Exhibit 10.1
(1) UTG COMMUNICATIONS INC
(2) XXXXX XXXXX GALLIFLENT XXXXXX
(3) CITY COMMUNICATIONS (SE) LIMITED
(4) XXXXXX XXXXXXX XXXXXXX,
XXXX XXXXXX XXXXXXX,
XXXXXX XXXX XXXXXXX
and XXXXX XXXXXX XXXXXX
(5) SHAALA KARIM and XXXXXXXXXXX XXXXX
(6) STARPOINT TECHNOLOGIES LIMITED
CONFORMED COPY
SHAREHOLDERS AGREEMENT
---------------------------------------------
Mundays
Xxxxx Xxxxx
Xxxxxx Xxxx
Xxxxxxxx, Xxxxx
Xxxxxx XX00 0XX
Telephone: 00000 000000
Ref: RAP/RAF/P14831
DATE: 16th November 1998
PARTIES
1. UTG COMMUNICATIONS, INC ("UTG"), a Delaware corporation having its
principal place of business at Xxxxxxxxxxxx. 00, XX 0000 Xxxxxx,
Xxxxxxxxxxx.
2. XXXXX XXXXX GALLIFLENT-XXXXXX of 00 Xxxxxxx, Xxxxx, Xxxxxx, XX00 0XX ("Xx.
Xxxxxx")
3. CITY COMMUNICATIONS (SE) LIMITED ("CCL") (registered number 2979724) whose
registered office is at Xxxxxxxx Xxxxx, Xxxxxxx Xxxx, Xxxxxx XX00 0XX
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4. XXXXXX XXXXXXX XXXXXXX of 00 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxx, Xxxxx
X00 0XX, XXXX XXXXXX XXXXXXX of 35 Xxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx,
Xxxx Xxxxxxxx X00 0XX, XXXXXX XXXX XXXXXXX of 287 Queslett Road, Great
Xxxx, Xxxxxxxxxx, Xxxx Xxxxxxxx X00 0XX and XXXXX XXXXXX XXXXXX of 0
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxx Xxxxxxxx XX00 0XX (together "the
Midlands Group")
5. SHAALA KARIM of Greenacre, 00 Xxxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxx XX0 0XX and XXXXXXXXXXX XXXXX of 00 Xxxx Xxxx, Xxxxxx Xxxx,
Xxxxxx X0 0XX (together "CCD")
6. STARPOINT TECHNOLOGIES LIMITED (registered number 3617342) whose
registered office is at Xxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxx, Xxxxx, Xxxxxx,
XX00 0XX ("the Company")
RECITALS
A. The Company is a private company limited by shares. Further particulars
relating to the Company are set out in Schedule 1.
B. CCL has agreed to subscribe for certain shares in the capital of the
Company on the terms and subject to the conditions set out herein and to
apply to have 2,000 of such shares allotted to Xx Xxxxxxxxxxx Xxxxx.
C. The Midlands Group and the Company have entered into a Business Sale and
Transfer Agreement in the Agreed Form under which the Midlands Group are
entitled to have allotted to them certain shares in the capital of the
Company on the terms and subject to the conditions thereof.
D. Miss Shaala Karim, Call Cards Direct Limited and the Company have entered
into a Business Sale and Transfer Agreement in the Agreed Form under which
Miss Shaala Karim is entitled to have allotted to her certain shares in
the capital of the Company on the terms and subject to the conditions
thereof and in respect of which 5,000 of such shares shall be issued to Xx
Xxxxxxxxxxx Xxxxx at her request by way of gift.
E. After completion of this Agreement and the said Business Sale and Transfer
Agreements, CCL, the Midlands Group, CCD and UTG will own the entire
issued share capital of the Company.
F. The Parties have entered into this Agreement in order to regulate the
relationship between them as shareholders in the Company.
AGREEMENT
1. Definitions
1.1 The Recitals and Schedules form part of this Agreement and shall have the
same force and effect as if set out in the body of this Agreement. Any
reference to this Agreement shall include the Recitals and Schedules.
1.2 In this Agreement the following words and expressions shall have the
following meanings:
"the Agreed Form" the form agreed between and signed by or
on behalf of the Parties;
"the Articles" the Articles of Association of the
Company to be adopted at or immediately
prior to
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Completion (being in the Agreed Form
marked "A") and thereafter as amended in
accordance with this Agreement;
"the Board" the Board of Directors of the Company
for the time being;
"Business Day" any day (other than Saturday) on which
banks are open for the transaction of
normal banking business in London;
"the First Call Options" the options granted by the Individual
Shareholders pursuant to Clause 7;
"the Companies Acts" the Companies Xxx 0000, the Companies
Consolidation (Consequential Provisions)
Xxx 0000 and the Companies Xxx 0000;
"Completion" completion of the Subscription Agreement
in accordance with its terms;
"the Completion Date" the date of this Agreement;
"Director" any director for the time being of the
Company including, where applicable, any
alternate director;
"Family Members" means in relation to an Individual
Shareholder, his spouse and/or children;
"Family Trust" means in relation an Individual
Shareholder trusts (whether arising
under a settlement, declaration of trust
or other instrument wheresoever made or
under a testamentary disposition or on
an intestacy) under which an immediate
beneficial interest in any of the Shares
in question is for the time being vested
in any Individual Shareholder and/or
Family Members of that person. For these
purposes a person shall be deemed to be
beneficially interested in a Share if
that Share or the income derived from it
is or may become liable to be
transferred or paid or applied or
appointed to or for the benefit of that
person;
"First Call Options" the options granted by the Individual
Shareholders pursuant to Clause 7.1
"First Call Option Periods" 1 July 2001 until
31 July 2001, 1 July 2002 until 31 July
2002 and 1 July 2003 until 31 July 2003;
"First Call Option Price" the value of each share based on the
Valuation divided by the number of
Shares issued and allotted;
"Group Company" in relation to any company, a subsidiary
of that company, a holding company of
that
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company or a subsidiary of a holding
company of that company;
"Individual Shareholders" each of the Shareholders, other than UTG
or, in respect of each of them, any
person to whom shares in the Company
have been transferred by them in
accordance with the provisions of this
Agreement;
"Issue Price" the closing price per share of common
stock of UTG quoted on the NASDAQ
National Market on the trading day
preceding an Option Completion converted
into pounds sterling at the US$
:(pound)exchange rate quoted in the Wall
Street Journal Western Edition on the
same date as the closing price falls to
be determined;
"Option" either the First Call Option or the
Second Call Option;
"Option Completion" completion of any purchase and sale of
the Option Shares or UTG's shareholding
pursuant to an exercise of either the
First Call Option or the Second Call
Option;
"the Option Shares" all the Shares held by the Individual
Shareholders on the date of the exercise
of each of the First Call Options;
"the Parties" the parties to this Agreement (except
the Company);
"the Second Call Option Price" the lesser of the First Call Option
Price reduced by 25% or the value of the
lowest First Call Option Price at which
UTG previously exercised any of its
First Call Options.
