EXHIBIT 10.27
UTG COMMUNICATIONS INTERNATIONAL INC.
SUBSCRIPTION AGREEMENT
THIS AGREEMENT is made as of January ___, 1998, by and between UTG
Communications International Inc., a Delaware corporation (the "Company"),
having an address c/o Xxxxxx X. Xxxxxxx, Esq., 00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, and the subscriber signatory hereto (the
"Subscriber").
Set forth below are the terms and conditions pursuant to which the Subscriber
subscribes for shares of common stock, $.00001 par value per share (the "Common
Stock"), of the Company in an offering by the Company of up to 750,000 shares at
$2 per share (Such number of shares and price gives effect to a 1:13 reverse
stock split to be completed as a condition to this subscription.). There is no
minimum number of shares being offered by the Company.
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
Subscriber, intending to be legally bound, hereby agrees to purchase from the
Company, 250,000 shares (the "Shares") of the Company's Common Stock, at a
purchase price of $2.00 per Share. For each Share purchased, the Subscriber will
also receive, for no additional consideration, three Warrants (the "Warrants"),
substantially in the form of Exhibit C attached hereto, each to purchase one
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share of Common Stock, which Warrants will expire five years from the date of
original issuance and shall be exercisable at $2, $3 and $4.50 per share,
respectively.
The Subscriber will pay for the subscription by check payable in U.S.
Dollars or by wire transfer in U.S. Dollars to the Company's designated account
the amount of $500,000 net of a 3% underwriting commission payable to
Interfinance Inv. Co. Ltd. against delivery of (i) one or more certificates
representing the 250,000 Shares, (ii) executed copies of the Warrants, (iii) an
executed copy of the Registration Rights Agreement between the parties hereto
and of even date herewith (the "Registration Rights Agreement"), substantially
in the form of Exhibit D hereto and (iv) an opinion of counsel to the Company
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covering the matters set forth in Exhibit E hereto in form and substance
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satisfactory to Subscriber's counsel.
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations of the Subscriber. The Subscriber hereby represents
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and warrants to the Company that:
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(a) THE SUBSCRIBER IS AWARE AND UNDERSTANDS THAT AN INVESTMENT IN THE
SHARES AND WARRANTS INVOLVES A NUMBER OF VERY SIGNIFICANT RISKS AND THAT THIS
INVESTMENT SHOULD NOT BE MADE UNLESS THE SUBSCRIBER IS PREPARED TO LOSE THE
ENTIRE INVESTMENT. SINCE INCEPTION, THE COMPANY HAS INCURRED SUBSTANTIAL LOSSES
AND NEGATIVE CASH FLOW, AND THE COMPANY EXPECTS TO CONTINUE TO INCUR SUBSTANTIAL
LOSSES AND NEGATIVE CASH FLOW FOR THE FORESEEABLE FUTURE. IN ADDITION TO THIS
INVESTMENT, THE COMPANY IS IN IMMEDIATE NEED OF SUBSTANTIAL ADDITIONAL CAPITAL
IN ORDER TO FUND ITS OPERATING REQUIREMENTS. THERE CAN BE NO ASSURANCE THAT
SUFFICIENT FINANCING WILL BE AVAILABLE ON TERMS ACCEPTABLE TO THE COMPANY OR AT
ALL. FAILURE TO OBTAIN SUCH FINANCING IN THE IMMEDIATE FUTURE COULD FORCE THE
COMPANY TO CEASE OPERATIONS COMPLETELY, RESULTING IN A LOSS OF THE SUBSCRIBER'S
ENTIRE INVESTMENT.
