNICATIONS INTERNATIONAL, INC.
8% NOTE DUE JUNE 30, 2003
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT (A) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (B) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR ANOTHER THEN-AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND
STATE SECURITIES LAWS, (C) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION
UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR (D) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER).
August 13, 1999 USD 200,000
FOR VALUE RECEIVED, UTG COMMUNICATIONS INTERNATIONAL, INC., a corporation
organized under the laws of the State of Delaware (the "Company"), hereby
promises to pay to Blacksea Inv. Ltd. (the "Holder"), a corporation organized
under the laws of Switzerland, or registered assigns, the principal sum of Two
Hundred Thousand US dollars (USD 200,000) on June 30, 2003 (the "Maturity
Date"), and to pay interest thereon in the manner set forth herein at the rate
of 8% per annum, payable annually on June 30 of each year (the "Interest Payment
Date"), until the principal hereof is paid or made available for payment in the
manner set forth herein. Simultaneously with this Note, the Company is executing
a debenture in favor of the Holder, for CHF 250,000 due on June 30, 2003, at an
annual interest rate of 5% (the CHF 250,000 Note"). This Note and the CHF
250,000 Note shall replace that certain Loan Agreement dated August 13, 1998
between the Company and the Holder (the "Loan Agreement"), which upon the
execution of this Note and the CHF 250,000 Note, shall cease to be effective.
1. INTEREST. The Company promises to pay interest on the principal amount
of this Note at the rate of 8% per annum. Interest on this Note will accrue from
the date hereof until payment in full of the principal amount hereof has been
made or duly provided for. Interest shall be payable in arrears on each Interest
Payment Date on or prior to the Maturity Date. Interest on this Note is payable
to the Holder at the option of the Company in the form of either such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
2. PRINCIPAL. On the Maturity Date, upon surrender of this Note by the
Holder to the Company, the Company shall pay to the Holder the outstanding
principal amount hereof in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, together with accrued interest on such outstanding principal amount as
set forth in Section 1.
4
<PAGE>
3. REDEMPTION. The Note may be redeemed in whole or in part by the Company
at 100% of the principal plus accrued interest through and including the date of
redemption at any time by giving the Holder at least thirty (30) days prior
notice in writing.
4. NO AMENDMENT. No provision of this Note may be amended, altered or
modified without the written agreement of the Holder and the Company.
5. NO VOTING RIGHTS. This Note shall not entitle the Holder hereof to any
of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to attend any
meetings of stockholders or any other proceedings of the Company.
6. LOST OR DESTROYED DEBENTURE. If this Note shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such Note, and of the
ownership thereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
7. CONFIDENTIALITY. The Company and the Holder agree that the terms and
existence of this Note and any other information provided by the parties to each
other in connection with execution of this Note, the Loan Agreement and the
$200,000 Note, shall be confidential and shall not be, without the prior consent
of the other party or unless required by law, be disclosed or otherwise made
accessible, in any manner whatsoever, in whole or in part.
8. INDEMNIFICATION. The Company hereby agrees to indemnify the Holder for
and hold it harmless against any loss, liability, damage, claim or expense
(including reasonable attorneys' fees) incurred by or asserted against Lender,
arising out of or in connection with this Note, except as to matters in respect
of which the Holder is determined to have acted with gross negligence or in bad
faith.
9. SALES AND TRANSFER. The Holder of this Note, by acceptance hereof,
agrees that it will not offer, sell, transfer, assign or otherwise dispose of
this Note except with the written consent of the Company and under circumstances
which will not result in a violation of the Securities Act, including Regulation
S promulgated under the Securities Act, or any applicable state blue sky laws
relating to the sale of securities and the Holder agrees to provide the Company
with such documentation as the Company shall deem necessary in accordance with
this Note to demonstrate that such offer, sale, transfer, assignment or
disposition complies with applicable securities laws.
