Exhibit 10.52
AGREEMENT
CONCERNING THE EXCHANGE OF COMMON STOCK
AMONG
AMERICAN CHAMPION ENTERTAINMENT, INC. ("ACEI")
BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD. ("X.X.Xxxxxxx")
and
THE SHAREHOLDERS OF BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD.
TABLE OF CONTENTS
Page No.
ARTICLE 1 - EXCHANGE OF SECURITIES 9
1.1 - Issuance of Shares
9
1.2 - Exemption from Registration
9
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF B.A. Network 9
2.1 - Organization
9
2.2 - Capital
10
2.3 - Subsidiaries
10
2.4 - Directors and Officers
10
2.5 - Financial Statements
10
2.6 - Investigation of Financial Condition
10
2.7 - Compliance with Laws
10
2.8 - Litigation 11
2.9 - Authority 11
2.10 - Ability to Carry Out Obligations
11
2.11 - Full Disclosure
11
2.12 - Material Contracts
11
2.13 - Indemnification
12
2.14 - Transactions with Officers and Directors
12
2.15 - Background of Officers and Directors
12
2.16 - Employee Benefits
13
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF ACEI 13
3.1 - Organization
13
3.2 - Capital
13
3.3 - Subsidiaries
14
3.4 - Directors and Officers
14
3.5 - Financial Statements
14
3.6 - Absence of Changes
14
3.7 - Absence of Undisclosed Liabilities
14
3.8 - Tax Returns
14
3.9 - Investigation of Financial Condition
14
3.10 - Trade Names and Rights 14
3.11 - Compliance with Laws
15
3.12 - Litigation 15
3.13 - Authority 15
3.14 - Ability to Carry Out Obligations
15
3.15 - Validity of ACEI Shares
15
3.16 - Full Disclosure
15
3.17 - Assets
15
3.18 - Material Contracts
16
3.19 - Compliance With SEC Reporting Requirements
16
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 16
4.1 - Share Ownership 16
4.2 - Investment Intent
16
4.3 - (deleted)
17
4.4 - Legend
17
ARTICLE 5 - COVENANTS 17
5.1 - Investigative Rights
17
5.2 - Conduct of Business
18
ARTICLE 6 - CONDITIONS PRECEDENT TO ACEI'S PERFORMANCE 18
6.1 - Conditions 18
6.2 - Accuracy of Representations
18
6.3 - Performance
18
6.4 - Absence of Litigation
18
6.5 - Acceptance by B.A. Network Shareholders
18
6.6 - Officer's Certificate
19
6.7 - Opinion of Counsel to B.A. Network
19
ARTICLE 7 - CONDITIONS PRECEDENT TO B.A. Network'S PERFORMANCE 19
7.1 - Conditions 19
7.2 - Accuracy of Representations
19
7.3 - Performance
20
7.4 - Absence of Litigation
20
7.5 - Current Status
20
7.6 - Directors of ACEI
20
7.7 - Officers of ACEI 20
7.8 - blank
20
7.9 - Officer's Certificate
20
7.10 - Opinion of Counsel
20
ARTICLE 8 - CLOSING 20
8.1 - Closing
20
ARTICLE 9 - MISCELLANEOUS 21
9.1 - Captions and Headings
21
9.2 - Memos, Attachments and Exhibits
21
9.3 - No Oral Change
21
9.4 - Non-Waiver 22
9.5 - Entire Agreement 22
9.6 - Member to B.A. Network's Board of Directors
22
9.7 - Choice of Law
22
9.8 - Counterparts
22
9.9 - Notices
22
9.10 - (deleted) 23
9.11 - Binding Effect
23
9.12 - Mutual Cooperation
23
9.13 - Announcements 23
9.14 - Expenses 23
9.15 - Survival of Representations and Warranties
23
9.16 - Exhibits
24
EXHIBITS
Exhibit 1.1 Allocation of B.A. Network Shares
Exhibit 2.2 Authorized Capital of B.A. Network
Exhibit 2.4 Directors and Officers of B.A. Network
Exhibit 2.5 B.A. Network Financial Statements
Exhibit 2.12 Material Contracts
Exhibit 3.2 Outstanding options and warrants of ACEI
Exhibit 3.3 Subsidiaries of ACEI
Exhibit 3.4 Directors and Officers of ACEI
Exhibit 3.5 ACEI Financial Statements
Exhibit 7.10 Opinion of Counsel of ACEI
Exhibit A B.A. Network's Revenue Projections
AGREEMENT
AGREEMENT, made as of the 27th day of March ,
2000, by and among American Champion Entertainment, Inc. of the United
States of America, a Delaware corporation ("ACEI"), Beijing Wisdom Network
Technology Company, Ltd., a corporation formed under the laws of the
People's Republic of China ("B.A. Network") and the shareholders of
Beijing Wisdom Network Technology Company, Ltd. (the "Shareholders").
This agreement is subject to review by the U.S. Securities and Exchange
Commission ("SEC") and approval by the shareholders of ACEI, and shall
become effective immediately upon satisfactory review by the SEC and
approval by the shareholders at a meeting of the shareholders of ACEI.
Once approval by shareholders is obtained, ACEI shall notify B.A. Network
of the effectiveness of this agreement within the same day.
