Exhibit 10.2
Share Exchange Agreement
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("Agreement"), dated as of
______________, 1999, among GS TELECOM LIMITED ("GST"), a Colorado Corporation,
and Steven C. Gillam (Gillam) and David Andrew Castle (Castle).
W I T N E S S E T H:
A. WHEREAS, GST is a corporation duly organized under the laws of the State
of Colorado, and Gillam and Castle are residents of the U. K.
B. Exchange of Shares. GST and Castle and Gillam agree that 15% of the
ownership interests of
Manex Studios LLC
Manex Visual Effects LLC
Manex Entertainment Ltd
Mass Illusions LLC
(HEREINAFTER THE LLC INTEREST) SHALL BE EXCHANGED TO GST FOR 38,720,000
(THIRTY-EIGHT MILLION SEVEN HUNDRED TWENTY THOUSAND) SHARES OF THE COMMON STOCK
OF GST. EQUAL NUMBERS OF THE GST SHARES, ON THE CLOSING DATE, SHALL BE DELIVERED
TO GILLAM AND CASTLE IN EXCHANGE FOR THEIR INTERESTS AS DESCRIBED ABOVE.
C. WHEREAS, the parties hereto wish to enter into this Agreement,
pursuant to the provisions of the Colorado Statutes.
NOW, THEREFORE, it is agreed among the parties as follows:
ARTICLE I
The Consideration
1.1 Subject to the conditions set forth herein on the "Closing Date"
(as herein defined), Gillam & Castle shall exchange 15% of the outstanding LLC
interest in Manex Studios LLC, Manex Visual Effects LLC, Manex Entertainment
Ltd, Mass Illusions LLC for 38,720,000 (Thirty-Eight Million Seven Hundred
Twenty) (19,360,000 each to Gillam and Castle) common shares of GST stock and
the Agreement for bonus registration as set forth in article 7.7 hereof. The
transactions contemplated by this Agreement shall be completed at a closing
("Closing") on a closing date ("Closing Date") which shall be as soon as
possible after all conditions of this agreement have been met or satisfied.
On the Closing Date, all of the documents, shares and notes to be
furnished to GST and Castle and Gillam, including the documents to be furnished
pursuant to Article VII of this Agreement, shall be delivered to be promptly
distributed to the parties as specified in this Agreement.
ARTICLE II
Issuance and Exchange of Shares
2.1 The shares of no par value common stock of GST shall be issued by
it to Castle and Gillam (or according to their instructions at closing and the
assignment of LLC interests specified in 1.1 shall be delivered to GST, together
with an Agreement as specified in Article 7.7 hereof.
2.2 Other than those previously disclosed in writing, GST represents
that
a. no outstanding options or warrants for its unissued shares exist;
b. all preferred stock of GST due for redemption as of the date hereof shall
have been redeemed as of closing date, if any; and
c. other than the rights accruing to holders of the Convertible Loan Notes
listed in Schedule 4.2, that there are no loans or other instruments which carry
conversion rights giving the holder rights to voting shares in GST at any time
after closing.
ARTICLE III
Representations, Warranties
and Covenants of Castle and Gillam
Subject to the disclosures referred to in 3.3 Castle and Gillam hereby
represent, warrant, and covenant to GST to the best of their knowledge and
belief as follows:
3.1 Castle and Gillam have title to the LLC interest as disclosed to
GST.
3.2 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein will conflict with or result in a breach or violation of any covenant,
promise, or loan agreement entered into previously by Castle and Gillam.
3.3 Castle and Gillam have deduced title to their interest in the LLCs
to GST. As a result of claims to other interests in the LLCs made by third
parties, declaratory relief is being sought by the other LLC shareholders
against whom these claims were made, in the course of which the ownership of
shares by Castle and Gillam will be included. Assurances have been received from
the parties claiming interest against the other LLC shareholders that their
claims do not extend to the shares owned by Castle and Gillam.
3.4 The representations and warranties of Castle and Gillam are true
and correct as of the date hereof.
3.5 All warranties and representations concerning the LLC interests of
Castle and Gillam which are relied upon by GST are contained in this agreement.
3.6 Intellectual Property. As disclosed to GST certain but not all of
the trade names, inventions, discoveries, ideas, research, engineering, methods,
practices, processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how, and trade secrets which are used in the
conduct of business by the LLC's, whether registered or unregistered are owned
by or licensed to Masstech Inc. (collectively the "Proprietary Rights"). The
title to the Proprietary Rights that are not in the public domain in the name of
Masstech Inc has been disclosed to GST and is not in the name of any
shareholder, director, officer, agent, partner or employee or anyone else known
to Masstech Inc(except to the extent that part of the title includes an option
which has not yet been exercised) and none of the same have any right, title,
interest, restriction, lien or encumbrance therein or thereon or thereto. The
LLCs' use of the Proprietary Rights is set out in the title to the Proprietary
Rights.