10. GOVERNING LAW. This Note shall be governed by, enforced under and
construed in accordance with the laws of Switzerland, without giving effect to
the principles of conflicts of laws thereof. Any controversy or claim arising
under this Note shall be settled by arbitration in accordance with the Rules of
the American Arbitration Association and judgment upon the award rendered by the
arbitrator(s) may be entered in any court or tribunal having jurisdiction
thereof. The arbitration shall be [completed] within 60 days of the commencement
of the arbitration. The findings of such arbitration shall be final and binding
on all parties thereto and neither party shall
2
<PAGE>
have the right to appeal such findings to any other forum. The place of
arbitration shall be New York, New York, USA.
11. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in
Switzerland.
12. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be given by registered or certified mail, postage prepaid
and return receipt requested or by personal service at the following addresses:
If to the Company: If to the Holder:
Limmattalstrasse 10 Blacksea Inv. Ltd.
8954 Geroldswil
Switzerland
Facsimile: 411-749-3109
Notice shall be deemed given upon personal delivery or three (3) days after
depositing in the U.S. Mail, postage prepaid.
13. WAIVER.
(a) The Company hereby waives presentment for payment, notice of dishonor,
protest and notice of protest and, in the event of default hereunder, the
Company agrees to pay all costs of collection, including reasonable attorneys'
fees.
(b) Any waiver by the Company or the Holder hereof of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder hereof to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. Any waiver must be
in writing.
14. UNENFORCEABLE PROVISIONS. If any provision of this Note is invalid,
illegal or unenforceable, the remaining provisions of this Note shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
[signature page to follow]
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
UTG COMMUNICATIONS INTERNATIONAL, INC.
By: /s/ Ueli Ernst
Name:
Title:
Acknowledged and Accepted:
BLACKSEA INV. LTD.
By: ____________________________
Name:
Title:
EXHIBIT 10.41
Void after 5:00 p.m. New York, New York time
on June 30, 2001
Warrant to Purchase 3,000 Shares of Common Stock
THIS WARRANT HAS BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR ANY
SHARES ISSUED UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
ACT OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON", AS THAT TERM
IS DEFINED IN REGULATION S (A "U.S. PERSON"), UNLESS REGISTERED UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS THIS
WARRANT HAS BEEN REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
-----------------------------------------
WARRANT TO PURCHASE COMMON STOCK
of
UTG Communications International, Inc.,
a Delaware Corporation
This is to certify that, FOR VALUE RECEIVED, Blacksea Inv. Ltd., or assigns,
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from UTG Communications International, Inc., a Delaware Corporation (the
"Company"), 3,000 fully paid, validly issued and non-assessable shares of common
stock, $.00001 par value, of the Company ("Common Stock") at any time following
the effective date of a registration statement under the Act covering the
Warrant Shares (as defined below) through and including June 30, 2001 ("Exercise
Period"). The Warrant Exercise Price (as defined below) shall be $30.00 for each
share of Common Stock of the Company issuable upon the exercise of this Warrant.
The number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price."
<PAGE>
(a) Exercise of Warrant. This Warrant may be exercised in whole or
in part at any time during the Exercise Period. During the Exercise Period, the
Holder shall have the right to exercise this Warrant into the kind and amount of
shares of Common Stock and other securities and property (including cash)
receivable by a Holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant,
subject to the provisions hereof, may only be exercised by presentation and
surrender hereof to the Company at the following address: Limmattalstrasse 10,
8954 Geroldswil, Switzerland with the Exercise Form annexed as Exhibit A hereto
duly executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. As soon as practicable after each such
exercise of the Warrant, but not later than ten (10) business days from the date
of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificates for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee; provided however, that,
unless the Warrant Shares are registered under the Act and any applicable blue
sky or state securities laws or an exemption from such registration is
available, the Company will not deliver any Warrant Shares within the United
States or to any U.S. Person. The Common Stock and any Warrants issued in
exchange for this Warrant shall be issued with such restrictive legends as are
required by the Act or the regulations thereunder. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant, in proper form for
exercise and accompanied (i) by payment of the Exercise Price, (ii) the
documentation set forth in this paragraph (a) and (iii) delivery instructions
consistent with this paragraph (a), the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then by physically delivered to the Holder.