(b) the subscription hereunder is being made by the Subscriber as principal
for the Subscriber's own account and not for the benefit of any other person;
(c) the Subscriber is a resident of the jurisdiction set out on the
signature page hereof;
(d) this Subscription Agreement constitutes a legal, valid, binding and
enforceable obligation of the Subscriber;
(e) the Subscriber will not make any offers to sell the Shares and Warrants
or sell any of the Shares and Warrants except in accordance with the terms of
this Subscription Agreement;
(f) the Subscriber has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Shares and Warrants, and at the present time, it
could afford a complete loss of such investment;
(g) the Subscriber acknowledges that the Company and counsel for the
Company will rely upon the accuracy and truth of the Subscriber's
representations in Sections 2 and 3 hereof and the Subscriber hereby consents to
such reliance;
(h) the Subscriber has access to the same kind of information which would
be available in registration statements filed by the Company under the
Securities Act;
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(i) neither the United States ("U.S.") Securities and Exchange Commission
(the "SEC") nor any state securities commission has approved any of the Shares
and Warrants offered or passed upon or endorsed the merits of the offering;
(j) the Subscriber acknowledges that all documents, records, and books
pertaining to the investment in the Shares and Warrants have been made available
for inspection by him, his attorney, accountant, purchaser representative or tax
advisor (collectively, the "Advisors");
(k) the Subscriber and the Advisors have had a reasonable opportunity to
ask questions of and receive answers from a person or persons acting on behalf
of the Company concerning the offering of the Shares and Warrants and all such
questions have been answered to the full satisfaction of the Subscriber and his
Advisors;
(l) in evaluating the suitability of an investment in the Company, the
Subscriber has not relied upon any representation or other information (oral or
written) other than as contained in documents or answers to questions so
furnished to the Subscriber or his Advisors by the Company;
(m) the Subscriber is unaware of, and in no way relying on, any form of
general solicitation or general advertising in connection with the offer and
sale of the Shares and Warrants;
(n) the Subscriber has such knowledge and experience in financial, tax, and
business matters so as to enable him to utilize the information made available
to him in connection with the offering of the Shares and Warrants to evaluate
the merits and risks of an investment in the Shares and Warrants and to make an
informed investment decision with respect thereto;
(o) the Subscriber is not relying on the Company respecting the tax and
other economic considerations of an investment in the Shares and Warrants, and
the Subscriber has relied on the advice of, or has consulted with, only his own
Advisors;
(p) the Subscriber is acquiring the Shares and Warrants solely for his own
account for investment and not with a view to distribution, other than in
accordance with the terms hereof;
(q) the Subscriber must bear the economic risk of the investment
indefinitely because none of the Shares and Warrants may be sold, hypothecated
or otherwise disposed of unless subsequently registered under the Act and
applicable state securities laws or an exemption from registration is available;
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(r) the Subscriber has adequate means of providing for its current needs
and foreseeable contingencies and has no need for its investment in the Shares
and Warrants to be liquid;
(s) the Subscriber has completed accurately the Subscriber Questionnaire
attached hereto as Exhibit A and meets the requirements of at least one of the
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suitability standards for an "accredited investor;" and
(t) the Subscriber: (u) if a natural person represents that the Subscriber
has reached the age of 21 and has full power and authority to execute and
deliver this Subscription Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof; (v) if a
corporation, partnership, association, joint stock company, trust,
unincorporated organization or other entity represents that such entity was not
formed for the specific purpose of acquiring the Shares and Warrants, such
entity is validly existing under the laws of the state of its organization, the
consummation of the transactions contemplated hereby is authorized by, and will
not result in a violation of state law or its charter or other organizational
documents, such entity has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and to
carry out the provisions hereof and thereof, this Subscription Agreement has
been duly authorized by all necessary action, this Subscription Agreement has
been duly executed and delivered on behalf of such entity and is a legal, valid
and binding obligation of such entity; and (w) if executing this Subscription
Agreement in a representative or fiduciary capacity, represents that it has full
power and authority to execute and deliver this Subscription Agreement in such
capacity and on behalf of the subscribing individual, xxxx, partnership, trust,
estate, corporation, or other entity for whom the Subscriber is executing this
Subscription Agreement, and such individual, xxxx, partnership, trust, estate,
corporation, or other entity has full right and power to perform pursuant to
this Subscription Agreement and make an investment in the Company, and that this
Subscription Agreement constitutes a legal, valid and binding obligation of such
entity; and
2.2 Representations and Warranties by the Company.
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(a) Organization and Qualification: The Company and each subsidiary of the
Company (each, a "Subsidiary" and collectively, the "Subsidiaries"), is a
corporation duly organized and existing in good standing under the laws of their
respective jurisdiction of incorporation and each has the power to own its
property and to carry on its business as now being conducted. The Company and
each Subsidiary is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary.