3.7 Material Contracts. Other than as disclosed in the title to the
Proprietary Rights disclosed to GST there is no material obligation, contract,
agreement, lease, sublease, commitment or understanding of any kind, nature or
description, oral or written, fixed or contingent due or to become due,
existing, or inchoate relating to the Proprietary Rights.
ARTICLE IV
Representations, Warranties and Covenants of GS Telecom Limited
No representations or warranties are made by any director, officer,
employee or shareholder of GST as individuals, except as and to the extent
stated in this Agreement or in a separate written statement.
GST hereby represents, warrants and covenants to Castle and Gillam,
except as stated in the GST Disclosure Statement, as follows both for itself and
it's subsidiary and associated companies:
4.1 (a) GST is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado, and has the corporate
power and authority to own or lease its properties and to carry on its business
as it is now being conducted. The Articles of Incorporation and Bylaws of GST,
copies of which have been delivered to Castle and Gillam, are complete and
accurate, and the minute books of GST contain a record, which is complete and
accurate in all material respects, of all meetings, and all corporate actions of
the shareholders and Board of Directors of GST.
(b) All subsidiary and associated companies of GST have been
formed and have conducted their business in accordance with the laws of the
country and/or state in which they are resident.
4.2 The aggregate number of shares which GST is authorized to issue is
100,000,000 (One Hundred Million) shares of common stock with no par value per
share, of which17, 056,414 (Seventeen Million fifty six Thousand Four Hundred
Fourteen) shares of such common stock will be issued and outstanding, fully paid
and non-assessable, prior to closing under this agreement. GST has no
outstanding options, warrants or other rights to purchase, or subscribe to, or
securities convertible into or exchangeable for any shares of capital stock,
except for the notes with conversion privileges listed in Schedule 4.2. No
preferred stock of GST is outstanding.
4.3 GST has complete and unrestricted power to enter into and, upon the
appropriate approvals as required by law; to consummate the transactions
contemplated by this Agreement.
4.4 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by GST will conflict with or result in a breach or violation of the
Articles of Incorporation or Bylaws of GST or the rules of N.A.S.D.A.Q. and/or
the Securities Exchange Commission (S.E.C.) where appropriate.
4.5 The execution of this Agreement has been duly authorized and
approved by the GST's Board of Directors.
4.6 GST has delivered to Castle and Gillam audited financial statements
of GST and all subsidiary and associated companies dated June 30, 1998. All such
statements, herein sometimes together called "GST Financial Statements" are (and
will be) complete and correct in all material respects and, together with the
notes to these financial statements, present fairly the financial position and
results of operations of GST of the periods indicated. All statements of GST and
its subsidiary and associated companies will have been prepared in accordance
with generally accepted accounting principles.
4.7 Since the dates of the GST Financial Statements, there have not
been any material adverse changes in the business or condition, financial or
otherwise of GST or any subsidiary or associated company. GST does not have any
material liabilities or obligations, secured or unsecured except as shown on
updated financials (whether accrued, absolute, contingent or otherwise)
disclosed to Castle and Gillam in writing prior to the closing and the Closing
Date.
4.8 GST has delivered to Castle and Gillam a full list and description
of all existing pending legal proceedings involving GST, none of which will
materially adversely affect them, and, except for these proceedings, there are
no legal proceedings or regulatory proceedings involving material claims
pending, or, to the knowledge of the officers of GST and its subsidiary and
associated companies, threatened against any of these companies or affecting any
of its assets or properties, and none have committed any material breach or
violation of or default under any contract or instrument to which any of these
companies is a party, and no event has occurred which with the lapse of time or
action by a third party could result in a material breach or violation of or
default under any contract or other instrument to which any of these companies
is a party or by which they or any of their respective properties may be bound
or affected, or under their respective Articles of Incorporation or Bylaws, nor
is there any court or regulatory order pending, applicable to any of these
companies.
4.9 Neither GST or any subsidiary or associated company or agent
thereof shall not enter into or consummate any transactions prior to the Closing
Date other than in the ordinary course of business and will pay no dividend, or
increase the compensation of officers and will not enter into any agreement or
transaction which would adversely affect its financial condition, or issue any
new shares.
4.10 GST or any subsidiary or associated company is not a party to any
contract performable in the future, except as shown in Schedule 4.10.
4.11 The representations and warranties of GST are true and correct as
of the date hereof.