WHEREAS, ACEI desires to acquire 80.00% of all of the issued and
outstanding shares of B.A. Network, in exchange for a total value of
$4,672,050 of either ACEI authorized but unissued shares of the common
stock, $.0001 par value (the "Exchange Stock"), or partially in cash; and
such Exchange Stock and cash, shall be granted in three parts:
I. A number of shares equal to $300,000 in value, included in the
Exchange Stock, or $300,000 in cash, is payable to B.A. Network as Part I
of the exchange transaction. B.A. Network shall have to right to choose
between payment in shares or in cash, and B.A. Network shall provide ACEI
official written notice of its choice of payment not later than three
business days after to the date of effectiveness of this agreement.
1.1 If B.A. Network elects to be paid in cash, then ACEI
shall transfer by wire the amount of $300,000 into an
account specified by B.A. Network within ten business
days from the date of effectiveness of this agreement.
1.2 If B.A. Network elects to be paid in shares, then ACEI
shall issue and transfer $300,000 in value of ACEI
shares into a stock account specified by B.A. Network
within ten business days from the date of effectiveness
of this agreement.
1.2.1 The price of the shares shall be based on the
average of the daily closing sales prices from
the date of the Letter of Intent to the date of
effectiveness of this agreement.
1.2.2 The shares shall have registration rights and
become freely tradable without restrictions upon
effectiveness of registration.
II. For the year 2000, ACEI shall xxxxx X.X. Network the amount of
US$1,184,097 in shares of ACEI, or in cash, according to the following
projections, as part II of the exchange transaction. B.A. Network shall
have to right to choose between payment in shares or in cash, and B.A.
Network shall provide ACEI official written notice of its choice of
payment not later than three business days after to the delivery of
reviewed financial statements to ACEI via one of the big five U.S.
accounting firms.
B.A. Network Revenue Projections
2000
2001
2002
(To be annually audited & quarterly reviewed
by acceptable U.S. accounting
firm.)
Exchange Rate - RMB / US$ : 8.3 /
1
Gross Revenue (RMB)
65,000,000
80,000,000
95,000,000
Gross Revenue (US$)
$7,831,325
$9,638,554
$11,445,783
Gross Revenue (US$) x 80.00%
$6,265,060
$7,710,843
$9,156,627
EBITDA (earnings before interests, taxes, depreciation &
amortization)
EBITDA (RMB)
3,250,000
4,000,000
4,750,000
EBITDA (US$)
$391,566
$481,928
$572,289
EBITDA (US$) x 80.00%
$313,253
$385,542
$457,831
18% of Gross Revenue, payable
$1,127,711
$1,387,952
$1,648,193
in ACEI common stock
18% of EBITDA, payable
$56,386
$69,398
$82,410
in ACEI common stock
Total payable in ACEI common stock
$1,184,097
$1,457,349
$1,730,603
Total payments over years 2000 to 2002, to be paid in ACEI
common stock,
$4,372,050
2.1 If B.A. Network elects to be paid in cash, and upon the
delivery of reviewed financial statements to ACEI via
one of the big five U.S. accounting firms, then ACEI
shall make the following quarterly payments:
2.1.1 Within 10 business days, ACEI shall make payment
by wire transfer to an account specified by B.A.
Network of the amount of
(Gross Revenue + EBITDA) x 80% x 18% x 50%
for Gross Revenue and EBITDA amounts that are
less than or equal to the figures in the above
table,
and
(Gross Revenue + EBITDA) x 80% x 18% x 20%
for Gross and EBITDA amounts that are more than
the figures in the above table.
2.1.2 Within 6 months, ACEI shall make payment by wire
transfer to an account specified by B.A. Network
of the amount of
(Gross Revenue + EBITDA) x 80% x 18% x 20%
for Gross Revenue and EBITDA amounts that are
less than or equal to the figures in the above
table,
and
(Gross Revenue + EBITDA) x 80% x 18% x 40%
for Gross and EBITDA amounts that are more than
the figures in the above table.
2.1.3 Within 9 months, ACEI shall make payment by wire
transfer to an account specified by B.A. Network
of the amount of
(Gross Revenue + EBITDA) x 80% x 18% x 20%
for Gross Revenue and EBITDA amounts that are
less than or equal to the figures in the above
table.
2.1.4 Within 12 months, ACEI shall make payment by wire
transfer to an account specified by B.A. Network
of the amount of
(Gross Revenue + EBITDA) x 80% x 18% x 10%
for Gross Revenue and EBITDA amounts that are
less than or equal to the figures in the above
table,
and
(Gross Revenue + EBITDA) x 80% x 18% x 40%
for Gross and EBITDA amounts that are more than
the figures in the above table.
2.2 If B.A. Network elects to be paid in shares, and within
ten business days from the delivery of quarterly
reviewed financial statements to ACEI via one of the big
five U.S. accounting firms, then ACEI shall issue and
transfer the amount of ACEI common stock, based on 80%
X 18% of the Gross Revenue and EBITDA according to the
figures in the above table, into a stock account
specified by B.A. Network. The price of the shares
shall be the average of the closing sales prices of ACEI
shares within the applicable quarter, and be subject to
the following restrictions:
2.2.1 For amounts less than and equal to the above
tabulation, 50% shall not have restrictions, 20%
shall be restricted from sales for 6 months from
the date of issuance, 20% restricted for 9
months, and 10% restricted for 12 months.