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(b) Due Authorization: The execution and delivery of this Subscription
Agreement, the Registration Rights Agreement and such further documentation
contemplated to be executed under each of such agreements, including, but not
limited to, the issuance and sale of the Shares, any Additional Shares (as
hereinafter defined), the Warrants and any Additional Warrants (as hereinafter
defined) by the Company, and compliance by the Company with all the provisions
of this Subscription Agreement and the Registration Rights Agreement (i) are
within the corporate power and authority of the Company, (ii) do not require the
approval or consent of the stockholders of the Company (except for any approval
or consent which has been obtained prior to the date hereof) and (iii) have been
duly authorized by all requisite corporate action and proceedings on the part of
the Company. This Subscription Agreement, the Registration Rights Agreement and
the Warrants have been duly executed and delivered by the Company. Each such
document constitutes a valid and binding obligation of the Company, enforceable
in accordance with its respective terms, except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The Company has furnished
to the Subscriber true and correct copies of the Company's certificate of
incorporation and by-laws as in effect on the date of this Subscription
Agreement.
(c) Legal Compliance: The Company and each Subsidiary is (i) in material
compliance with all applicable laws and regulations in the jurisdictions in
which it conducts business and (ii) no material adverse consequences are known,
filed or commenced against the Company or any Subsidiary with respect to any
failure so to comply, except where singly or in the aggregate of the foregoing
clauses (i) and/or (ii), noncompliance would not have material adverse
consequences. The foregoing is subject to the limitation that substantial
amounts are owed by the Company and its Subsidiaries, which can only be paid
assuming adequate financing is continually obtained. The failure to pay such
amounts would have a material adverse effect on the Company and its Subsidiaries
and could result in the bankruptcy of the Company and its Subsidiaries.
(d) Accuracy of Information: Information furnished in writing by the
Company and each Subsidiary, or any of their representatives, to the Subscriber
in connection with the transactions contemplated by this Subscription Agreement,
and the Company's reports and registration statements filed with the SEC do not
contain any material misstatement of fact, or omission of any material fact
required to be stated therein or otherwise disclosed so as to make the
statements therein not misleading.
(e) Litigation: There is no action, suit or proceeding pending against the
Company or any of its Subsidiaries, properties or assets by or before any court,
arbitrator or governmental body, department, commission, board, bureau, agency
or instrumentality.
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(f) Governmental Consents, Etc.: Except as obtained or made, the Company is
not required to obtain any consent, approval or authorization of, or to make any
declaration or filing with, any governmental authority as a condition to or in
connection with the valid execution, delivery and performance of this
Subscription Agreement and the Registration Rights Agreement and the valid
offer, issue, sale or delivery of the Shares, any Additional Shares, the
Warrants and any Additional Warrants, or the performance by the Company of its
obligations in respect thereof, except for any filings required to effect any
registration pursuant to the Registration Rights Agreement.
(g) Investment Company Act: The Company is not an "investment company" or
an "affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
(h) Taxes: The Company and each Subsidiary has filed all material tax
returns which are required to be filed and has paid or caused to be paid all
material taxes as shown on said returns and on all assessments received by it to
the extent that such taxes have become due, or the validity or amount of which
is being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside. The Company and each Subsidiary has
paid, or has established adequate reserves, for all material federal, state and
local tax liabilities applicable to the Company and each Subsidiary for all
fiscal years which have not been examined and reported on by the taxing
authorities (or closed by applicable statutes). For the purpose of this
Subscription Agreement, "tax" or "taxes" means any federal, state, local or
foreign income, gross receipts, windfall profits, severance, property,
production, sales, use, transfer, gains, license, excise, employment, payroll,
withholding, value added, estimated, alternative or add on minimum tax, or any
other tax, custom, duty, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any governmental authority.
(i) Conflicting Agreements and Charter Provisions: None of (i) the
execution and delivery of this Subscription Agreement and the Registration
Rights Agreement and the issuance of the Shares, any Additional Shares, the
Warrants and any Additional Warrants, (ii) the fulfillment of and compliance
with the terms and provisions of this Subscription Agreement, the Registration
Rights Agreement, the Warrants and the Additional Warrants, will conflict with
or results in or will (with or without the giving of notice or lapse of time or
both) result in a breach of the terms, conditions or provisions of, or give rise
to a right of termination under, or give rise to a right of payment or
compensation under, or constitute a default under, or result in any violation
of, the certificate of incorporation or by-laws of the Company or any mortgage,
agreement, instrument, indenture, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its properties is subject.