4.12 GST has delivered, or will deliver within four weeks of the date
of this Agreement, to Castle and Gillam, all of its corporate books and records
for review, true and correct copies of GST tax return since 1996, if any. GST
will also deliver Castle and Gillam on or before the Closing Date any reports
relating to the financial and business condition of GST which occur after the
date of this Agreement and any other reports sent generally to its shareholders
after the date of this Agreement.
4.13 GST has no employee benefit plan in effect at this time.
4.14 No representation or warranty by GST in this Agreement, the GST
Disclosure Statement or any certificate delivered pursuant hereto contains any
untrue statement of a material fact or omits to state any material fact
necessary to make such representation or warranty not misleading.
ARTICLE V
Obligations of the Parties Pending the Closing Date
5.1 At all times prior to the Closing Date during regular business
hours, each party will permit the other to examine its books and records and the
books and records of its subsidiaries and will furnish copies thereof on
request. It is recognized that, during the performance of this Agreement, each
party may provide the other parties with information, which is confidential or
proprietary information. During the term of this Agreement, and for four years
following the termination of this Agreement, the recipient of such information
shall protect such information from disclosure to persons, other than members of
its own or affiliated organizations and its professional advisers, in the same
manner as it protects its own confidential or proprietary information from
unauthorized disclosure, and not use such information to the competitive
detriment of the disclosing party. In addition, if this Agreement is terminated
for any reason, each party shall promptly return or cause to be returned all
documents or other written records of such confidential or proprietary
information, together with all copies of such writings and, in addition, shall
either furnish or cause to be furnished, or shall destroy, or shall maintain
with such standard of care as is exercised with respect to its own confidential
or proprietary information, all copies of all documents or other written records
developed or prepared by such party on the basis of such confidential or
proprietary information. No information shall be considered confidential or
proprietary if it is (a) information already in the possession of the party to
whom disclosure is made, (b) information acquired by the party to whom the
disclosure is made from other sources, or (c) information in the public domain
or generally available to interested persons or which at a later date passes
into the public domain or becomes available to the party to whom disclosure is
made without any wrongdoing by the party to whom the disclosure is made.
5.2 GST and Castle and Gillam shall promptly provide each other with
information as to any significant developments in the performance of this
Agreement, and shall promptly notify the other if it discovers that any of its
representations, warranties and covenants contained in this Agreement or in any
document delivered in connection with this Agreement was not true and correct in
all material respects or became untrue or incorrect in any material respect.
5.3 All parties to this Agreement shall take all such action as may be
reasonably necessary and appropriate and shall use their best efforts in order
to consummate the transactions contemplated hereby as promptly as practicable.
ARTICLE VI
Procedure for Exchange
6.1 At the Closing Date, the exchange shall be effected as set forth in
Colorado Laws with common stock certificates of GST being exchanged for the LLC
interests.
ARTICLE VII
Conditions Precedent to the
Consummation of the Exchange
The following are conditions precedent to the consummation of the
Agreement on or before the Closing Date:
7.1 Castle and Gillam shall have performed and complied with all of its
respective obligations hereunder which are to be complied with or performed on
or before the Closing Date and GST and Castle and Gillam shall provide one
another at the Closing with a certificate to the effect that such party has
performed each of the acts and undertakings required to be performed by it on or
before the Closing Date pursuant to the terms of this Agreement.
7.2 Other than as disclosed to GST no action, suit or proceeding shall
have been instituted or shall have been threatened before any court or other
governmental body or by any public authority to restrain, enjoin or prohibit the
transactions contemplated herein, or which might subject any of the parties
hereto or their directors or officers to any material liability, fine,
forfeiture or penalty on the grounds that the transactions contemplated hereby,
the parties hereto or their directors or officers, have violated any applicable
law or regulation or have otherwise acted improperly in connection with the
transactions contemplated hereby.
7.3 The representations warranties and disclosures made by Castle and
Gillam and GST in this Agreement shall be true as though such representations
warranties and disclosures given by each to the other at closing had been made
or given on and as of the Closing Date, except to the extent that such
representations warranties and disclosures may be untrue on and as of the
Closing Date because of (1) changes caused by transactions suggested or approved
in writing by Castle and Gillam or (2) events or changes (which shall not, in
the aggregate, have materially and adversely affected the business, assets, or
financial condition of GST or LLCs) occurring or arising after the date of this
Agreement.
7.4 GST shall furnish Castle and Gillam with a certified copy of a
resolution or resolutions duly adopted by the Board of Directors of GST,
approving this Agreement and the transactions contemplated by it.