"the Second Call Options" the options granted by UTG pursuant to
Clause 8.1;
"the Shareholders" the Parties or, in respect of each of
them, any person to whom shares in the
Company have been transferred by them in
accordance with the provisions of this
Agreement or the Articles;
"the Shares" the 100,000 Ordinary Shares of(pound)1
each in the capital of the Company;
"Subsidiary and Holding a subsidiary or holding company as those
Company" expressions are defined in Section 736
of the Companies Act of 1985;
"UTG Director" a Director of the Company appointed
under Clause 3.1;
"UTG Group" UTG and its Group Companies;
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"UTG Shares" the ordinary shares in the common stock
of UTG credited as fully paid to be
allotted to the Individual Shareholders
pursuant to Clause 9;
"Valuation" the value of the Company shall be
calculated using 8 x latest annual
audited pre-tax profits ("P") + final 3
months' turnover for that year ("T") /2.
In formulaic terms this is represented
by 8P + T/2.
1.3 In this Agreement (unless the context requires otherwise):
1.3.1 words and expressions which are defined in the Companies Acts shall have
the same meanings as are ascribed to them in the Companies Acts;
1.3.2 any question as to whether a person is connected (or, as the case may be,
unconnected) with or controlled by any other person shall be determined in
accordance with the provisions of Section 839 ICTA 1988 (excluding
sub-section (7) thereof) and Section 840 ICTA 1988 respectively;
1.3.3 any reference to any statute or statutory provision includes a reference
to any subordinate legislation made under that statute or statutory
provision before the date of this Agreement, to any modification,
re-enactment or extension of such statute or statutory provision made
before that date and to any former statute or statutory provision which it
consolidated or re-enacted before that date;
1.3.4 any gender includes a reference to other genders;
1.3.5 the singular includes a reference to the plural and vice versa;
1.3.6 any reference to a Recital, Clause or Schedule is to a recital, clause or
schedule (as the case may be) of or to this Agreement; and
1.3.7 "directly or indirectly" means (without limitation) either alone or
jointly with any other person, firm or body corporate and whether on his
own account or in partnership with another or others or as the holder of
any interest in or as officer, employee or agent of or consultant to any
other person, firm or body corporate.
1.4 The headings contained in this Agreement are for the purposes of
convenience only and do not form part of and shall not affect the
construction of this Agreement or any part of it.
1.5 Terms used but not defined in this Agreement shall have the same meaning
as in the Subscription Agreement.
2. Subscription of Shares and Commercial Principles
2.1 Forthwith upon the execution hereof CCL shall transfer to the Company the
benefit and burden of the contract it has with LDC Direct Limited for a
consideration of (pound)23,000 which it shall invoice to the Company. The
Company shall then satisfy the sums due under the said invoice by
allotting to CCL 21,000 Ordinary Shares of (pound)1 each credited as fully
paid and to Xx Xxxxxxxxxxx Xxxxx, 2,000 Ordinary Shares of (pound)1 each
credited as fully paid.
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2.2 CCL shall be free to transfer all or any of the said 21,0000 Shares to Xx
Xxxxxx or to such persons as Xx Xxxxxx may nominate free of any restraints
or any rights of pre-emption set out herein or in the Articles.
2.3 Forthwith upon the execution hereof the Business Sale and Transfer
Agreements with the Midlands Group and CCD shall be completed and the
Consideration Shares (as therein defined) shall be allotted to the
Midlands Group and CCD respectively.
2.4 The Parties record that the Company's object is to maximise value for the
Shareholders of the Company. Accordingly the business of the Company will
be conducted with sound commercial profit-making principles with the aim
of generating maximum value and dividends for the Shareholders.
2.5 The Directors and the Shareholders shall procure that the whole of the
profits of the Company available for distribution are distributed by the
Company to the Shareholders by way of dividend.
2.6 The Directors and Shareholders shall procure that the Company shall as
soon as reasonably practicable after Completion re-register as a public
limited company.
3. Board of Directors and Proceedings of Directors
3.1 UTG shall whilst a Shareholder have the right to appoint two Directors of
the Company and named alternates and the following provisions shall have
effect:-
3.1.1 Any such appointment shall be effected by notice in writing to the Company
by UTG and UTG may in like manner at any time and from time to time remove
(but not more than once in any twelve (12) month period) from office any
director appointed by it pursuant to this Clause and appoint any person in
place of any director so removed or dying or otherwise vacating office.
3.1.2 Any notice of appointment or removal shall take effect on the date
specified in the notice or, if none, on the date of receipt of the notice.
3.2 Immediately following execution of this Agreement a meeting of the Board
shall be held at which Xx. X. Xxxxx and Xx. X. Xxxxxxx, having consented
to act, shall be appointed as the UTG Directors and Xx. Xxxxxx shall be
appointed as Managing Director. The Chairman shall always be a UTG
Director.