2.2.2 For amounts more than the above tabulation, 20%
shall not have restrictions, 40% shall be
restricted from sales for 6 months from the date
of issuance, and 40% shall be restricted for 12
months.
III. As part III of the exchange transaction, ACEI shall issue
shares of ACEI common stock to B.A. Network for the years 2001 and 2002,
based of figures in the above table.
3.1 Within ten business days from the delivery of quarterly
reviewed financial statements to ACEI via one of the big
five U.S. accounting firms, then ACEI shall issue and
transfer the amount of ACEI common stock, based on 80%
X 18% of the Gross Revenue and EBITDA according to the
figures in the above table, into a stock account
specified by B.A. Network.
3.2 The price of the shares shall be the average of the
closing sales prices of ACEI shares within the
applicable quarter, and be subject to the following
restrictions:
3.2.1 For amounts less than and equal to the above
tabulation, 50% shall not have restrictions, 20%
shall be restricted from sales for 6 months from
the date of issuance, 20% restricted for 9
months, and 10% restricted for 12 months.
3.2.2 For amounts more than the above tabulation, 20%
shall not have restrictions, 40% shall be
restricted from sales for 6 months from the date
of issuance, and 40% shall be restricted for 12
months.
WHEREAS, the Shareholders desire to exchange their B.A. Network
shares for the Exchange Stock as set forth herein; and
WHEREAS, B.A. Network desires to assist ACEI in a business
combination which will result in the Shareholders of B.A. Network owning
approximately 16% of the then issued and outstanding shares of ACEI's
Common Stock (with the understanding that since ACEI is currently in an
expansion phase with multiple acquisition candidates in negotiation, the
actual resulting ownership by B.A. Network of ACEI may be significantly
less) and ACEI owning 80.00% of the issued and outstanding shares of B.A.
Network's Capital Stock;
NOW, THEREFORE, in consideration of the mutual promises, covenants
and representations contained herein, the parties hereto agree as follows:
ARTICLE I
Exchange of Securities
1.1 Issuance of Shares. Subject to all of the terms and
conditions of this Agreement, ACEI agrees to issue to the Shareholders the
shares of the Exchange Stock, or partially in cash, as described above in
exchange for 80.00% of all of the outstanding shares of B.A. Network
capital stock owned by the Shareholders, as set forth on Exhibit 1.1.
1.2 Exemption from Registration. Except as specified above for
issuance of shares with registration rights, the parties hereto intend
that the Common Stock to be issued by ACEI to the Shareholder shall be
exempt from the registration requirements of the Securities Act of 1933,
as amended (the "Act") pursuant to Section 4(2) of the Act and the rules
and regulations promulgated thereunder.
ARTICLE 2
Representations and Warranties of B.A. Network
B.A. Network and the Shareholders of B.A. Network represent to ACEI
that:
2.1 Organization. B.A. Network is a corporation duly organized and
validly existing and in good standing under the laws of the People's
Republic of China and has all necessary corporate powers to own its
properties and to carry on its business as now owned and operated by it,
and is duly qualified to do business and is in good standing where its
business requires qualification. (Further legal descriptions of B.A.
Network, if necessary, such as transfer of assets and liabilities of
another entity, etc).
2.2 Capital. The authorized capital stock of B.A. Network is as
set forth on the annexed Exhibit 2.2, a copy of which is annexed hereto
and made a part hereof. The shares currently outstanding are owned by the
Shareholders. All of the issued and outstanding shares of B.A. Network
are duly and validly issued, fully paid, and non-assessable. There are no
outstanding subscriptions, options, rights, warrants, debentures,
instruments, convertible securities, or other agreements or commitments
obligating B.A. Network to issue or to transfer from treasury any
additional shares of its capital stock of any class.
2.3 Subsidiaries. As of the date of this Agreement, B.A. Network
does not have any subsidiaries or own any interest in any other
enterprise.
2.4 (a) Directors and Officers. Exhibit 2.4 to this Agreement, the
text of which is incorporated herein by reference, contains the names and
titles of all directors and officers of B.A. Network as of the date of
this Agreement.
2.5 (b) Financial Statements. The B.A. Network financial
statements are to be audited by a reputable international auditing firm
for the year ending December 31, 1999 which are annexed hereto as Exhibit
2.5 and must be delivered to ACEI prior to the Closing. Such financial
statements are to be complete, accurate and fairly present the financial
condition of B.A. Network as of the date thereof and the results of
operations for the year ending December 31, 1999, for the business of B.A.
Network that has been operated in the normal course.
There are no material liabilities, either fixed or contingent, not
reflected in such financial statements other than contracts or obligations
in the ordinary and usual course of business; and no such contracts or
obligations in the usual course of business constitute liens or other
liabilities which, if disclosed, would materially alter the financial
condition of B.A. Network as reflected in such financial statements. The
financial statements of B.A. Network are incorporated herein by reference
and deemed to be a part hereof.
2.6 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein,
ACEI and/or its attorneys shall have the opportunity to meet with
accountants and attorneys of ACEI to discuss the financial condition of
B.A. Network. B.A. Network shall make available to ACEI and/or its
attorneys all books and records of B.A. Network. If the transaction
contemplated hereby is not completed, all documents received by ACEI
and/or its attorneys shall be returned to B.A. Network and all information
so received shall be treated as confidential.