(b) Reservation of Shares. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrant.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average closing bid and asked prices for such day on such
exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices
2
<PAGE>
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount not less than the book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the exercise of the Warrant, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company at its office in Geroldswil, Switzerland for
other warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. Upon surrender of this Warrant to the Company at its office in
Geroldswil, Switzerland or at the offices of its stock transfer agent, if any,
with the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(1) In case the Company shall (i) declare a stock dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock
3
<PAGE>
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(3) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant to be mailed to the Holders, at their last addresses appearing in the
Warrant Register, and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section (f), and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(4) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any Shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (1) above.
(5) Irrespective of any adjustments in the Exercise Price or
the number or kind of Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of Shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f), the Company shall
forthwith file in the custody of its Secretary and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any Holder of a Warrant executed and delivered
pursuant to Section (a) and the Company shall forthwith after each such
adjustment, mail a copy by certified mail of such officer's certificate to the
Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to all the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if the capital reorganization of the
4
<PAGE>
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale of all or
substantially all of the property and assets of the Company to another
corporation or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least ten days prior to the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, sale,
dissolution, liquidation or winding up is to take place and date, if any is to
be fixed, as of which the holders of the Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. Notwithstanding the above, the failure to give such notice shall not
affect the validity of any transaction for which the notice was required to be
given.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation, other than a merger with a subsidiary,
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant or in case of any sale to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant, at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger or sale by a holder of
the number of shares of Common Stock which might have been purchased upon
exercise of this Warrant immediately prior to such reclassification, change,
consolidation, merger or sale. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers or sales. In the event that in connection with any such
capital reorganization any shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (1) of Section (f) hereof.
(j) Callable Warrant. This Warrant may not be called by the Company
at any time.
(k) Assignment. This Warrant may only be assigned to a transferee
who has executed an Assignment Form, substantially in the form of Exhibit B
attached hereto.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the Undersigned, being duly authorized, as of the date below.
5
<PAGE>
August 13, 1999
UTG Communications International, Inc.
By: /s/ Ueli Ernst
Name:
Title:
6
<PAGE>
EXHIBIT A
EXERCISE FORM
Dated: ______________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ________________ shares of Common Stock and
hereby makes payment of _____________ in payment of the actual exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________
hereby sells, assigns and transfers unto
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
the right to purchase Common Stock represented by this Warrant to the extent of
__________ Shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _________________________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date__________________
Signature__________________
8
EXHIBIT 10.42
Void after 5:00 p.m. New York, New York time
on June 30, 2001
Warrant to Purchase 3,000 Shares of Common Stock
THIS WARRANT HAS BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR ANY
SHARES ISSUED UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
ACT OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON", AS THAT TERM
IS DEFINED IN REGULATION S (A "U.S. PERSON"), UNLESS REGISTERED UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS THIS
WARRANT HAS BEEN REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
-----------------------------------------
WARRANT TO PURCHASE COMMON STOCK
of
UTG Communications International, Inc.,
a Delaware Corporation
This is to certify that, FOR VALUE RECEIVED, Blacksea Inv. Ltd., or assigns,
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from UTG Communications International, Inc., a Delaware Corporation (the
"Company"), 3,000 fully paid, validly issued and non-assessable shares of common
stock, $.00001 par value, of the Company ("Common Stock") at any time following
the effective date of a registration statement under the Act covering the
Warrant Shares (as defined below) through and including June 30, 2001 ("Exercise
Period"). The Warrant Exercise Price (as defined below) shall be $45.00 for each
share of Common Stock of the Company issuable upon the exercise of this Warrant.
The number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price."