3.3 In order for a Board meeting to be duly convened all Directors must be
given at least ten (10) Business Days' written notice of such meeting and
be supplied with a detailed agenda and supporting documents relating to
that meeting. The Parties hereby agree that failure to give such notice
and written information shall render all resolutions passed at that Board
meeting invalid unless subsequently ratified by the UTG Directors.
Directors may attend Board meetings by means of conference telephone and
physical attendance shall not be necessary.
3.4 The quorum necessary for the transaction of business at a Board meeting
shall be any two Directors of whom one shall be a UTG Director.
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3.5 Board meetings shall be held at regular intervals at least once in every
quarter.
3.6 Subject only to the provisions of Clause 4 and to the Articles, matters of
business arising at any meeting of the Board shall be decided by a
majority of votes.
3.7 Each Director shall be entitled to one vote each and the Chairman shall be
entitled to a second or casting vote.
3.8 In addition to his right under Clause 3.2 above, Xx Xxxxxx (whilst he
remains a Shareholder or whilst a company controlled by him remains a
Shareholder) shall have the right to appoint one Director and a named
alternate and the provisions set out in Clauses 3.1.1 and 3.1.2 shall
apply to such Director. This Director shall be appointed as Operations
Manager and may be Xx Xxxxxx himself.
3.9 The Midlands Group and CCD (whilst each remain Shareholders) shall each
jointly have the right to appoint one Director and a named alternate and
the provisions set out in Clauses 3.1.1 and 3.1.2 shall apply to such
Director.
4. Conduct of the Company's Affairs
4.1 The Shareholders shall exercise all rights available to them in relation
to the Company and the Company shall do everything necessary to procure
(so far as they are able to do so) that during the term of this Agreement:
4.1.1 the business of the Company consists exclusively of the business of
distribution of pre-paid services in the telecommunication and other
industries;
4.1.2 the Shareholders are given full opportunity to examine the books and
accounts kept by the Company and are supplied with all relative
information, including monthly and quarterly management accounts,
operating statistics and statements and such other trading and financial
information in such form as they reasonably require to keep each of them
properly informed about the business of the Company and generally to
protect their interests. Such accounts and statements shall be issued
within 15 days of the end of the relevant month or quarter, as the case
the may be;
4.1.3 the auditors of the Company are such firm of chartered accountants as UTG
shall agree in writing;
4.1.4 the bankers of the Company are Barclays Bank Plc, Clapham Common Branch,
or such other bankers as the Shareholders agree in writing;
4.1.5 the registered office of the Company is at Xxxxx Xxxxx, Xxxxxx Xxxx,
Xxxxxxxx, Xxxxx, Xxxxxx, XX00 0XX or at such other place as the
Shareholders agree in writing;
4.1.6 the Company complies with the provisions of its Memorandum and Articles;
4.1.7 the Accounting Reference Date for the Company shall be the 31st March and
the first financial statements shall be for the period from the
incorporation of the Company and ending 31 March 1999. The Directors shall
procure that the financial statements of the Company are audited
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and approved prior to the 31st March in the year following the 31st
December;
4.1.8 other than to register the Company as a public limited company the
Memorandum and new Articles of Association of the Company are not altered
and no further articles or resolutions inconsistent with them are adopted
or passed unless the Shareholders agree in writing;
4.1.9 any company which becomes a Subsidiary of the Company adopts new Articles
of Association in a form approved by the Shareholders in writing;
4.1.10 all cheques drawn by the Company in excess of (pound)10,000 are signed by
two Directors;
4.1.11 the Board determines the general policy of the Company (subject to the
express provisions of this Agreement), including the scope of their
respective activities and operations and that the Board reserves to itself
all matters involving major or unusual decisions.
4.2 The Shareholders shall exercise all rights available to them in relation
to the Company so as to procure (so far as they are able) that the Company
does not without the prior written consent of the Shareholders holding at
least the percentage of Shares set out below do any of the matters
contained in Schedule 2.
Period Percentage Shareholding Required
First year from the date of this Agreement 70%
Second year from the date of this Agreement 70%
Third year from the date of this Agreement 80%
Fourth year from the date of this Agreement 90%
Subsequent years 90%
4.3 If a transaction involving any matter in paragraphs 13 or 20 of Schedule 2
is agreed by the requisite majority of Shareholders, any Shareholder who
does not wish to participate in an issue of new Shares shall have the
right exercisable forthwith upon such issue occurring to require the other
Shareholders to acquire all his Shares at market value. This right shall
be exercisable in writing and the provisions of Clause 9 shall apply to
the completion of such sale mutatis mutandis. Any dispute as to market
value shall be referred to the auditors for resolution acting as experts.
5. Transfer of Shares
5.1 Each Shareholder agrees with the other Shareholders that (save as
otherwise provided herein) it or he will not sell, transfer, mortgage,
charge or dispose of or agree to sell, transfer, mortgage, charge or
dispose of in whole or in part any interest (and whether separately,
together, in part or in whole) in any Share save pursuant to the
provisions of this Agreement.
5.2 UTG shall not be entitled to transfer Shares save to other members of the
UTG Group and any of the Individual Shareholders shall be entitled to
transfer Shares to (i) a Family Trust (ii) a Family Member or (iii) each
other provided that:-
5.2.1 CCL shall be entitled to transfer its shareholding to Xx Xxxxxx or
nominees of Xx Xxxxxx without the consent of the other Shareholders;
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5.2.2 the transferee enters into a Deed of Adherence in the agreed form marked
"B" agreeing to be bound by the terms of this Agreement (including this
Clause) in all respects as if it had been a Party in the capacity of the
transferor of such Shares and (in the case of a transfer from UTG)
agreeing furthermore to transfer such Shares back to such transferor on it
ceasing to be a Group Company of such transferor; and
5.2.3 the transferor shall remain bound by the terms of this Agreement as if
still a Shareholder and shall enter into a guarantee in such form as the
other Shareholders may reasonably require guaranteeing the obligations of
the transferee under this Agreement.
5.3 The Parties shall execute all such consents as are required pursuant to
the Articles to permit a transfer pursuant to the provisions of this
Agreement.