2.7 Compliance with Laws. B.A. Network has complied with and are
not in violation of applicable national, state or local statutes, laws and
regulations (including, without limitation, any applicable building,
zoning or other law, ordinance or regulation) affecting its properties or
the operation of its business. All national, state and local income tax
returns required to be filed by B.A. Network have been filed and all
required taxes have been paid or an adequate reserve therefor has been
established in the financial statements. B.A. Network's tax returns have
not been audited by any authority empowered to do so.
2.8 Litigation. Neither B.A. Network nor the Shareholders are a
party to any suit, action, arbitration or legal, administrative or other
proceeding, or governmental investigation pending or, to the best
knowledge of B.A. Network and the Shareholders, threatened against or
affecting B.A. Network or the Shareholders, their assets or financial
condition, except for matters which would not have a material effect on
B.A. Network, the Shareholders or their respective properties. Neither
B.A. Network nor the Shareholders are in default with respect to any
order, writ, injunction or decree of any national, state, local or foreign
court, department, agency or instrumentality applicable to it. Neither
B.A. Network nor Shareholders are engaged in any lawsuits to recover any
material amount of moneys due to B.A. Network or Shareholders.
2.9 Authority. The Board of Directors of B.A. Network has
authorized the execution of this Agreement and the consummation of the
transactions contemplated herein, and upon obtaining any necessary
shareholder approval, B.A. Network will have full power and authority to
execute, deliver and perform this Agreement and this Agreement will be a
legal, valid and binding obligation of B.A. Network, enforceable in
accordance with its terms and conditions, except as may be limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally.
2.10 Ability to Carry Out Obligations. The execution and delivery
of this Agreement by B.A. Network and the performance by B.A. Network of
its obligations hereunder in the time and manner contemplated will not
cause, constitute or conflict with or result in (a) any breach or
violation of any of the provisions of or constitute a default under any
license, indenture, mortgage, charter, instrument, articles of
incorporation, by-laws, or other agreement or instrument to which B.A.
Network or Shareholders are a party or by which either may be bound, nor
will any consents or authorizations of any party other than those hereto
be required; (b) an event that would permit any party to any agreement or
instrument, to terminate it or to accelerate the maturity of any
indebtedness or other obligation of B.A. Network or Shareholders; or (c)
an event that would result in the creation or imposition of any lien,
charge, or encumbrance on any asset of B.A. Network or Shareholders.
2.11 Full Disclosure. None of the representations and warranties
made by B.A. Network and the Shareholders herein, or in any exhibit,
certificate or memorandum furnished or to be furnished by B.A. Network, or
on its behalf, contains or will contain any untrue statement of material
fact, or omit any material fact, the omission of which would be
misleading.
2.12 Material Contracts. Neither B.A. Network nor the Shareholders
has any material contracts to which either is a party or by which they are
bound, except for those agreements set forth on the annexed hereto as
Exhibit 2.12.
2.13 Indemnification. B.A. Network and the Shareholders agree to
defend and hold harmless ACEI, its officers and directors against and in
respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and reasonable attorney's fees, that it shall incur or
suffer, which arise out of, result from or relate to any breach of or
failure by B.A. Network to perform any of its respective representations,
warranties, covenants and agreements in this Agreement or in any exhibit
or other instrument furnished or to be furnished by B.A. Network under
this Agreement.
2.14 Transactions with Officers and Directors. Except as otherwise
disclosed in B.A. Network's financial statements dated December 31, 1999
and delivered to ACEI, there have been, and through the date of Closing
there will be (1) no bonuses or unusual compensation to any of the
officers or directors of B.A. Network; (2) no loans, leases or contracts
made to or with any of the officers or directors of B.A. Network; (3) no
dividends or other distributions declared or paid by B.A. Network; and (4)
no purchases by B.A. Network of any of its capital shares.
2.15 Background of Officers and Directors. During the past five
year period, no officer or director of B.A. Network has been the subject
of:
(a) A petition under the U.S. Federal Bankruptcy laws or any
other insolvency law or has a receiver, fiscal agent or similar officer
been appointed by a court for the business or property of such person, or
any partnership in which he was a general partner at or within two years
before the time of such filing, or any corporation or business association
of which he was an executive officer at or within two years before the
time of such filing;
(b) A conviction in the United States in a criminal
proceeding or a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
(c) Any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from, or otherwise limiting, the
following activities:
(i) Acting as a futures commission merchant,
introducing broker, commodities trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person regulated by
the United States Commodity Futures Trading Commission or an associated
person of any of the foregoing, or as an investment advisor, underwriter,
broker or dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan association or
insurance company, or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase and sale of any security or commodity or in connection with any
violation of U.S. Federal, State or other securities law or commodities
law.
(d) Any order, judgment, decree, not subsequently reversed,
suspended or vacated, of any U.S. Federal, State or local authority
barring, suspending, or otherwise limiting for more than 60 days the right
of such person to engage in any activity described in the preceding sub-
paragraph, or to be associated with persons engaged in any such activity;
(e) a finding by any court of competent jurisdiction in a
civil action or by the United States Securities and Exchange Commission to
have violated any securities law, and the judgment in such civil action or
finding by such Commission has not been subsequently reversed, suspended
or vacated; or
(f) a finding by any court of competent jurisdiction in a
civil action or by the United States Commodity Futures Trading Commission
to have violated any commodities law, and the judgment in such civil
action or finding by such Commission has not been subsequently reversed,
suspended or vacated.