<PAGE>
(a) Exercise of Warrant. This Warrant may be exercised in whole or
in part at any time during the Exercise Period. During the Exercise Period, the
Holder shall have the right to exercise this Warrant into the kind and amount of
shares of Common Stock and other securities and property (including cash)
receivable by a Holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant,
subject to the provisions hereof, may only be exercised by presentation and
surrender hereof to the Company at the following address: Limmattalstrasse 10,
8954 Geroldswil, Switzerland with the Exercise Form annexed as Exhibit A hereto
duly executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. As soon as practicable after each such
exercise of the Warrant, but not later than ten (10) business days from the date
of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificates for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee; provided however, that,
unless the Warrant Shares are registered under the Act and any applicable blue
sky or state securities laws or an exemption from such registration is
available, the Company will not deliver any Warrant Shares within the United
States or to any U.S. Person. The Common Stock and any Warrants issued in
exchange for this Warrant shall be issued with such restrictive legends as are
required by the Act or the regulations thereunder. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant, in proper form for
exercise and accompanied (i) by payment of the Exercise Price, (ii) the
documentation set forth in this paragraph (a) and (iii) delivery instructions
consistent with this paragraph (a), the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then by physically delivered to the Holder.
(b) Reservation of Shares. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrant.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average closing bid and asked prices for such day on such
exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices
2
<PAGE>
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount not less than the book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the exercise of the Warrant, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company at its office in Geroldswil, Switzerland for
other warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. Upon surrender of this Warrant to the Company at its office in
Geroldswil, Switzerland or at the offices of its stock transfer agent, if any,
with the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(1) In case the Company shall (i) declare a stock dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock
3
<PAGE>
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(3) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant to be mailed to the Holders, at their last addresses appearing in the
Warrant Register, and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section (f), and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(4) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any Shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (1) above.
(5) Irrespective of any adjustments in the Exercise Price or
the number or kind of Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of Shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f), the Company shall
forthwith file in the custody of its Secretary and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any Holder of a Warrant executed and delivered
pursuant to Section (a) and the Company shall forthwith after each such
adjustment, mail a copy by certified mail of such officer's certificate to the
Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to all the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if the capital reorganization of the
4
<PAGE>
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale of all or
substantially all of the property and assets of the Company to another
corporation or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least ten days prior to the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, sale,
dissolution, liquidation or winding up is to take place and date, if any is to
be fixed, as of which the holders of the Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. Notwithstanding the above, the failure to give such notice shall not
affect the validity of any transaction for which the notice was required to be
given.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation, other than a merger with a subsidiary,
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant or in case of any sale to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant, at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger or sale by a holder of
the number of shares of Common Stock which might have been purchased upon
exercise of this Warrant immediately prior to such reclassification, change,
consolidation, merger or sale. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers or sales. In the event that in connection with any such
capital reorganization any shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (1) of Section (f) hereof.
(j) Callable Warrant. This Warrant may not be called by the Company
at any time.
(k) Assignment. This Warrant may only be assigned to a transferee
who has executed an Assignment Form, substantially in the form of Exhibit B
attached hereto.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the Undersigned, being duly authorized, as of the date below.
5
<PAGE>
August 13, 1999
UTG Communications International, Inc.
By: /s/ Ueli Ernst
Name:
Title:
6
<PAGE>
EXHIBIT A
EXERCISE FORM
Dated: ______________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ________________ shares of Common Stock and
hereby makes payment of _____________ in payment of the actual exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________
hereby sells, assigns and transfers unto
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
the right to purchase Common Stock represented by this Warrant to the extent of
__________ Shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _________________________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date__________________
Signature__________________
8
EXHIBIT 10.43
Void after 5:00 p.m. New York, New York time
on June 30, 2001
Warrant to Purchase 3,000 Shares of Common Stock
THIS WARRANT HAS BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR ANY
SHARES ISSUED UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
ACT OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON", AS THAT TERM
IS DEFINED IN REGULATION S (A "U.S. PERSON"), UNLESS REGISTERED UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS THIS
WARRANT HAS BEEN REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
-----------------------------------------
WARRANT TO PURCHASE COMMON STOCK
of
UTG Communications International, Inc.,
a Delaware Corporation
This is to certify that, FOR VALUE RECEIVED, Blacksea Inv. Ltd., or assigns,
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from UTG Communications International, Inc., a Delaware Corporation (the
"Company"), 3,000 fully paid, validly issued and non-assessable shares of common
stock, $.00001 par value, of the Company ("Common Stock") at any time following
the effective date of a registration statement under the Act covering the
Warrant Shares (as defined below) through and including June 30, 2001 ("Exercise
Period"). The Warrant Exercise Price (as defined below) shall be SFR 50.00 for
each share of Common Stock of the Company issuable upon the exercise of this
Warrant. The number of shares of Common Stock to be received upon the exercise
of this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price."