6. Conflict with Articles
6.1 In the event of any conflict between the terms of this Agreement and any
provision of the Articles this Agreement shall prevail.
7. The First Call Options
7.1 Upon and subject to the terms of this Agreement:-
7.1.1 Each of the Individual Shareholders hereby grants to UTG upon and subject
to the terms and conditions of this Agreement the option to purchase at
the First Call Option Price in each of the First Call Option Periods the
following proportion of his remaining Option Shares:
End of Year 2 - the financial year of the Company ending 31 March
2001: 33%
End of Year 3 - the financial year of the Company ending 31 March
2002: 50%
End of Year 4 - the financial year of the Company ending 31 March
2003: 100%
7.1.2 The First Call Options shall be exercisable by notice in writing given by
UTG to the Individual Shareholders between the 1st July and the 30th July
in each of the years 2001, 2002 and 2003 and notice of the First Call
Options, once given, shall be binding on UTG and shall be irrevocable
except with the written consent of all the Individual Shareholders.
7.1.3 In the event that the Individual Shareholders do not receive written
notice of exercise of the First Call Options within the relevant First
Call Option Period then the First Call Options shall lapse and be of no
further force or effect.
7.1.4 Completion of the First Call Options shall take place in accordance with
the provisions of Clause 9.
8. The Second Call Options
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8.1 Upon and subject to the terms of this Agreement:-
8.1.1 If UTG has not exercised any of the First Call Options within any of the
prescribed periods set out in Clause 7 UTG hereby grants to the Individual
Shareholders the option to purchase from UTG at the Second Call Option
Price all the Shares then held by UTG.
8.1.2.1 Notice of the Second Call Options shall be exercisable in writing given
by any of the Individual Shareholders at any time within six months of
UTG failing to exercise or complete any of the First Call Options.
Notice of the Second Call Options, once given, shall be binding on the
relevant Individual Shareholders and shall be irrevocable except with
the written consent of UTG.
8.1.2.2 If more than one Individual Shareholder wishes to exercise the Second
Call Option, they shall do so pro rata to their existing holdings of
Ordinary Shares.
8.1.3.1 Completion of the Second Call Options shall take place in accordance
with the provisions of Clause 9.
8.1.3.2 It shall be a term of the Completion of the Second Call Option that all
sums owed by the Company to UTG or any of its Shareholders or any
Company controlled by any Shareholders on any account whatsoever shall
be repaid in full on such completion.
9. Option Completion
9.1.1 An Option Completion shall take place at such time during normal business
hours and at such place in the UK as the Party exercising the Option may
specify by written notice to the other, provided that the date fixed for
the Option Completion shall not be later than thirty (30) days after
notice of exercise is given.
9.1.2 In the event that more than one Party exercises an Option and the Parties
are unable to agree the time and place for Option Completion, it is hereby
agreed that Option Completion shall take place at 2.00 pm at the Company's
registered office on the thirtieth (30th) day after receipt of the last
Option notice by the receiving Party.
9.2 An Option Completion shall take place as follows:-
9.2.1 When UTG have acquired all the Option Shares each of the Individual
Shareholders shall (if requested by UTG) procure the resignation of the
Director nominated by him, such director or member confirming that he has
no claim against the Company for compensation for loss of office or
otherwise save in relation to any Director's fees or expenses which has
been agreed to be paid and which is outstanding.
9.2.2 The Parties shall procure that all requisite resolutions are validly
passed at duly convened and quorate meetings of the Board of Directors and
Shareholders of the Company and that all provisions of the Companies Acts
and all other statutory requirements are fully complied with.
9.2.3 Each of the Individual Shareholders shall deliver to UTG duly executed
stock transfer forms in respect of the relevant Option Shares together
with all share certificates relating to the relevant Option Shares.
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9.2.4 The Parties shall procure that the Board approves the transfers of the
relevant Option Shares for registration (subject, if applicable, to such
transfers being duly stamped).
9.2.5 UTG shall deliver to each of the relevant Individual Shareholders :-
in respect of Year 2, cash by way of bankers draft;
in respect of Year 3, 50% in cash by way of bankers draft and the
remaining 50% by the issue of UTG Shares at the Issue Price;
in respect of Year 4, by the issue of UTG Shares at the Issue Price
Provided however that if UTG Shares are not at the relevant time quoted on
NASDAQ the Individual Shareholders may at their sole discretion be
entitled to receive the whole or part of the First Call Option Price in
cash by way of bankers draft.
9.2.6 Subject to the due performance by UTG of its obligations, if any
Shareholder shall fail or refuse to transfer any Option Shares in
accordance with his obligations hereunder, or fails to take any action
required of him in order to ensure completion of the First Call Options
("Defaulting Shareholder"), the Company may authorise any person to
execute and deliver as attorney on behalf of the Defaulting Shareholder or
to undertake any action required on the part of the Defaulting Shareholder
to complete the First Call Options and such authorised person may give a
good receipt for the First Call Option Price and the Company may register
the transfer of the Option Shares to UTG and issue to it certificates for
the same. The Defaulting Shareholder shall in such case be bound to
deliver up his certificate for the Option Shares to the Company whereupon
the Defaulting Shareholder shall be entitled to receive the First Call
Option Price which shall in the meantime be held by the authorised person
on trust for the Defaulting Shareholder but without interest. After the
name of the transferee has been entered in the register in purported
exercise of these powers, the validity of the proceedings shall not be
questioned by any person.
9.2.7 Subject to the due performance by the Individual Shareholders of their
respective obligations, if UTG shall fail or refuse to transfer any of its
shares in accordance with its obligations hereunder, or fails to take any
action required of it in order to ensure completion of any of the Second
Call Options, any of the Individual Shareholders may authorise any person
to execute and deliver as attorney on behalf of UTG or to undertake any
act required on the part of UTG to complete any of the Second Call Options
and such authorised person may give a good receipt for the Second Call
Option Price and the Company may register the transfer of the Second Call
Option Shares to the relevant Individual Shareholders and issue to them
certificates for the same. UTG shall in such case be bound to deliver up
its certificate for the Second Call Option shares to the Company whereupon
UTG shall be entitled to receive the Second Call Option Price which shall
in the meantime be held by the authorised person on trust for UTG but
without interest. After the name of the transferee has been entered on the
register in purported exercise of these powers the validity of the
proceedings shall not be questioned by any person.