2.16 Employee Benefits. B.A. Network does not have any pension
plan, profit sharing or similar employee benefit plan.
ARTICLE 3
Representations and Warranties of ACEI
ACEI represents and warrants to B.A. Network that:
3.1 Organization. ACEI is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, and has all
necessary corporate powers to own properties and to carry on business.
3.2 Capital. The authorized capital stock of ACEI consists of
40,000,000 shares of Common Stock, par value $.0001 per share and
6,000,000 shares of Preferred Stock, par value $.0001 per share, which may
be issued in one or more series at the discretion of the board of
directors. As of the date of this Agreement, there were approximately
6,000,000 shares of Common Stock outstanding, all of which were fully paid
and non-assessable, and there was no Preferred Stock outstanding. Except
for the Options and common stock purchase warrants as listed in Exhibit
3.2 and convertible debentures that ACEI has sold and that the underlying
common stock are registered on Form S-3's filed with the U.S. Securities
and Exchange Commission in February 2000, there are no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating ACEI to issue or to transfer from
treasury any additional shares of its capital stock of any class.
3.3 Subsidiaries. ACEI's subsidiaries are identified on Exhibit
3.3, annexed hereto and made a part hereof.
3.4 Directors and Officers. Exhibit 3.4, annexed hereto and hereby
incorporated herein by reference, contains the names and titles of all
directors and officers of ACEI as of the date of this Agreement.
3.5 Financial Statements. Exhibit 3.5, annexed hereto and
incorporated herein by reference, consists of the ACEI audited financial
statements as of December 31, 1998, and unaudited financial statements for
the three month periods ended March 31, 1999 and June 30, 1999.
3.6 Changes Since December 31, 1998. Since December 31, 1998,
there has been not been any adverse change in the financial condition and
operations of ACEI.
3.7 Absence of Undisclosed Liabilities. As of Xxxxxxxx 00, 0000,
XXXX does not have any material debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and whether
due or to become due, that is not reflected in ACEI balance sheet as of
December 31, 1998 or as presented in the Notes to the Financial
Statements. There have been no new liabilities incurred since December
31, 1998, except for those described in the reports for the three month
periods ended March 31, 1999 and June 30, 1999 and those incurred in the
ordinary course of business and in connection with this transaction.
3.8 Tax Returns. Within the times and in the manner prescribed by
law, ACEI has filed all federal, state and local tax returns required by
law and has paid all taxes, assessments and penalties due and payable.
The provisions for taxes, if any, reflected in the balance sheet included
in Exhibit 3.5 is adequate for any and all federal, state, county and
local taxes for the period ending on the date of such balance sheet and
for all prior periods, whether or not disputed. There are no present
disputes as to taxes of any nature payable by ACEI.
3.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein,
B.A. Network shall have the opportunity to meet with ACEI's accountants
and attorneys to discuss the financial condition of ACEI. ACEI shall make
available to B.A. Network all books and records of ACEI.
3.10 Trade Names and Rights. Except for the subsidiaries of ACEI
as described in Exhibit 3.3 which own trademark and copyrights of
intellectual properties, ACEI does not use any trademark, service xxxx,
trade name, or copyright in its business, or own any trademarks, trademark
registrations or applications. To the best knowledge of ACEI, no person
owns any trademark, trademark registration or application, service xxxx,
trade name, copyright, or copyright registration or application the use of
which is necessary or contemplated in connection with the operation of
ACEI's business as a holding company.
3.11 Compliance with Laws. ACEI has complied with and is not in
violation of applicable federal, state or local statutes, laws or
regulations (including, without limitation, any applicable building,
zoning, securities or other law, ordinance, or regulation) affecting its
properties or the operation of its business.
3.12 Litigation. ACEI is not a party to any suit, action,
arbitration, or legal, administrative, or other proceeding, or
governmental investigation pending or, to the best knowledge of ACEI,
threatened against or affecting ACEI or its business, assets or financial
condition. ACEI is not engaged in any legal action to recovery moneys due
to it.
3.13 Authority. The Board of Directors and Shareholders of ACEI
have authorized the execution of this Agreement and the transactions
contemplated herein, and ACEI has full power and authority to execute,
deliver and perform this Agreement and this Agreement is the legal, valid
and binding obligation of ACEI, is enforceable in accordance with its
terms and conditions, except as may be limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors
generally.
3.14 Ability to Carry Out Obligations. The execution and delivery
of this Agreement by ACEI and the performance by ACEI of its obligations
hereunder will not cause, constitute, or conflict with or result in (a)
any breach or violation of any of the provisions of or constitute a
default under any license, indenture, mortgage, charter, instrument,
articles of incorporation, by-laws, or other agreement or instrument to
which ACEI is a party, or by which it may be bound, nor will any consents
or authorizations of any party other than those hereto be required; (b) an
event that would permit any party to any agreement or instrument to
terminate it or to accelerate the maturity of any indebtedness or other
obligation of ACEI; or (c) an event that would result in the creation or
imposition of any lien, charge, or encumbrance on any asset of ACEI.