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(j) Capitalization: The Form 10-QSB filed for the period ended September
30, 1997 sets forth as of the date of this Subscription Agreement and prior to
the issuance of the Shares and the Warrants, (i) all classes of authorized
capital stock of the Company (collectively, the "Capital Stock"), (ii) the
respective amount authorized for each such class, and (iii) the issued and
outstanding amount of each such class (including such amounts subscribed and
approved for issuance but not yet issued by the Company's transfer agent),
except for the aggregate of 400,000 shares of Common Stock of the Company
subscribed by five investors and approved for issuance but not yet issued by the
Company's transfer agent, as evidenced in Exhibit F attached hereto. All of the
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outstanding shares of the Capital Stock have been validly issued and are fully
paid and nonassessable. No class of Capital Stock of the Company is entitled to
preemptive rights. Except as disclosed therein and except as expressly provided
for in this Subscription Agreement, as of the date of this Subscription
Agreement, there are no outstanding options, warrants, scrip, rights to
subscribe to, antidilution rights, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, shares of any
class of Capital Stock of the Company, or contracts, commitments, understandings
or arrangements by which the Company or any stockholder of the Company is or may
become bound relating to the issuance or transfer of any shares of Capital Stock
or options, warrants or rights to purchase or acquire any shares of Capital
Stock of the Company or relating to the voting of any shares of Capital Stock of
the Company. The reverse-split of Common Stock to be effected as a condition to
this Subscription Agreement (the "Reverse Stock Split") whereby for each
thirteen shares of Common Stock previously held, such holder will be entitled to
one share of Common Stock plus a three year warrant exercisable for one share of
post-split Common Stock at an exercise price of $15.00 per share (the "Reverse
Split Warrants"), was duly authorized and all necessary action on the part of
the Company has been taken, including, but not limited to, any and all corporate
action and any and all filings required under federal or state securities laws
and with any securities exchange or quotation system on which the Company's
Common Stock is listed or quoted, as the case may be. The Shares, any Additional
Shares and the shares of Common Stock issuable upon exercise of the Warrants,
any Additional Warrants and the Reverse Split Warrants will be duly authorized,
validly issued and outstanding, fully paid and nonassessable. Except for the
make-whole arrangement granted by the Company in connection with stockholder
consent for the Reverse Split, a copy of which is attached hereto as Exhibit G,
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and the Reverse Stock Split Warrants, the stockholders of the Company have not
received any additional consideration or rights in connection with the Reverse
Stock Split.
(k) Brokers: Except for Interfinance Inv. Co. Ltd., the Company has not
engaged any finder, broker or investment adviser in connection with the
transactions contemplated hereby.
(l) Elections and Appointments: All necessary corporate action has been
taken by the Company to duly elect Messrs. Xxxxxx Xxxxx and Xxxxx Xxxxxxx to the
Board of
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Directors of the Company, and to duly appoint Xx. Xxxxxx Xxxxx as Chairman of
the Board of Directors and Chief Executive Officer and Xx. Xxxxx Xxxxxxx as
Treasurer. Xx. Xxxxx Xxxx was also elected as Chief Operating Officer of the
Company, but no representation is made as to his continuing presence.
(m) TelePath Limited: The share agreement, dated November 7, 1997, between
the Company and TelePath Ltd. ("Telepath Agreement") has been validly terminated
and the Company has been released from any and all obligations thereunder. No
shares of Common Stock were issued by the Company pursuant to the Telepath
Agreement and the Company has no further obligation with respect thereto.
(n) Subsidiaries: All of the issued and outstanding shares of capital stock
or other equity interests of the Company's Subsidiaries are owned beneficially
and of record by the Company free and clear of any liens, charges or
encumbrances.
30 ACKNOWLEDGMENTS; REPRESENTATIONS AND COVENANTS OF THE SUBSCRIBER WITH
RESPECT TO U.S. SECURITIES LAWS; SECURITIES TRANSFERS.