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10. Finance
10.1 UTG will provide within three (3) months of the Completion Date the sum of
(pound)150,000 to the Company to be used as working capital which will be
unsecured and bear no interest.
10.2.1 UTG will provide further funding to the Company in cash or by letter of
credit or the provision of bank guarantees to allow the Company to expand
by purchasing new terminals as more particularly detailed in Schedule 3.
10.2.2 The Company will serve notice on UTG when the objectives under columns A
and B of Schedule 3 have been achieved and UTG shall forward the funds or
put in place the letters of credit or bank guarantees shown under column
C to the Company within the time period specified under column D of
Schedule 3.
10.2.3 Any dispute arising over the attainment of the objectives contained in
columns A and B of Schedule 3 shall (subject to Clause 10.2.4) entitle
any Party or the Company to instruct an Expert pursuant to Clause 20 to
determine the dispute.
10.2.4 Funds transferred to the Company pursuant to this Clause 10.2 shall
remain with the Company even when a dispute arises as described in Clause
10.2.3 whereupon any determination by an Expert shall resolve the
disputed levels of the objectives and shall require the Company to reach
the next objectives following the disputed objectives before further
funds are remitted by UTG pursuant to this Clause.
10.2.5 If UTG provides funding by way of guarantees for a bank which then lends
money to the Company, UTG shall pay to the Company as a capital
contribution the amount of interest payable by the Company to the bank
and the Company shall not be obliged to repay the bank until UTG acquires
all the Shares of the Company it does not already own and UTG will
procure that the bank accepts these terms.
10.3 UTG's compliance with this Clause 10 is vital to the successful
development of the Company and unless UTG can show reasonable cause why it
has not complied herewith failure to comply within 20 working days of
receipt of a written default notice from the Company to comply with this
Clause 10 will entitle the remaining Parties and or the Company (to the
extent that it is legally able to do so) and or any third party nominated
by the remaining Parties to purchase within the period of 60 days after
the expiry of such notice all of UTG's Shares at par and the relevant
provisions of Clause 9 above shall apply to such purchase.
Provided that it shall be a condition of such purchase that all sums lent
by UTG (or by a bank relying on UTG's guarantee) to the Company or any of
its Shareholders or any company controlled by any Shareholder shall be
repaid upon completion of the sale of UTG's Shares.
11. Restrictive Covenant
11.1 Each of the Individual Shareholders undertakes to and covenants with the
Company and as a constituent part of this Agreement that, save with the
prior written consent of the other Parties:-
11.1.1 he will not except in the proper performance of his duties under his
service contract, directly or indirectly on his own behalf or jointly
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with or on behalf of any other person, concern, undertaking, firm or body
corporate:
11.1.1.1 whilst he is a shareholder of the Company and for the period of
6 months after ceasing to be a shareholder, deal with, seek
employment or engagement with, be employed or engaged by or
engage in business with or be in any way interested in or
connected with any person, concern, undertaking, firm or body
corporate which engages in or carries on within any part of the
United Kingdom the business of the distribution of debit
telephone cards;
11.1.1.2 whilst he is a shareholder of the Company and for the period of
6 months after ceasing to be a shareholder, deal with, seek
employment or engagement with, be employed or engaged by any
person, undertaking or body corporate or division within such
entity which is, or which has at any time during the period of
twelve (12) months preceding that event been, a customer or
client of the Company and on or for whose account or business
he personally worked or was responsible or in relation to whom
he obtained Confidential Information (as defined in Clause
11.1.2 below) during the same period ("a Client") or offer or
agree to provide goods of a like description to those
previously supplied to such Client by the Company or solicit
the custom of a Client in respect of any such goods;
11.1.1.3 whilst he is a shareholder of the Company and for the period of
6 months after ceasing to be a shareholder, interfere or seek
to interfere with the relations between the Company and any
person who has within the previous twelve (12) months been one
of its suppliers (or an introducer of prospective customers)
and with which he was involved personally in dealings or
negotiations on behalf of the Company at any time during that
period ("a Supplier");
11.1.1.4 whilst he is a shareholder of the Company and for the period of
6 months after ceasing to be a shareholder, solicit or
endeavour to entice away from the Company any person who is a
senior or managerial employee or director of the Company known
personally to him (whether or not such person would commit a
breach of the terms of his contract of employment by leaving
the service of the company concerned) or knowingly employ or
assist in or procure the employment by any other person, firm
or company of any such person;
11.1.1.5 at any time, use for any purpose (other than in connection with
his employment with the Company) any trade or business name
used by the Company (including in particular (but without
limitation) the name Starpoint (whether alone or in conjunction
with other names)) or any name similar to those names or likely
to be confused with them;
11.1.2 except in so far as is required for the proper performance of his duties,
he will not at any time hereafter divulge to any person or otherwise make
use of any secrets, trade secrets or confidential knowledge or
information not in the public domain concerning the business and/or
finances of the Company or of any of its suppliers or clients
("Confidential Information") and will use his reasonable endeavours
37
without cost to himself to prevent the publication or disclosure of any
such secrets, knowledge or information by any third party.
11.2 The restrictions contained in each sub-clause of this Clause shall be
construed as separate and individual restrictions and shall each be
capable of being severed without prejudice to the other restrictions or to
the remaining provisions of this Agreement.
12. Announcements
12.1 No announcement (other than if and to the extent required by law or by any
governmental or regulatory body) shall be made by or on behalf of the
Parties concerning the subject matter of this Agreement without the prior
written consent of the other Parties.