<PAGE>
(a) Exercise of Warrant. This Warrant may be exercised in whole or
in part at any time during the Exercise Period. During the Exercise Period, the
Holder shall have the right to exercise this Warrant into the kind and amount of
shares of Common Stock and other securities and property (including cash)
receivable by a Holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant,
subject to the provisions hereof, may only be exercised by presentation and
surrender hereof to the Company at the following address: Limmattalstrasse 10,
8954 Geroldswil, Switzerland with the Exercise Form annexed as Exhibit A hereto
duly executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. As soon as practicable after each such
exercise of the Warrant, but not later than ten (10) business days from the date
of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificates for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee; provided however, that,
unless the Warrant Shares are registered under the Act and any applicable blue
sky or state securities laws or an exemption from such registration is
available, the Company will not deliver any Warrant Shares within the United
States or to any U.S. Person. The Common Stock and any Warrants issued in
exchange for this Warrant shall be issued with such restrictive legends as are
required by the Act or the regulations thereunder. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant, in proper form for
exercise and accompanied (i) by payment of the Exercise Price, (ii) the
documentation set forth in this paragraph (a) and (iii) delivery instructions
consistent with this paragraph (a), the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then by physically delivered to the Holder.
(b) Reservation of Shares. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrant.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average closing bid and asked prices for such day on such
exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices
2
<PAGE>
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount not less than the book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the exercise of the Warrant, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company at its office in Geroldswil, Switzerland for
other warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. Upon surrender of this Warrant to the Company at its office in
Geroldswil, Switzerland or at the offices of its stock transfer agent, if any,
with the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(1) In case the Company shall (i) declare a stock dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common
3
<PAGE>
Stock outstanding immediately prior to such action. Such adjustment shall be
made successively whenever any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(3) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant to be mailed to the Holders, at their last addresses appearing in the
Warrant Register, and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section (f), and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(4) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any Shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (1) above.
(5) Irrespective of any adjustments in the Exercise Price or
the number or kind of Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of Shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f), the Company shall
forthwith file in the custody of its Secretary and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any Holder of a Warrant executed and delivered
pursuant to Section (a) and the Company shall forthwith after each such
adjustment, mail a copy by certified mail of such officer's certificate to the
Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to all the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if the capital reorganization of the
4
<PAGE>
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale of all or
substantially all of the property and assets of the Company to another
corporation or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least ten days prior to the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, sale,
dissolution, liquidation or winding up is to take place and date, if any is to
be fixed, as of which the holders of the Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. Notwithstanding the above, the failure to give such notice shall not
affect the validity of any transaction for which the notice was required to be
given.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation, other than a merger with a subsidiary,
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant or in case of any sale to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant, at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger or sale by a holder of
the number of shares of Common Stock which might have been purchased upon
exercise of this Warrant immediately prior to such reclassification, change,
consolidation, merger or sale. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers or sales. In the event that in connection with any such
capital reorganization any shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (1) of Section (f) hereof.
(j) Callable Warrant. This Warrant may not be called by the Company
at any time.
(k) Assignment. This Warrant may only be assigned to a transferee
who has executed an Assignment Form, substantially in the form of Exhibit B
attached hereto.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the Undersigned, being duly authorized, as of the date below.
5
<PAGE>
August 13, 1999
UTG Communications International, Inc.