(a) The Subscriber understands that the Shares and Warrants have not been
registered (i) under the U.S. Securities Act of 1933, as amended (the
"Securities Act") with the SEC in reliance upon the exemption from such
registration requirements afforded by Regulation S under the Securities Act,
governing the offer and sale of securities that occur outside the U.S., or (ii)
with any state securities commission. The Subscriber understands that the Shares
and Warrants may not be offered, sold, transferred or otherwise disposed of in
the U.S., its territories or possessions, or to persons known to be residents of
the U.S. or to a "U.S. person" within the meaning of Regulation S under the
Securities Act ("U.S. Person"; see the definition of U.S. Person annexed hereto
as Exhibit B) until the effectiveness of a registration statement registering
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the Shares and Warrants under the Securities Act or an exemption from the
registration requirements under the Securities Act is available.
(b) The Subscriber hereby represents and Warrants that the Subscriber is
not a resident of the U.S. and is not otherwise deemed to be a U.S. Person.
(c) The Subscriber agrees that if it should resell or transfer the Shares
and Warrants it will do so only (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
other applicable 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 that
has been declared effective under the Securities Act.
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(d) The Subscriber agrees that it will give each person to whom it
transfers the Shares and Warrants notice of any restrictions on transfer of such
Shares and Warrants, if then applicable. If a transfer of Shares and Warrants is
proposed to be made, the holder (or beneficial holder, as the case may be) will
be required to furnish to the Company or the Company's transfer agent, such
certifications, legal opinions, or other information as may reasonably be
requested to confirm that the proposed transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
(e) Each certificate representing the Shares and Warrants will bear the
following legend (unless such Shares and Warrants have been transferred pursuant
to a registration statement that has been declared effective under the
Securities Act):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT: (1) IT WILL NOT
RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY 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 OTHER THEN APPLICABLE 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); (2) PRIOR TO ANY SUCH
TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE), IT WILL
FURNISH TO THE COMPANY OR THE TRANSFER AGENT FOR THE COMMON STOCK SUCH
CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS THE COMPANY OR SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR STATE SECURITIES
LAWS; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK
EVIDENCED HEREBY IS
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TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
(f) The Subscriber understands and agrees that any disposition of the
Shares and Warrants in violation of this Subscription Agreement shall be null
and void, and that no transfer of the Shares and Warrants likely will be made by
the Company or the Company's transfer agent upon the Company's stock transfer
books unless there has been compliance with the terms of this Subscription
Agreement. The Subscriber also understands and agrees that the Company likely
will issue stop transfer instructions to the Company's transfer agent
instructing such transfer agent not to transfer the certificate(s) evidencing
the Shares and Warrants to U.S. Persons, and that any such stop transfer
instructions will only be removed to permit transfers made in compliance with
the terms of this Subscription Agreement.
(g) The Subscriber (i) acknowledges that the Shares and Warrants have not
been registered under the Securities Act and that the Company has an obligation
to so register any of the Shares and Warrants only in accordance with the
Registration Rights Agreement, (ii) represents and Warrants that the Subscriber
is acquiring beneficial ownership of the Shares and Warrants for the
Subscriber's own account and not for the account or benefit of a U.S. Person or
other person, and (iii) agrees that the Subscriber will not transfer or
otherwise dispose of any of the Shares and Warrants unless such transfer or
other disposition is registered under the Securities Act or is in accordance
with Regulation S under the Securities Act or otherwise is exempt from
registration under the Securities Act.
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40 COVENANTS.
4.1 Covenants of the Subscriber. The Subscriber acknowledges that in
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making its decision to subscribe for the Shares and Warrants, it has not relied
upon the advice of any adviser to the Company or of any other third party.
4.2 Covenants of the Company.
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(a) Use of Proceeds: The proceeds of the sale of the Shares will be used
by the Company for general corporate purposes, including, but not limited to,
the satisfaction of liabilities.
(b) Reservation of Shares to be Issued upon Exercise of Warrants: The
Company will reserve the aggregate number of shares issuable upon exercise of
the Warrants and any Additional Warrants, and upon exercise of the Warrants and
any Additional Warrants such shares issued thereof will be validly issued, fully
paid and non-assessable, with no personal liability attaching to the ownership
thereof.