13. Termination
13.1 This Agreement shall remain in full force and effect unless and until
terminated in accordance with the provisions of this Clause 13.
13.2 Subject to the provisions of Clause 13.3 this Agreement shall terminate
forthwith upon:-
13.2.1 all the Individual Shareholders ceasing to hold any of the Shares;
13.2.2 the making of an order or the passing of an effective resolution for the
winding-up of the Company (otherwise than for the purpose of a
reconstruction pursuant to a scheme previously approved by the
Shareholders); or
13.2.3 the execution of an instrument in writing between all of the Shareholders
terminating this Agreement.
13.3 The termination of this Agreement (howsoever arising):-
13.3.1 shall be without prejudice to the rights of any Party accrued hereunder
as at the date of termination or to any claim which any Party may have
for damages against or otherwise arising from any antecedent breach
thereof by any other Party; and
13.3.2 shall not operate to affect such of the provisions hereof as in
accordance with their terms are expressed to operate or have effect
thereafter.
14. Confidentiality
14.1 Each of the Parties agrees not to make public or reveal to any third party
any commercial, organisational or other information of a confidential
nature concerning the other Parties obtained as a result of such Party's
participation in this Agreement save insofar as the information in
question:-
14.1.1 is proven to have been known to such Party prior to Completion;
14.1.2 is proven to have become known to such Party during the term of this
Agreement through the lawful act of a third party;
14.1.3 comes into the public domain otherwise than as a result of breach of this
Clause or of law;
38
14.1.4 is required to be given, made or published by law or under the rules and
regulations of NASDAQ or any other recognised investment exchange (as
defined in Section 207 of the Financial Services Act 1986);
14.1.5 is made public or revealed with the prior written approval of the other
Parties to the contents thereof and the manner of its presentation and
publication; or
14.1.6 is made available by a Party to a customer or potential customer of the
Company on a confidential basis and such information relates to the
product or service being supplied or to be supplied to the recipient of
the confidential information and is necessary or requisite for the proper
supply of such product of service.
14.2 The Parties shall use their respective best endeavours to agree the form
and manner of presentation and publication of information regarding the
Company which shall be given to relevant customers and prospective
customers.
14.3 The Parties agree to make known to such of its executives and employees to
whom the information described in this Clause 14 is disclosed, the
conditions of this Clause and to ensure they are under obligation to be
bound thereof.
15. General
15.1.1 This Agreement shall be binding on and enure for the benefit of the
successors of the Parties and the successors in title to the Shares held
by the Individual Shareholders..
15.1.2 Subject to the provisions of this Agreement, this Agreement is personal
to the Parties, their heirs, estates, executors and assigns.
15.2 The Parties (but without imposing any additional financial obligations on
the Parties) shall and shall use their best endeavours to procure that any
necessary third party shall do all such further acts and things and
execute all such further deeds, documents and assurances as any of them
may reasonably require by notice in writing to give effect to the terms of
this Agreement.
15.3 This Agreement shall not constitute a partnership between the Parties or
any of them.
15.4 Each Shareholder shall exercise all voting rights and powers of control
available to it in relation to the Company so as to give full effect to
the terms of this Agreement.
16. Severability
16.1 In the event that any provision of this Agreement or any part thereof
shall for any reason be held by any judicial determination to be invalid
or unenforceable the valid and enforceable parts of this Agreement shall
continue in full force and effect and the Parties shall negotiate in good
faith a substitute provision for the provision of this Agreement held to
be invalid or unenforceable as aforesaid to reflect the purpose or intent
(as closely as may be possible) of such provision.
39
17. Waiver and Remedies
17.1 The failure of any Party at any time or times to require performance of
any provision of this Agreement shall not affect its right to enforce such
provision at a later time and all express rights granted to any Party
hereunder shall be in addition to any rights that such Party may have
under the general law in respect of a breach of this Agreement.
17.2 No waiver by a Party of any condition or of the breach of any term,
covenant, representation, warranty or undertaking contained in this
Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed to be or construed as a further or continuing waiver of
any such condition or breach or a waiver of any other condition or deemed
to be or construed as the waiver of the breach of any other term,
covenant, representation, warranty or undertaking in this Agreement.
17.3 Any liability to any Party under this Agreement may in whole or in part be
released, compounded or compromised or time or indulgence given by that
Party in its absolute discretion as regards any other Party under such
liability without in any way prejudicing or affecting its rights against
any further Party under the same or a like liability, whether joint and
several or otherwise.
17.4 This Agreement may be amended, modified, superseded or cancelled and any
of its terms, covenants, representations, warranties, undertakings or
conditions may be waived only by an instrument in writing signed by (or by
some person duly authorised by) all of the Parties or, in the case of a
waiver, by the Party waiving compliance.
17.5 If any Shareholder ceases to be a shareholder in the Company then, subject
to compliance with Clause 5.2, as from the date of such cessation this
Agreement may be varied or cancelled without reference to or the need for
signature of such Shareholder on any relevant document provided that (for
the avoidance of doubt) such variation or cancellation will not give rise
to any new or increased liability of any former Shareholder or Shareholder
not consenting to the variations in question.
18. Costs
18.1 Each party shall bear its own costs and expenses in relation to the
preparation, negotiation and implementation of this Agreement and the
agreements and arrangements of which it forms part.
19. Restrictive Trade Practices Act 1976
19.1 No party to this Agreement which carries on business within the United
Kingdom shall give effect to, or enforce or purport to enforce any
provision of this Agreement (including any provision in any Schedules or
Recitals), or any provision of any document which may be executed pursuant
to this Agreement, or in connection with it, which is/are or may be
registrable under the Restrictive Trade Practices Act 1976 (as amended)
("the RTPA") until the day after particulars of this Agreement or the
arrangements have been furnished to the Director General of Fair Trading
in accordance with the requirements of the RTPA.
20. Valuation Procedure
40
20.1 The Company shall be valued in accordance with the defined formula
"Valuation " set out in Clause 1.2 above as and when appropriate.