3.15 Validity of ACEI Shares. The shares of ACEI Common Stock to
be delivered pursuant to this Agreement, when issued in accordance with
the provisions of this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable.
3.16 Full Disclosure. None of the representations and warranties
made by ACEI herein, or in any exhibit, certificate or memorandum
furnished or to be furnished by ACEI, or on its behalf, contains or will
contain any untrue statement of material fact, or omit any material fact,
the omission of which would be misleading.
3.17 Assets. ACEI has good and marketable title to all of its
property free and clear of any and all liens, claims and encumbrances,
except as disclosed in its financial statements.
3.18 Material Contracts. Except as otherwise disclosed in this
agreement and in its Report on From 10-KSB for the year ended December 31,
1998 and the three month periods ended March 31, 1999 and June 30, 1999,
ACEI has no material contracts to which it is a party or by which it is
bound.
3.19 Complience With SEC Reporting Requirements. The Common Stock of
ACEI is registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). ACEI has duly filed all materials
and documents required to be filed pursuant to all reporting obligations
under either Section 13(a) or 15(d) of the Exchange Act prior to the
consummation of the transaction contemplated hereby. The Common Stock of
ACEI is currently traded on the Nasdaq SmallCap Market.
ARTICLE 4
Representations and Warranties of Shareholders
4.1 Share Ownership. The Shareholders represent that they hold
shares of B.A. Network's common stock as set forth in Exhibit 2.2 hereof,
and that such shares are owned of record and beneficially by such
shareholders, and such shares are not subject to any lien, encumbrance or
pledge, and are restricted securities as defined in Rule 144 of the
Securities Act of 1933. The Shareholders severally represent that they
hold authority to exchange their shares pursuant to this Agreement.
4.2 Investment Intent. The Shareholders understand and acknowledge
that the shares of Exchange Stock are being offered for exchange in
reliance upon the exemption provided in Section 4(2) of the Securities Act
of 1933 for non-public offerings; and The Shareholders make the following
representations and warranties with the intent that same may be relied
upon in determining the suitability of each such shareholder as a
purchaser of securities. In the event the following representations and
warranties may cause discrepancies from the meanings of above sections I,
II, & III (particularly the descriptions of "not restricted" and "freely
tradable"), then the meanings of above sections I, II, & III shall
prevail.
(a) The Shareholders acknowledge that the Exchange Stock being
acquired solely for the account of such Shareholders, for investment
purposes only, and not with a view towards or for sale in connection with
any distribution thereof, and with no present intention of distributing or
re-selling any part of the Exchange Stock;
(b) The Shareholders agree not to dispose of his Exchange
Stock, or any portion thereof unless and until counsel for ACEI shall have
determined that the intended disposition is permissible and does not
violate the Securities Act of 1933 or any applicable state securities
laws, or the rules and regulations thereunder;
(c) The Shareholders acknowledge that ACEI has made all
documentation pertaining to all aspects of the herein transaction
available to them and to their qualified representatives, if any, and has
offered such person or persons an opportunity to discuss such transaction
with the officers of ACEI;
(d) The Shareholders represent that they have relied solely
upon ACEI's Report on Form 10-KSB for the period ended December 31, 1998
and all other filings made by ACEI with the Securities and Exchange
Commission and independent investigations made by the Shareholders or
their representatives, if any;
(e) The Shareholders represent that they are knowledgeable
and experienced in making and evaluating investments of this nature and
desire to acquire the Exchange Stock on the terms and conditions herein
set forth;
(f) The Shareholders represent that they are able to bear the
economic risk of an investment, as a result of the herein transaction, in
the Exchange Stock;
(g) The Shareholders represent that they understand that an
investment in the Exchange Stock is not liquid, and The Shareholders
represent that they have adequate means of providing for their current
needs and personal contingencies and have no need of liquidity in this
investment; and
(h) The Shareholders represent that they are an "accredited
investor" as that term is defined in Rule 501 of Regulation D, promulgated
under the Securities Act of 1933.
4.3 (deleted)
4.4 Legend. The Shareholders agree that the certificates
evidencing the Exchange Stock acquired pursuant to this Agreement will
have a legend placed thereon stating that the securities have not been
registered under the Act or any state securities laws and setting forth or
referring to the restrictions on transferability and sale of such
securities.
ARTICLE 5
Covenants
5.1 Investigative Rights. From the date of this Agreement until
the Closing Date, ACEI and B.A. Network shall provide to each other, and
such other party's counsels, accountants, auditors and other authorized
representatives, full access during normal business hours and upon
reasonable advance written notice of each party's properties, books,
contracts, commitments and records for the purpose of examining the same.
Each party shall furnish the other party with all information concerning
each party's affairs as the other party may reasonably request.
5.2 Conduct of Business. Prior to the Closing, ACEI and B.A.
Network shall each conduct its business in the normal course, and shall
not sell, pledge, or assign any assets, without the prior written approval
of the other party except in the regular course of business or as part of
the transactions contemplated hereby. Neither ACEI nor B.A. Network shall
amend its Articles of Incorporation or By-laws, declare dividends, redeem
or sell stock or other securities, incur additional or newly funded
liabilities, acquire or dispose of fixed assets, change employment terms,
enter into any material or long term contract, guarantee obligations of
any third party, settle or discharge any balance sheet receivable for less
than its stated amount, pay more on any liability than its stated amount,
or enter into any other transaction other than in the regular course of
business.