50 RIGHT TO REQUEST PURCHASE OF ADDITIONAL SHARES.
(a) From the date hereof through the sixth monthly anniversary hereof, the
Company shall have the right to request the Subscriber to subscribe for up to
500,000 shares of Common Stock (the "Additional Shares") on the same terms and
conditions as those set forth herein (including without limitation, the same
purchase price per share) by giving the Subscriber notice in writing to the
address specified on the signature page hereof no less than 15 business days
prior to the proposed purchase of such shares of Common Stock (the "Additional
Closing"); provided that at each such Additional Closing the Company shall issue
to the Subscriber the same number and type of Warrants for each Additional
Share (the "Additional Warrants") as is issuable to Subscriber at the Closing;
and provided further that the Subscriber shall have no obligation to purchase
any Additional Shares if on the date of any Additional Closing (i) any of the
representations and warranties contained herein shall be untrue in any material
respect, (ii) the Company is in breach of this Subscription Agreement, the
Registration Rights Agreement , any Warrant or Additional Warrant previously
issued to the Subscriber, (iii) the TMI Agreement shall not have been
terminated or renegotiated in form and substance satisfactory to the Subscriber,
(iv) (A) the Company or its Subsidiaries shall have voluntarily commenced any
proceeding under applicable bankruptcy, insolvency or liquidation of similar
laws, (B) an involuntary proceeding shall have been initiated under any such law
with respect to the Company, any of its Subsidiaries or their respective assets,
(C) a receiver, trustee, custodian, sequestrator or similar official shall have
been appointed with respect to the Company, any of its Subsidiaries or their
respective assets, (D) the Company or its Subsidiaries shall have made a general
assignment for the benefit of their respective creditors or (E) the Company or
any third party shall have taken any
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action with respect to any of the foregoing, (v) the Company or a substantial
part of its assets shall have been sold, transferred or assigned to a third
party or the Company shall have entered into an agreement to effect any of the
foregoing (except for the possible sale of any other assets heretofore disclosed
in writing to Subscriber) or (vi) there shall have occurred an event or
condition which makes the survival of the Company and its Subsidiaries as a
going concern unlikely, or the Company has knowledge that any such event or
condition is reasonably likely to occur.
(b) Together with the first notice given hereunder, the Company shall send
to the Subscriber evidence in writing of the termination or renegotiation of the
TMI Agreement.
(c) At any Additional Closing, the Company shall deliver to the Subscriber
(i) the requisite number of Additional Shares and Additional Warrants and (ii) a
certificate executed by a duly authorized officer of the Company to the effect
that (A) the Company's representations and warranties contained herein are true
and correct as of the date of such Additional Closing, (B) the Company is not in
breach of this Subscription Agreement, the Registration Rights Agreement or any
Warrant or Additional Warrant previously issued to the Subscriber and (C) no
event or condition shall have occurred which would entitle Subscriber not to
purchase Additional Shares pursuant to the provision of Section 5(a) hereof; and
the Subscriber shall deliver to the Company a certificate executed by a duly
authorized officer of the Subscriber to the effect that the representations and
warranties of the Subscriber contained herein are true and correct as of the
date of such Additional Closing.
60 FURTHER ASSURANCES. Each of the parties hereto agrees to execute and
deliver such documents, make such filings and do all such things as are required
by, and to comply with the provisions of the Securities Act, any other
applicable securities legislation and any orders, policies, rules or regulations
of the SEC, the National Association of Securities Dealers, Inc. or other
relevant regulatory authorities concerning the issuance by the Company and the
purchase, holding and resale by the Subscriber of the Shares and Warrants.
70 MODIFICATION. This Subscription Agreement shall not be modified or
waived except by an instrument in writing signed by the party against whom any
such modification or waiver is sought.
80 ASSIGNABILITY. This Subscription Agreement and the rights and
obligations hereunder are not transferable or assignable by the Subscriber.
90 BLUE SKY QUALIFICATION. The Subscriber's right to purchase Shares and
Warrants under this Subscription Agreement are expressly conditioned upon the
exemption from qualification of the offer and sale of the Shares and Warrants
from applicable Federal
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and state securities laws. The Company shall not be required to qualify this
transaction under the securities laws of any jurisdiction and, should
qualification be necessary, the Company shall be released from any and all
obligations to maintain its offer, and may rescind any sale contracted, in the
jurisdiction.