20.2 Where any doubt or dispute arises as to the Valuation of the Company, the
First Call Option Price or the Second Call Option Price, any Party hereto
may refer the determination of the Valuation or price to an independent
firm of chartered accountants, to be appointed in the absence of agreement
between the Parties by the President of the Institute of Chartered
Accountants in England and Wales ("the Experts").
20.3 Each Party shall give the Experts access to all books or records in their
possession in relation to the matter in dispute and shall instruct their
advisers to make available to the Experts such accounts or records or
notes held by those advisers relating to the matter in dispute as the
Experts may require and generally shall provide the Experts with such
other information and assistance as the Experts may require.
20.4 Each Party shall be entitled to make representations to the Experts, but
if they do so the Experts shall be obliged to disclose the same to the
other Parties and invite those Parties' comments on any information or
material so supplied.
20.5.1 For the avoidance of doubt, the Experts shall refer to the Company's
appropriate management accounts to determine the turnover figures (where
such values are not obvious by reference to the latest annual audited
accounts of the Company) required to calculate the Valuation.
20.5.2 The figures for operating profits will be those derived from the audited
profit and loss account for the last accounting period completed.
20.6 In making their determination of the Valuation or price the Experts shall
act as experts and not as arbitrators and their decision shall, in the
absence of manifest material error, be final and binding on all Parties.
The Experts' fees and costs shall be borne by the Parties in such
proportions as the Experts may determine or, failing any determination,
equally. Any determination shall be in writing and copies thereof shall be
given to each of the Parties hereto.
20.7 The Experts have power to award interest and for such interest to run on a
day by day basis as determined by the Experts.
21. Entire Agreement and Variation
21.1 This Agreement (together with the documents referred to in it) constitutes
the entire legally binding agreement between the Parties in respect of the
subject matter of this Agreement and may only be varied by a written
agreement signed on behalf of each of the Parties.
21.2 Each of the Parties acknowledges and agrees that in entering into this
Agreement, and the documents referred to in it, it or he does not rely,
and has not relied, upon any statement, representation, warranty or
understanding (whether negligently or innocently made) of any person
(whether party to this Agreement or not) other than as expressly set out
or referred to in this Agreement or the documents referred to in it and
the only remedy available to it in respect of any misrepresentation or
untrue statement made to it or him shall be a claim for breach of contract
under this Agreement. Nothing in this sub-clause shall however operate to
limit or exclude any liability for fraud.
41
22. Notices
22.1 Any notice to be served in connection with this Agreement shall be in
writing (which, for the avoidance of doubt, shall include facsimile
transmission) and any notice or other correspondence under or in
connection with this Agreement shall be delivered or transmitted by
facsimile transmission or by registered mail:-
22.1.1 in the case of a company, to its registered office for the time being
marked "For the Urgent Attention of the Secretary"; or
22.1.2 in the case of individuals, to the addresses set opposite their
respective names at the head of this Agreement or to such other address
as may be notified in writing for the purposes of this Agreement to the
Party serving the document
22.2 Any such notice or correspondence shall be deemed to have been served as
follows:-
22.2.1 in the case of delivery by hand, on delivery if delivered between 9.00 am
and 5.00 pm on a business day and, if delivered outside such hours, at
the time when such hours re-commence on the first business day following
delivery;
22.2.2 in the case of service by registered mail, on the third business day
after the day on which it was posted;
22.2.3 in the case of facsimile transmission, on the day it is transmitted
provided that if that day is not a business day or, being a business day,
transmission takes place after 5.00 pm, then at 9.00 am on the first
business day following transmission of the notice.
22.3 Subject as provided in Clause 22.2, in proving such service it shall be
sufficient to prove that the notice or correspondence was properly
addressed and left at or posted by registered mail to or transmitted by
facsimile transmission to the place to which it was so addressed.
22.4 In this Clause "business day" shall mean any day other than Saturday,
Sunday or any other day which is a public holiday in the place at or to
which the notice or correspondence is left or despatched.
23. Governing Law and Jurisdiction
23.1 This Agreement is to be read and construed in accordance with and governed
by the laws of England.
23.2 Each of the Parties hereby agrees to submit to the non-exclusive
jurisdiction of the English Courts as regards any claim or matter or
dispute arising from or in connection with this Agreement.
EXECUTED as a deed and delivered on the date set out at the head of this
Agreement.
42
SCHEDULE 1
The Company
Company number : 3617342
Date of incorporation : 18 August 1998
Share capital
authorised : (pound)100,000 divided into 100,000
Ordinary Shares of (pound)1 each,
issued : (pound)51,000 divided into 51,000
Ordinary Shares of(pound)1 each to UTG
Registered office : Xxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxx, Xxxxx,
Xxxxxx XX00 OLP
Directors : Xxxxx Xxxxx Galliflent-Xxxxxx (to be
appointed at end of completion meeting)
Xxxx Xxxxx
Secretary : Mundays Company Secretaries Limited
SCHEDULE 2
Matters requiring consent of the specified percentage of Shareholders in Clause
4.2
1. Create any fixed or floating charge, lien (other than a lien arising by
operation of law) or other encumbrance over the whole or any part of its
undertaking, property or assets, except for the purpose of securing
indebtedness to its bankers for sums borrowed in the ordinary and proper
course of business.
2. Borrow (except from the Company's bankers in the ordinary and proper
course of business) in excess of a maximum aggregate sum outstanding at
any time of (pound)500,000.
3. Make a loan or advance of any amount or give credit (other than normal
trade credit) or repay any loan made by UTG pursuant to Clause 10 of this
Agreement.
4. Give a guarantee or indemnity to secure the liabilities or obligations of
any person (other than a wholly-owned subsidiary of the Company).
5. Sell, transfer, lease, assign, or otherwise dispose of a material part of
its undertaking, property or assets (or any interest in them), or contract
to do so otherwise than in the ordinary and proper course of business.
6. Enter into a contract, arrangement or commitment involving expenditure on
capital account or the realisation of capital assets.