ARTICLE 6
Conditions Precedent to ACEI's Performance
6.1 Conditions. ACEI's obligations hereunder shall be subject to
the satisfaction, at or before the Closing, of all the conditions set
forth in this Article 6. ACEI may waive any or all of these conditions in
whole or in part without prior notice; provided, however, that no such
wavier of a condition shall constitute a waiver by ACEI of any other
condition or of any of ACEI's other rights or remedies, at law or in
equity, if B.A. Network or the Shareholders shall be in default of any of
their representations, warranties or covenants under this Agreement.
6.2 Accuracy of Representations. Except as otherwise permitted by
this Agreement, all representations and warranties by Shareholders and
B.A. Network in this Agreement or in any written statement that shall be
delivered to ACEI by B.A. Network under this Agreement shall be true and
accurate on and as of the Closing Date as though made at that time.
6.3 Performance. B.A. Network shall have performed, satisfied, and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it, on or before the Closing
Date.
6.4 Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the
transaction contemplated by this Agreement or to its consummation, shall
have been instituted or threatened against B.A. Network or the
Shareholders on or before the Closing Date.
6.5 Acceptance by B.A. Network Shareholders. The holders of an
aggregate of not less than 100% of the issued and outstanding shares of
common stock of B.A. Network shall have agreed to exchange a percentage of
their shares as stipulated in this Agreement, for shares of the Exchange
Stock.
6.6 Officer's Certificate. B.A. Network shall have delivered to
ACEI a certificate, dated the Closing Date, and signed by the President of
B.A. Network, certifying that each of the conditions specified in Sections
6.2 through 6.5 hereof have been fulfilled.
6.7 Opinion of Counsel to B.A. Network. B.A. Network shall have
delivered to ACEI an opinion of its Chinese and United States counsel, as
applicable, dated the Closing date, to the effect that:
(a) B.A. Network is a corporation duly organized, validly
existing and in good standing under the laws of the People's Republic of
China and the City of Beijing;
(b) The authorized capital stock of B.A. Network is as set
forth on the annexed Exhibit 2.2, a copy of which is annexed hereto and
made a part hereof. All issued and outstanding shares are legally issued.
(c) This Agreement has been duly and validly authorized,
executed and delivered and constitutes the legal and binding obligation of
B.A. Network, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally; and
ARTICLE 7
Conditions Precedent to
B.A. Network's and Shareholders' Performance
7.1 Conditions. B.A. Network's and Shareholders' obligations
hereunder shall be subject to the satisfaction, at or before the Closing,
of all the conditions set forth in this Article 7. B.A. Network and
Shareholders may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by B.A. Network and Shareholders of
any other condition or of any of B.A. Network's and Shareholders' rights
or remedies, at law or in equity, if ACEI shall be in default of any of
its representations, warranties or covenants under this Agreement.
7.2 Accuracy of Representations. Except as otherwise permitted by
this Agreement, all representations and warranties by ACEI in this
Agreement or in any written statement that shall be delivered to B.A.
Network and Shareholders by ACEI under this Agreement shall be true and
accurate on and as of the Closing Date as though made at that time.
7.3 Performance. ACEI shall have performed, satisfied, and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it, on or before the Closing
Date.
7.4 Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the
transaction contemplated by this Agreement or to its consummation, shall
have been instituted or threatened against ACEI on or before the Closing
Date, except as disclosed herein.
7.5 Current Status. ACEI shall have prepared and filed with the
Securities and Exchange Commission its Annual Report on Form 10-KSB for
the period ended December 31, 1998 and its Quarterly Report on Form 10-QSB
for the three month periods ended March 31, 1999 and June 30, 1999.
7.6 Directors of ACEI. ACEI's Board of Directors shall remain to
serve until a new board is elected at the next annual meeting of
stockholders in the year 2000.
7.7 Officers of ACEI. ACEI's officers shall remain in their office
as per terms of their employment agreements.
7.8 Intentionally Left Blank
7.9 Officers' Certificate. ACEI shall have delivered to B.A.
Network and Shareholders a certificate, dated the Closing Date and signed
by the President of ACEI certifying that each of the conditions specified
in Sections 7.2 through 7.7 have been fulfilled.
7.10 Opinion of Counsel. ACEI shall deliver an opinion of its
counsel in the form annexed hereto as Exhibit 7.10;
ARTICLE 8
Closing
8.1 Closing. The Closing of this transaction shall be held at the
offices of Sichenzia, Ross & Xxxxxxxx LLP, Esqs., 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or such other place as shall be mutually agreed
upon, on ______________________ , 2000 or such other date as shall be
mutually agreed upon by the parties. At the Closing:
(a) Shareholder shall present the certificates representing
their shares of B.A. Network being exchanged to ACEI, and such
certificates will be duly endorsed in blank;
(b) Shareholders shall receive a certificate or certificates
representing the number of shares of ACEI Common Stock for which the
shares of B.A. Network common stock shall have been exchanged;
(c) ACEI shall deliver an officer's certificate, as described
in Section 7.9 hereof, dated the Closing Date, that all representations,
warranties, covenants and conditions set forth in this Agreement on behalf
of ACEI are true and correct as of, or have been fully performed and
complied with by, the Closing Date;
(d) ACEI shall deliver a resolution of its Board of Directors
of ACEI approving this Agreement and each matter to be approved by the
Directors of ACEI under this Agreement;
(e) ACEI shall deliver an opinion of its counsel, as
described in Section 7.10 hereof, dated the Closing Date;
(f) B.A. Network shall deliver an officer's certificate, as
described in Section 6.6 hereof, dated the Closing Date, that all
representations, warranties, covenants and conditions set forth in this
Agreement on behalf of B.A. Network are true and correct as of, or have
been fully performed and complied with by, the Closing Date.