100 SURVIVAL; INDEMNIFICATION.
(a) All of the covenants, representations and warranties of the Subscriber
contained herein shall survive the execution and delivery of this Subscription
Agreement for a period of one year from the date hereof. The Subscriber agrees
to indemnify and hold harmless the Company and each director, officer, employee,
agent or representative thereof from and against any and all loss, damage or
liability and related costs and expenses (including but not limited to,
reasonable attorneys' fees and costs of investigation) due to or arising out of
a breach of any covenant, representation or warranty made by him in this
Subscription Agreement.
(b) All of the covenants, representations and warranties of the Company
contained herein shall survive the execution and delivery of this Subscription
Agreement for a period of one year from the date hereof. The Company agrees to
indemnify and hold harmless the Subscriber from and against all losses
(including reasonable attorneys fees) which are incurred or suffered by reason
of (i) the breach by the Company of any of the representations or warranties
made by the Subscriber herein or any document incorporated herein by reference
or (ii) by reason of the Company to comply with any of the covenants or
agreements contained herein or any document incorporated herein by reference at
or after the Closing.
110 AGREEMENT. The Subscriber agrees that by executing this subscription
agreement an irrevocable agreement of purchase and sale of the Shares and
Warrants shall be created upon its acceptance by the Company. This Subscription
Agreement and the Registration Rights Agreement constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
120 NOTICES. All notices or other communications given or made hereunder
shall be in writing and shall be delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid to the Subscriber at the address
set forth on the signature page hereof, and to the Company at the address set
forth in the first paragraph hereof.
130 OFFERING RESTRICTIONS. The Shares and Warrants have not been
registered under the Securities Act and the Subscriber agrees that it will not
sell any of the Shares and Warrants within the U.S. or to, or for the account or
benefit of, U.S. Persons except pursuant to an effective registration statement
registering the Shares and Warrants under
14
the Securities Act, or pursuant to an exemption from the registration
requirements of the Securities Act.
140 GOVERNING LAW. Notwithstanding the place where this Subscription
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be governed by, and
constituted in accordance with, the laws of the State of Delaware without regard
to the choice of law principles thereof.
150 VALIDITY. The holding of any provision of this Subscription Agreement
to be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Subscription Agreement, which shall remain in
full force and effect.
160 TIME. Time shall be of the essence hereof.
170 INUREMENT. This Subscription Agreement shall inure to the benefit of
and be binding upon the respective legal representatives and successors of the
parties.
180 COUNTERPARTS. This Subscription Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this subscription by
signing any of such counterpart and delivering the same by telex, telecopy,
telegraph, cable or otherwise in writing (each delivery by any of such means to
be deemed to be "in writing" for purposes of this subscription agreement).
_____________________________________
Subscriber: Medfield Investment S.A.
By: /s/ Xxxxx X. Deck
-----------------
Name:____________________________
Title:___________________________
Subscriber's Address for Notices and
Delivery of Securities:
____________________________________
____________________________________
____________________________________
15
With a copy to:
Wuersch & Xxxxxx LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax (000) 000-0000
Subscription accepted as _______________
UTG COMMUNICATIONS INTERNATIONAL INC.
By: /s/ Xxxx Xxxxx
---------------
Name: X. Xxxxx
Title: Director
EXHIBIT A TO SUBSCRIPTION AGREEMENT
INVESTOR QUESTIONNAIRE
----------------------
ALL INVESTORS MUST INITIAL THE FOLLOWING:
----------------------------------------
x The undersigned understands that the representations contained in this
-
Investor Questionnaire qualifying or disqualifying it as an accredited
investor as that term is defined in Rule 501 of Regulation D promulgated
under the Act are made for the purpose of inducing a sale of securities to
the undersigned. The undersigned understands and acknowledges that the
Company will rely upon such representations. The undersigned hereby
represents that the statement or statements initialed below are true and
correct in all respects, and the undersigned will notify the Company
immediately of any material change in any of the information contained in
such statement or statements. The undersigned understands that any false
representations may constitute a violation of law and that any company or
person who suffers damages as a result of such false representations may
have a claim against it for damages.