43
7. Engage a new employee, consultant or any other person at a remuneration
which could exceed a rate of (pound)40,000 per annum unless such person is
on a short term contract which means a contract of no more than one
month's duration.
8. Engage or dismiss the Managing Director as an employee or consultant.
9. Increase the remuneration of an employee, consultant or any other person
to a rate which could exceed (pound)40,000 per annum or increase the
remuneration of an employee, consultant or any other person whose existing
remuneration could exceed that rate.
10. Appoint or remove from office a Director except in accordance with the
rights conferred on the Shareholders under Clause 3 to appoint and remove
Directors.
11. Appoint a committee of the Directors or a local board or delegates any of
the powers of the Directors to a committee or local board.
12. Take or agree to take a leasehold interest in or licence over land.
13. Issue any shares or create any new shares, except as expressly permitted
by the Company's Articles.
14. Alter the rights attaching to any class of Shares.
15. Consolidate, sub-divide or convert any of the Company's share capital.
16. Issue renounceable allotment letters or permit any person entitled to
receive an allotment of shares to nominate another person to receive the
allotment except on terms that no renunciation or nomination shall be
registered unless the renounced or person nominated is approved by the
Board.
17. Create or acquire a subsidiary or dispose of any shares in a subsidiary.
18. Enter into a partnership or profit sharing agreement.
19. Do or permit to be done any act or thing whereby the Company may be wound
up (whether voluntarily or compulsorily), in accordance with the terms of
this Agreement.
20. Issue securities convertible into shares or debentures, or share warrants
or options in respect of shares.
21. Enter into a contract or transaction except in the ordinary and proper
course of business on arm's length terms.
22. Acquire, purchase or subscribe for shares, debentures, mortgages or
securities (or any interest in any of them) in any person.
23. Create a contract or obligation or renew or vary the terms of an existing
contract or obligation, to pay money or money's worth to any member of the
Company.
24. Hold a meeting of Shareholders or purport to transact any business at a
meeting unless there are present duly authorised representatives or
proxies for each of the Shareholders.
44
25. Introduce products to the Company which are produced by UTG where the
margin for the Company is less than the average margin on equivalent
products distributed by the Company.
45
SCHEDULE 3
------------------------------------------------------------------------------------------
Objectives Funding
------------------------------------------------------------------------------------------
B. With average
monthly spend or RGP
A. Deployed terminals (respectively) C. Amount D. Payable within
------------------------------------------------------------------------------------------
250 (pound)300.00 or(pound)21.00 US$94,500 7 days
------------------------------------------------------------------------------------------
400 (pound)350.00 or(pound)28.00 US$157,500 7 days
------------------------------------------------------------------------------------------
900 (pound)375.00 or(pound)33.75 US$157,500 7 days
------------------------------------------------------------------------------------------
1400 (pound)400.00 or(pound)35.00 US$157,500 7 days
------------------------------------------------------------------------------------------
14 days, and for every
subsequent 500 terminals
until 10,000 terminals
have been purchased, if
Every subsequent 500 the Company's cash
terminals (pound)400.00 or(pound)38.00 US$157,500 position requires.
------------------------------------------------------------------------------------------
Notes:-
A. Total number must have been deployed for a week or more.
B. Could be the average of any one or more weeks rounded up to represent a
month.
C. Payable by bank transfer or by the putting in place of the appropriate
letters of credit or bank guarantees to clear within allotted days from
fax notification from the Company of the attainment of the appropriate
objectives.
46
EXECUTED as a Deed by
UTG COMMUNICATIONS, INC
acting by its Chairman and
Chief Executive Officer Xxxx Xxxxx
Director
EXECUTED as a Deed by
XXXXX XXXXX
GALLIFLENT-XXXXXX Xxxxx X Xxxxxx
in the presence of:
Witness sign: R.A. Xxxxxx
Xxxxxxx Xxxxxx Xxxxxx
Address: Xxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxx,
Xxxxx, Xxxxxx
Occupation: Solicitor
EXECUTED as a Deed by
CITY COMMUNICATIONS (SE) LIMITED Xxxxx X Xxxxxx
acting by two directors or Director
one director and its secretary Xxx Xxxxxx
Director/Secretary
EXECUTED as a Deed by
XXXXXX XXXXXXX XXXXXXX Xxxxxx Xxxxxxx
in the presence of:
Witness sign: X. Xxxxxxxxxx
Name: (As below)
47
Address:
Occupation:
EXECUTED as a Deed by
XXXX XXXXXX XXXXXXX Xxxx Xxxxxxx
in the presence of:
Witness sign: X. Xxxxxxxxxx
Name: (As below)
Address:
Occupation:
EXECUTED as a Deed by
XXXXXX XXXX XXXXXXX Xxxxxx X. Xxxxxxx
in the presence of:
Witness sign: X. Xxxxxxx
Name: X.X. Xxxxxxx
Address: 00 Xxxxx Xxxx,
Xxxxxxxxxx, X00
Occupation: Retailer
EXECUTED as a Deed by
XXXXX XXXXXX XXXXXX Xxxxx Xxxxxx
in the presence of:
Witness sign: X. Xxxxxxxxxx
Name: (As below)
Address:
Occupation:
EXECUTED as a Deed by
SHAALA KARIM Shaala Karim
in the presence of:
48
Witness sign: X. Xxxxxxxxxx
Name: N. J. Fieldhouse
Address: 00 Xxxxxxxxxx Xxxx,
Xxxxxxx, Xxxxxx
Occupation: Solicitor
EXECUTED as a Deed by
XXXXXXXXXXX XXXXX Xxxxxxxxxxx Xxxxx
in the presence of:
Witness sign: X. Xxxxxxxxxx
Name: (As above)
Address:
Occupation:
EXECUTED as a Deed by
STARPOINT TECHNOLOGIES LIMITED
acting by two directors or one
director and its secretary Xxxx Xxxxx
Director
X.X. Xxxxxx (Authorised signatory of
Mundays Company Secretaries Limited)
Secretary
49