By: /s/ Ueli Ernst
Name:
Title:
6
<PAGE>
EXHIBIT A
EXERCISE FORM
Dated: ______________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ________________ shares of Common Stock and
hereby makes payment of _____________ in payment of the actual exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________
hereby sells, assigns and transfers unto
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
the right to purchase Common Stock represented by this Warrant to the extent of
__________ Shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _________________________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date__________________
Signature__________________
8
EXHIBIT 10.44
Void after 5:00 p.m. New York, New York time
on June 30, 2001
Warrant to Purchase 3,000 Shares of Common Stock
THIS WARRANT HAS BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR ANY
SHARES ISSUED UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
ACT OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON", AS THAT TERM
IS DEFINED IN REGULATION S (A "U.S. PERSON"), UNLESS REGISTERED UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS THIS
WARRANT HAS BEEN REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
-----------------------------------------
WARRANT TO PURCHASE COMMON STOCK
of
UTG Communications International, Inc.,
a Delaware Corporation
This is to certify that, FOR VALUE RECEIVED, Blacksea Inv. Ltd., or assigns,
("Holder") is entitled to purchase, subject to the provisions of this Warrant,
from UTG Communications International, Inc., a Delaware Corporation (the
"Company"), 3,000 fully paid, validly issued and non-assessable shares of common
stock, $.00001 par value, of the Company ("Common Stock") at any time following
the effective date of a registration statement under the Act covering the
Warrant Shares (as defined below) through and including June 30, 2001 ("Exercise
Period"). The Warrant Exercise Price (as defined below) shall be sfr75.00 for
each share of Common Stock of the Company issuable upon the exercise of this
Warrant. The number of shares of Common Stock to be received upon the exercise
of this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price."
<PAGE>
(a) Exercise of Warrant. This Warrant may be exercised in whole or
in part at any time during the Exercise Period. During the Exercise Period, the
Holder shall have the right to exercise this Warrant into the kind and amount of
shares of Common Stock and other securities and property (including cash)
receivable by a Holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant,
subject to the provisions hereof, may only be exercised by presentation and
surrender hereof to the Company at the following address: Limmattalstrasse 10,
8954 Geroldswil, Switzerland with the Exercise Form annexed as Exhibit A hereto
duly executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. As soon as practicable after each such
exercise of the Warrant, but not later than ten (10) business days from the date
of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificates for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee; provided however, that,
unless the Warrant Shares are registered under the Act and any applicable blue
sky or state securities laws or an exemption from such registration is
available, the Company will not deliver any Warrant Shares within the United
States or to any U.S. Person. The Common Stock and any Warrants issued in
exchange for this Warrant shall be issued with such restrictive legends as are
required by the Act or the regulations thereunder. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant, in proper form for
exercise and accompanied (i) by payment of the Exercise Price, (ii) the
documentation set forth in this paragraph (a) and (iii) delivery instructions
consistent with this paragraph (a), the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then by physically delivered to the Holder.
(b) Reservation of Shares. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrant.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average closing bid and asked prices for such day on such
exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices
2
<PAGE>
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount not less than the book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the exercise of the Warrant, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company at its office in Geroldswil, Switzerland for
other warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. Upon surrender of this Warrant to the Company at its office in
Geroldswil, Switzerland or at the offices of its stock transfer agent, if any,
with the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(1) In case the Company shall (i) declare a stock dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common
3
<PAGE>
Stock outstanding immediately prior to such action. Such adjustment shall be
made successively whenever any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(3) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant to be mailed to the Holders, at their last addresses appearing in the
Warrant Register, and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section (f), and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(4) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any Shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (1) above.
(5) Irrespective of any adjustments in the Exercise Price or
the number or kind of Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of Shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f), the Company shall
forthwith file in the custody of its Secretary and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any Holder of a Warrant executed and delivered
pursuant to Section (a) and the Company shall forthwith after each such
adjustment, mail a copy by certified mail of such officer's certificate to the
Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to all the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if the capital reorganization of the
4
<PAGE>
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale of all or
substantially all of the property and assets of the Company to another
corporation or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least ten days prior to the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, sale,
dissolution, liquidation or winding up is to take place and date, if any is to
be fixed, as of which the holders of the Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. Notwithstanding the above, the failure to give such notice shall not
affect the validity of any transaction for which the notice was required to be
given.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation, other than a merger with a subsidiary,
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant or in case of any sale to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant, at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger or sale by a holder of
the number of shares of Common Stock which might have been purchased upon
exercise of this Warrant immediately prior to such reclassification, change,
consolidation, merger or sale. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers or sales. In the event that in connection with any such
capital reorganization any shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (1) of Section (f) hereof.