AN INVESTOR SHOULD INITIAL ANY OF THE FOLLOWING STATEMENTS THAT APPLY TO IT:
---------------------------------------------------------------------------
x (a) The undersigned certifies that it is an accredited investor because it
_ is either (i) a bank as defined in Section 3(a)(2) of the Act, or savings
and loan association or other institution as defined in Section 3(a)(5)(a)
of the Act whether acting in its individual or fiduciary capacity, (ii) a
broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, (iii) an insurance company as defined in Section
2(13) of the Act, (iv) an investment company registered under the
Investment Company Act of 1940 or a business development company registered
under the Investment Company Act of 1940 or a business development company
as defined in Section 2(a)(48) of such Act, (v) a small business investment
company licensed by the United States Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958, (v) a
plan established and maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its political subdivisions, for
the benefit of its employees, if such plan has total assets in excess of
$5,00,000, or (vii) an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if investment decisions are
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or
registered investment adviser, or an employee benefit plan that has total
assets in excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors.
2
(b) The undersigned certifies that it is an accredited investor because it
___ is a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940.
x (c) The undersigned certifies that it is an accredited investor because it
___ is an organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, business trust, or partnership with total assets in
excess of $5,000,000.
x (d) The undersigned certifies that it is an accredited investor because it
___ is a trust, with total asses in excess of $5,000,000, whose purchases of
securities are directed by a person who has such knowledge and experience
in financial and business matters that he/she is capable of evaluating the
merits and risks of an investment in the Company.
(e) The undersigned certifies that it is an accredited investor because it
___ is an entity in which all of the equity owners are accredited investors.
Each such equity owner must also properly complete and submit a Investor
Questionnaire as if such equity owner was a shareholder. If this section
applies a questionnaire for individuals is available upon request from the
Company.
1
EXHIBIT B TO SUBSCRIPTION AGREEMENT
Definition of "U.S. Person"
---------------------------
Regulation S. Rule 902(o) provides:
(1) "U.S. Person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) Any estate of which any executor or administrator is a
U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in the
United States;
(vi) Any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii) Any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States; and
(viii) Any partnership or corporation if: (A) organized or
incorporated under the laws of any foreign jurisdiction; and (B)
formed by a U.S. person principally for the purpose of investing in
securities not registered under the Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in Rule
501(a) who are not natural persons, estates or trusts.
(2) Notwithstanding paragraph (o)(1), of this rule, any discretionary
account or similar account (other than an estate or trust) held for the benefit
or account of a non-U.S. person by a dealer or other professional fiduciary
organized, incorporated, or (if an individual) resident in the United States
shall not be deemed a "U.S. person."
2
(3) Notwithstanding paragraph (o)(1), any estate of which any professional
fiduciary acting as executor or administrator is a U.S. person shall not be
deemed a U.S. person if:
(i) An executor or administrator of the estate who is not a U.S.
person has sole or shared investment discretion with respect to the
assets of the estate; and
(ii) The estate is governed by foreign law.
(4) Notwithstanding paragraph (o)(1), any trust of which any professional
fiduciary acting as trustee is a U.S. person shall not be deemed a U.S. person
if a trustee who is not a U.S. person has sole or shared investment discretion
with respect to the trust assets, and no beneficiary of the trust (and no
settlor if the trust is revocable) is a U.S. person.
(5) Notwithstanding paragraph (o)(1), an employee benefit plan established
and administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country shall not be
deemed a U.S. person.
(6) Notwithstanding paragraph (o)(1), any agency or branch of a U.S.
person located outside the United States shall not be deemed a "U.S. person" if:
(i) The agency or branch operates for valid business reasons;
and
(ii) The agency or branch is engaged in the business of insurance
or banking and is subject to substantive insurance or banking
regulations, respectively, in jurisdictions where located.
(7) The International Monetary Fund, the International Bank of
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar international
organizations, their agencies, affiliates and pension plans shall not be deemed
"U.S. persons."
For the purposes of the foregoing "United States" means the United
States of America, its territories and possessions, any State of the United
States, and the District of Columbia.
3
Exhibit C: Warrant
Exhibit D: Registration Rights Agreement
Exhibit E: Legal Opinion
Exhibit F: List of 5 investors regarding 400,000 shares subscribed but not yet
issued
Exhibit G: Make-whole Agreement