7.5 GST shall deliver an Agreement providing deferred compensation,
which shall include in part the following:
(a) A portion of the purchase consideration shall be deferred
until the following mutually agreed gross revenue projections for Universal
Syntropy Inc. are attained or surpassed. These are
Fiscal Year ended June 30, 2000 $ 2,000,000
Fiscal Year ended June 30, 2001 $ 12,000,000 or
Cumulatively by the year ended June 30, 2001 $ 14,000,000
(b) If by the end of the fiscal year ended June 30, 2001 gross revenues
to that date from the fiscal years 1999, 2000, and 2001 have attained
or surpassed the sum of $14,000,000 as a result of the
commercialization by Universal Syntropy Inc of the IPR and software
purchased from Masstech Inc and/or also resulting from the sum of the
share of profits due to GST derived from Interest purchased in Manex
Entertainment Ltd, Manex Visual Effects LLC, Mass Illusions LLC and
Manex Studios LLC or the interests have been sold or otherwise disposed
of then the remaining common shares (full paid and non-assessable) of
the agreed purchase price (deferred until that event) shall be issued
as follows:
Agreed Shares
Shares Consideration Issued
Deferred
Masstech Inc. 6,600,000 4,280,000 2,320,000
Dr. Steven C. Gillam 24,200,000 19,360,000 4,840,000
D Andrew Castle 24,200,000 19,360,000 4,840,000
ARTICLE VIII
Termination and Abandonment
8.1 Anything contained in this Agreement to the contrary
notwithstanding; the Agreement may be terminated and abandoned at any
time prior to the Closing Date:
(a) By mutual consent in writing of Castle and Gillam and GST;
(b) By Castle and Gillam, or GST, if any condition set forth in
Article VII relating to the other party has not been met or
has not been waived;
(c) By Castle and Gillam, or GST, if any suit, action or other
proceeding shall be pending or threatened by the federal or a
state government before any court or governmental agency, in
which it is sought to restrain, prohibit or otherwise affect
the consummation of the transactions contemplated hereby;
(d) By any party, if there is discovered any material error,
misstatement or omission in the representations and warranties
of another party;
(e) By any party if the Agreement Closing Date is not within 30
days from the date hereof; or
(f) Castle and Gillam shall have the right to assign this
agreement to any other entity, at any time, subject to the due
diligence terms herein, provided that it may assign only once
at which time the 30 days contemplated in (e) above shall
begin to run again.
8.2 Any of the terms or conditions of this Agreement may be waived at
any time by the party which is entitled to the benefit thereof, by action taken
by its Board of Directors provided; however, that such action shall be taken
only if, in the judgment of the Board of Directors taking the action, such
waiver will not have a materially adverse effect on the benefits intended under
this Agreement to the party waiving such term or condition.
ARTICLE IX
Termination of Representation and
Warranties and Certain Agreements
9.1 The respective representations and warranties of the parties hereto
shall expire with, and be terminated and extinguished by consummation of the
Agreement; provided, however, that the covenants and agreements of the parties
hereto shall survive in accordance with their terms.
ARTICLE X
Miscellaneous
10.1 This Agreement embodies the entire agreement between the parties,
and there have been and are no agreements, representations or warranties among
the parties other than those set forth herein or those provided for herein.
10.2 All parties to this Agreement agree that if it becomes necessary
or desirable to execute further instruments or to make such other assurances as
are deemed necessary, the party requested to do so will use its best efforts to
provide such executed instruments or do all things necessary or proper to carry
out the purpose of this Agreement.
10.3 This Agreement may be amended upon approval of the Board of
Directors of each party provided that the shares issuable hereunder shall not be
amended without approval of Castle and Gillam.
10.4 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier
service, fees prepaid, addressed as follows:
To Castle and Gillam:
c/o Fox Brooks Marshall (D.A.Castle)
Century House, St. Peter's Square
Manchester,
England
To GS Telecom Limited:
First Floor Hampton House
20 Albert Embankment London, SE1 7TJ
or such other addresses as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
received.
10.5 No press release or public statement will be issued relating to the
transactions contemplated by this Agreement without prior approval of Castle and
Gillam and GST. However, either Castle and Gillam or GST may issue at any time
any press release or other public statement it believes on the advice of its
counsel it is obligated to issue to avoid liability under the law relating to
disclosures, but the party issuing such press release or public statement shall
make a reasonable effort to give the other party prior notice of and opportunity
to participate in such release or statement.
IN WITNESS WHEREOF, the parties have set their hands and seals this _____
day of __________________, 1999.
Steven C. Gillam GS TELECOM LIMITED
__________________________ By:_________________________
Director
David Andrew Castle
__________________________ Attest:_______________________