(j) Callable Warrant. This Warrant may not be called by the Company
at any time.
(k) Assignment. This Warrant may only be assigned to a transferee
who has executed an Assignment Form, substantially in the form of Exhibit B
attached hereto.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the Undersigned, being duly authorized, as of the date below.
5
<PAGE>
August 13, 1999
UTG Communications International, Inc.
By: /s/ Ueli Ernst
Name:
Title:
6
<PAGE>
EXHIBIT A
EXERCISE FORM
Dated: ______________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ________________ shares of Common Stock and
hereby makes payment of _____________ in payment of the actual exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________
hereby sells, assigns and transfers unto
Name
- --------------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
- --------------------------------------------------------------------------------
the right to purchase Common Stock represented by this Warrant to the extent of
__________ Shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _________________________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date__________________
Signature__________________
8
EXHIBIT 10.45
Void after 5:00 p.m. New York, New York time
on August 22, 2003
Warrant to Purchase 38,461 Shares of Common Stock
THIS WARRANT HAS BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR ANY
SHARES ISSUED UPON THE EXERCISE OF THIS WARRANT (THE "SHARES") HAVE BEEN
REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A "U.S.
PERSON", AS THAT TERM IS DEFINED IN REGULATION S (A "U.S. PERSON"), UNLESS
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS THIS
WARRANT HAS BEEN REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
-----------------------------------------
WARRANT TO PURCHASE COMMON STOCK
of
UTG Communications International, Inc.,
a Delaware Corporation
This is to certify that, FOR VALUE RECEIVED, ................, or
assigns, ("Holder") is entitled to purchase, subject to the provisions of this
Warrant, from UTG Communications International, Inc., a Delaware Corporation
(the "Company"), 38`461 fully paid, validly issued and non-assessable shares of
common stock, $.00001 par value, of the Company ("Common Stock") at any time
through and including August 22, 2003 ("Exercise Period"). The Warrant Exercise
Price shall be $15.00 for each share of Common Stock of the Company issuable
upon the exercise of this Warrant. The number of shares of Common Stock to be
received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes
<PAGE>
referred to as "Warrant Shares" and the exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price."
(a) Exercise of Warrant. This Warrant may be exercised in whole or
in part at any time during the Exercise Period. During the Exercise Period, the
Holder shall have the right to exercise this Warrant into the kind and amount of
shares of Common Stock and other securities and property (including cash)
receivable by a Holder of the number of shares of Common Stock into which this
Warrant might have been exercisable immediately prior thereto. This Warrant,
subject to the provisions hereof, may only be exercised by presentation and
surrender hereof to the Company at the following address: Limmattalstr. 10; P.O.
Box 13, CH-8954 Geroldswil; Switzerland, with the Exercise Form annexed as
Exhibit A hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as practicable
after each such exercise of the Warrant, but not later than ten (10) business
days from the date of such exercise, the Company shall issue and deliver to the
Holder a certificate or certificates for the Warrant Shares issuable upon such
exercise, registered in the name of the Holder or its designee; provided
however, that, unless the Warrant Shares are registered under the Act and any
applicable blue sky or state securities laws or an exemption from such
registration is available, the Company will not deliver any Warrant Shares
within the United States or to any U.S. Person. The Common Stock and any
Warrants issued in exchange for this Warrant shall be issued with such
restrictive legends as are required by the Act or the regulations thereunder. If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant evidencing
the rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this Warrant, in proper
form for exercise and accompanied (i) by payment of the Exercise Price, (ii) the
documentation set forth in this paragraph (a) and (iii) delivery instructions
consistent with this paragraph (a), the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then by physically delivered to the Holder.