(g) B.A. Network shall deliver an opinion of its counsel, as
described in Section 6.7 hereof, dated the Closing Date; and
(h) B.A. Network shall deliver resolutions of its Board of
Directors approving this Agreement and each matter to be approved by the
Directors of B.A. Network under this Agreement.
ARTICLE 9
Miscellaneous
9.1 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and
shall in no way be deemed to define, limit, or add to the meaning of any
provision of this Agreement.
9.2 Memos, Attachments & Exhibits. Any memos, attachments &
exhibits signed by the parties are vital segments of this agreement and
are valid and binding between the parties along with this agreement.
9.3 No Oral Change. This Agreement and any provision hereof may
not be waived, changed, modified or discharged orally, but it can be
changed by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
9.4 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the
party against whom such waiver is charged; and (i) the failure of any
party to insist in any one or more cases upon the performance of any of
the provisions, covenants or conditions of this Agreement or to exercise
any option herein contained shall not be construed as a waiver or
relinquishment for the future of any such provisions, covenants or
conditions; (ii) the acceptance of performance of anything required by
this Agreement to be performed with knowledge of the breach of failure of
a covenant, condition or provision hereof shall not be deemed a waiver of
such breach or failure; and (iii) no waiver by any party of one breach by
another party shall be construed as a waiver with respect to any other or
subsequent breach.
9.5 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties hereto and supersedes all prior
agreements and understandings.
9.6 Member to B.A. Network's Board of Directors. Upon the
effectiveness of this agreement, ACEI shall appoint one member to B.A.
Network's Board of Directors.
9.7 Choice of Law. This Agreement and its application shall be
governed by the laws of the United States of America and by the laws of
the People's Republic of China. Disputes between the parties shall be
settled amicable between the parties. In the event disputes cannot be
settled by the parties themselves, then the matter shall be handed over to
arbitration in a third country to be mutually agreed upon between the
parties.
9.8 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement may be in the English and Chinese languages. In the event of
discrepancies between the two languages, the parties shall amicably
negotiate to settle the disputes.
9.9 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of service if served personally
on the party to whom notice is to be given, or on the third day after
mailing if mailed to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid, and properly
addressed as follows:
To ACEI:
Xx. Xxxxxxx X. Xxxx
President & CEO
American Champion Entertainment, Inc.
0000 Xxx Xxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
U. S. A.
Phone: 0-000-000-0000
Fax: 0-000-000-0000
E-mail: x.xxxx@xxxxxxxxxxxxx.xxx
To B.A. Network:
Xx. Xxx, Tao
General Manager
Beijing Wisdom Network Technology Company, Ltd.
Xx. 000 Xxx Xxxx Xxx Xxxx, Xxxx Xxxxxxx
Xx Xxxx Xxxxxxxx, X-000
Xxxxxxx Xxxxxxxx
Xxxxxxx
Xxxxxx'x Xxxxxxxx of China
Phone: 00-00-0000-0000
Fax: 00-00-0000-0000
E-mail: xxxxxx@xxxxx.xxx.xx
9.10 (deleted)
9.11 Binding Effect. This Agreement shall inure to and be binding
upon the heirs, executors, personal representatives, successors and
assigns of each of the parties to this Agreement.
9.12 Mutual Cooperation. The parties hereto shall cooperate with
each other to achieve the purpose of this Agreement and shall execute such
other and further documents and take such other and further actions as may
be necessary or convenient to effect the transaction described herein.
9.13 Announcements. ACEI and B.A. Network will consult and
cooperate with each other as to the timing and content of any
announcements of the transactions contemplated hereby to the general
public or to employees, customers or suppliers.
9.14 Expenses. Each party will pay its own legal, accounting and
any other out-of-pocket expenses reasonably incurred in connection with
this transaction, whether or not the transaction contemplated hereby is
consummated. In no event shall one party be liable for any of the
expenses of the other party. ACEI shall be responsible for the expenses
of the audit, by one of the big five U.S. accounting firms, of B.A.
Networks financial statements for the years ended December 31, 1999 and
2000 only.
9.15 Survival of Representations and Warranties. The
representations, warranties, covenants and agreements of the parties set
forth in this Agreement or in any instrument, certificate, opinion or
other writing provided for in it, shall survive the Closing irrespective
of any investigation made by or on behalf of any party.
9.16 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided for hereinabove, including
any items referenced therein or required to be attached thereto. Any
material changes to the Exhibits shall be immediately disclosed to the
other party.
WHEREFORE, the above agreement is hereby agreed to and accepted as
of the date first above written.
AMERICAN CHAMPION ENTERTAINMENT, INC.
By: /s/ Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx
President & CEO
BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD.
By: /s/ Lin, Xxx
Xxx, Tao
General Manager
