September 27, 2000
Xxxxxx Science
Chairman & CEO
North American Gateway, Inc.,
000 Xxxxxx Xxxx Xxxx,
Xxxxx 000,
Xxxxxxx, Xxxxxxx
X0X 0X0
Dear Xxx,
RE: Agreement
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Symphony Telecom Inc. ("Symphony") would like to put forth an Agreement for the
acquisition from your group ("Xxxxxx's Group") and treasury of a majority of the
outstanding shares of North American Gateway, Inc ("NAG").
If the following terms are acceptable to you, this Agreement will form the basis
for the preparation of formal and binding Closing Documents by our solicitors.
We would like to close the Agreement on or before October 15, 2000.
It is our understanding that:
a) NAG is an international telecommunications service provider operating
worldwide as a global "Carrier's Carrier" delivering long distance service
to other telecommunications companies.
b) NAG's sales are approx. CAN$73 million per annum;
c) The shares of NAG which are to be acquired are not pledged or other wise
encumbered and the respective owners have the right to sell said shares
subject to the agreement between Xxxxx Xxxxxx-Science and Highpoint
Telecommunications ("Highpoint");
d) The financial status of NAG to be disclosed in the current audited
financial statements will not vary significantly from the representations
provided to Symphony by XXX.
e) The present management of XXX is willing to remain responsible for the
operations of NAG.
f) Any contractual obligations of the company with regard to the current
management will be fully disclosed within 3 days of signing. The Agreement
will be subject to new management contracts being approved by both Symphony
and management.
g) The Agreement is subject to a mutually acceptable shareholder's agreement
being approved by Symphony and Xxxxxx's Group.
Basedon this understanding, Symphony will purchase a controlling interest from
your group (the "Owners") as follows:
Purchase Price $33,000,000 USD payable as follows:
1. Xxxxx Science to trigger the option to rescind her agreement with Highpoint
representing 6,960,000 common shares.
2. Xxxxx will surrender 6,000,000 of said shares to treasury for US$3,000,000 of
preferred non-voting shares of NAG. Redeemable on closing. On closing these NAG
shares will be redeemed for US$500,000 cash and US$2,500,000 of preferred shares
or notes of Symphony. The Preferred shares of Symphony must be redeemed within
30 days of close or they will be converted into common shares of Symphony, at
Xxxxx's option, at $10 per share.
3. Upon Xxxxx receiving her shares back from Highpoint and surrendering them to
treasury, Symphony will purchase 13,900,000 common shares of NAG from treasury
for $30,000,000 USD payable as follows:
o A deposit of US$3,000,000 within 5 days of this Agreement being
signed. If the deal does not close the deposit is converted into a
note, payable in six months, bearing interest at 10% per annum.
o A cash payment of US$5,000,000 at closing.
o Preferred Shares or Notes of Symphony with a value of US$22,000,000
which must be redeemed into cash or become convertible into Common
Shares of Symphony at US$10.00 per share on the following schedule:
US$7,000,000 on January 31, 2001; US$7,000,000 on February 28, 2001;
and US$8,000,000 on March 31, 2001.
4. Symphony will issue a note for US $2 million to Xxxxx. Note is payable in 9
months in cash or Symphony common shares (maximum 50% in shares)
5. Symphony common shares issued to Xxxxx Xxxxxx-Science will be registered upon
Symphony's shares being traded on AMEX. If this does not occur within 120 days
of receipt of shares, as long as the average trading volume is 100,000 shares or
more for 10 consecutive days the company must file to have said shares
registered. After 121 days the shares must be registered notwithstanding the
trading volumes.
6. The Sciences to get $1,500,000 USD worth of Symphony common shares valued at
signing of this Agreement and delivered on the closing date. 7. If the China
deal happens, Symphony must initiate an IPO of NAG within six months of contract
signing. 8. In any case, if an IPO is not done within 24 months, Xxxxx can trade
her NAG shares for Symphony common shares based on a third party independent
valuation.
Summary of proposed structure:
Xxxxx 5,960,000 shares 24.6%
3'rd parties 2,522,000
China 1,100,000
Options 800,000
Symphony 13,900,000 57.24%
North American Gateway is not to enter into any transaction between contract
signing and closing which would have a material adverse affect on North American
Gateway without prior approval.
The purchase price will be subject to the usual adjustments customary in a
transaction of this nature.
The Closing Documents will contain the usual representations and warranties with
respect to the assets and liabilities.
This agreement will be subject to customary closing conditions in favour of
Symphony, Xxxxxx's group and NAG.
This Agreement and the transactions are subject to approval by the directors of
NAG and Symphony respectively.
If the terms of this Agreement are acceptable to you, please sign and return the
duplicate by September 27, 2000. We will then have the Closing Documents
prepared as soon as possible.
Yours very truly,
Symphony Telecom Inc.
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx X. Xxxxxx
President.
Xxxxxxxxxxxx and agreed this " 27 th " day of September, 2000.
/s/ Xxxxxx Science /s/ Xxxxx Xxxxxx-Science
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Per: Xxxxxx X Science Xxxxx Xxxxxx-Science