(b) Reservation of Shares. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrant.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or
2
<PAGE>
if no such sale is made on such day, the average closing bid and asked prices
for such day on such exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of the exercise of this Warrant;
or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount not less than the book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the exercise of the Warrant, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company at its office in Switzerland for other
warrants of different denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock purchasable hereunder.
Upon surrender of this Warrant to the Company at its office in Switzerland or at
the offices of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled. The term "Warrant" as used herein includes any Warrants
into which this Warrant may be divided or exchanged. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(1) In case the Company shall (i) declare a stock dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of
3
<PAGE>
shares, the Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
(2) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(3) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant to be mailed to the Holders, at their last addresses appearing in the
Warrant Register, and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section (f), and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(4) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any Shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (1) above.
(5) Irrespective of any adjustments in the Exercise Price or
the number or kind of Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of Shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f), the Company shall
forthwith file in the custody of its Secretary and with its stock transfer
agent, if any, an officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any Holder of a Warrant executed and delivered
pursuant to Section (a) and the Company shall forthwith after each such
adjustment, mail a copy by certified mail of such officer's certificate to the
Holder or any such holder.
4
<PAGE>
(h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to all the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if the capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale of all or substantially all
of the property and assets of the Company to another corporation or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least ten days prior to the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, sale, dissolution,
liquidation or winding up is to take place and date, if any is to be fixed, as
of which the holders of the Common Stock or other securities shall receive cash
or other property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
Notwithstanding the above, the failure to give such notice shall not affect the
validity of any transaction for which the notice was required to be given.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation, other than a merger with a subsidiary,
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant or in case of any sale to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant, at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger or sale by a holder of
the number of shares of Common Stock which might have been purchased upon
exercise of this Warrant immediately prior to such reclassification, change,
consolidation, merger or sale. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers or sales. In the event that in connection with any such
capital reorganization any shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (1) of Section (f) hereof.
(j) Callable Warrant. This Warrant may not be called by the Company
at any time.
5
<PAGE>
(k) Assignment. This Warrant may only be assigned to a transferee
who has executed an Assignment Form, substantially in the form of Exhibit B
attached hereto.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the Undersigned, each being duly authorized, as of the date
below.
UTG Communications International, Inc.
By:___________________________________
___________, 1999
6
<PAGE>
EXHIBIT A
EXERCISE FORM
Dated: ______________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ________________ shares of Common Stock and
hereby makes payment of _____________ in payment of the actual exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
________________________________________________________________________________
(Please typewrite or print in block letters)
Address
________________________________________________________________________________
Signature_______________________________________________________________________
----------
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________
hereby sells, assigns and transfers unto
Name
________________________________________________________________________________
(Please typewrite or print in block letters)
Address
________________________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
________ Shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _____________________ Attorney, to transfer
the same on the books of the Company with full power of substitution in the
premises.
Date ________________________
Signature___________________________
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from UTG
Communications International, Inc. and Subsidiaries and is qualified in it's
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 298,050
<SECURITIES> 0
<RECEIVABLES> 2,575,139
<ALLOWANCES> 261,831
<INVENTORY> 519,197
<CURRENT-ASSETS> 3,654,217
<PP&E> 4,738,328
<DEPRECIATION> 2,969,967
<TOTAL-ASSETS> 6,727,963
<CURRENT-LIABILITIES> 4,711,485
<BONDS> 0
0
0
<COMMON> 21
<OTHER-SE> 1,369,458
<TOTAL-LIABILITY-AND-EQUITY> 6,727,953
<SALES> 3,502,659
<TOTAL-REVENUES> 3,502,659
<CGS> 2,687,984
<TOTAL-COSTS> 1,646,488
<OTHER-EXPENSES> 116,818
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,364
<INCOME-PRETAX> (948,631)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,505,300)
<DISCONTINUED> 1,174,590
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 257,003
<EPS-BASIC> (12)
<EPS-DILUTED> (06)
</TABLE>
