AGREEMENT OF EXCHANGE
of convertible preferred voting stock of
TOPAZ GROUP, INC
for one hundred percent (100%) of the
issued and outstanding preferred shares of
ADVANCE GEMS & JEWELRY CO., LTD.
TOPAZ GROUP, INC. ("TOPAZ") is a development stage Co. presently listed for
trading on the NASDAQ Bulletin Board; ADVANCE GEMS & JEWELRY CO. LTD. ("ADVANCE
GEMS") is an operating company with its principal place of business located in
Bangkok, Thailand; and BEST WORTH AGENTS, LTD. (B.V.I.) ("BEST WORTH") is the
owner of one hundred percent (100%) of the issued and outstanding preferred
stock of Advance Gems which stock constitutes all of the voting and dividend
rights of Advance Gems. Topaz, Advance Gems, and Best Worth (sometimes
collectively referred to herein, as the "Parties"), believe it is in their
mutual best interests for Best Worth to exchange the preferred stock of Advance
Gems it owns for convertible preferred stock of Topaz having both voting and
dividend rights on the terms and conditions set forth in this Agreement of
Exchange.
Now therefore, the Parties agree as follows:
ARTICLE I
AGREEMENT OF EXCHANGE
Section 1.01. Topaz, Advance Gems, and Best Worth agree to the exchange of stock
as follows:
(a) Best Worth will transfer to Topaz 98,000,000 Baht shares of the
preferred stock of Advance Gems, which constitutes all of the issued and
outstanding shares of preferred stock of Advance Gems;
(b) In exchange for the transfer of shares by Best Worth in "a", Topaz will
issue shares of its convertible preferred stock and cause appropriate shares
certificates to be delivered to Best Worth as follows:
(i) upon consummation of this Agreement, eleven million (11,000,000)
shares of the voting convertible preferred stock of Topaz representing
forty-four percent (44%) of the voting and dividend rights of Topaz following
such issuance; and
(ii) immediately upon receipt of the auditor's records of profits by
Advance Gems, an additional number of shares of the voting convertible preferred
stock of Topaz equal to the aggregate percentage increase in the 1999 profits of
Advance Gems over 1998 aggregate profits of four million five hundred thousand
dollars ($4,500,000). For example, if the combined 1999 profits of Advance Gems
amount to an increase of fifty percent (50%) over into the combined 1998
profits, there would be an additional issuance to Best Worth of four million
(4,000,000) shares.
ARTICLE II
COVENANTS, REPRESENTATIONS AND
WARRANTIES OF TOPAZ
LEGAL STATUS
Section 2.01. Topaz is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada with corporate power to own
property in carry on its business as it is now being conducted.
Section 2.02. Topaz presently has one subsidiary. U.S. Heritage Corporation and
also owns one hundred percent (100%) of the issued and outstanding preferred
stock of Creative Gems and Jewelry Company Limited ("Creative") which
constitutes all of the voting and dividend rights of Creative. Following
consummation of this Agreement, Topaz will additionally own one hundred percent
(100%) of the issued and outstanding preferred stock of Advance Gems which will
considerate all of the voting and dividend rights of said corporation.
CAPITALIZATION
Section 2.03. (a) Topaz has an authorized capitalization of 100,000,000 shares
of common stock $.001 par value, of which 2,625,000 shares are issued and
outstanding, fully paid, and nonassessable, and 26,000,000 shares of voting
convertible preferred stock, $.001 par value, 11,375,000 of which are presently
issued and outstanding.
(b) Pursuant to the Agreement of Exchange between Topaz and Creative dated
April 3, 1999, Topaz shall, upon receipt of the auditor's report of profits by
Creative for 1999, issue to Best Worth an additional number of shares of the
voting convertible preferred stock of Topaz equal to the percentage increase in
Creative's 1999 profits over its 1998 profits, times 8,000,000.
FINANCIAL STATEMENTS
Section 2.04. (a) Topaz has delivered to Best Worth the balance sheet of Topaz
as of December 31, 1997, the related statements of income and retained earnings
for the year then ended, prepared internally and subject to normal changes
resulting from year-end audit.
(b) Other than changes in the usual and ordinary conduct of business since
December 31, 1997, there have been, and at the closing date there will be, no
changes in such financial statements.
TITLE TO PROPERTIES
Section 2.05. All book assets of Topaz are in existence, are in its possession,
and are in good condition and repair. Topaz has good and marketable title to all
of its assets and, except for any liens or encumbrances which are shown on its
financial statements as of December 31, 1997, or which have arisen in the
ordinary course of business since the date of such financial statements and
which do not interfere with the conduct of its business in the ordinary course,
holds such assets subject to no mortgage, lien, or encumbrance.
-2-
INDEBTEDNESS
Section 2.06. Except as set forth in the balance sheet of Topaz as of December
31, 1997, there is no outstanding indebtedness other than liabilities incurred
in the ordinary course of business or in connection with this transaction. Topaz
is not in default in respect of any terms or conditions of indebtedness.
NO LITIGATION OR PROCEEDING PENDING OR THREATENED
Section 2.07. Topaz is not a party to, nor has it been threatened with, any
litigation or governmental proceeding which, if decided adversely to it, would
have a material adverse effect upon the transaction contemplated hereby, or upon
the financial condition, net worth, prospects, or business of Topaz.
NO RESTRICTIONS PREVENTING TRANSACTION
Section 2.08. Topaz is not subject to any charter, bylaw, mortgage, lien, lease,
agreement, judgment, or other restriction of any kind which would prevent
consummation of the transaction contemplated by this Agreement
STATUS OF RECEIVABLES
Section 2.09. None of the accounts receivable or contracts receivable indicated
in the financial statements which Topaz has delivered to Best Worth is subject
to any counterclaim or setoff, and all such accounts receivable and contracts
receivable are good and collectible at the aggregate recorded amount thereof.
TAXES
Section 2.10. Topaz has filed all federal and state income tax or franchise tax
returns which are required to be filed, has paid all taxes shown on said returns
as have become due, and has paid all assessments received to the extent that
such assessments have become due.
STATUS OF SHARES BEING TRANSFERRED
Section 2.11. The shares of stock of Topaz which are to be issued and delivered
to Best Worth pursuant to the terms of this Agreement, when so issued and
delivered will be validly authorized and issued, and will be fully paid and
nonassessable; no shareholder of Topaz will have any preemptive right of
subscription or purchase in respect thereof.
AUTHORITY TO EXECUTE AGREEMENT
Section 2.12. Topaz has the legal power and right to enter this Agreement
subject to the approval of the principal terms of this Agreement by the
outstanding shares, as those terms are defined in the General Corporation Law of
Nevada. Topaz has obtained approval of the transaction set forth in this
Agreement by its outstanding shares as required by the Nevada Revised Statutes
and as indicated in the "Written Consent of Shareholders" attached hereto as
Exhibit "A".
-3-
DISCLOSURE
Section 2.13. At the date of this Agreement Topaz has, and at the closing date
it will have, disclosed all events, conditions, and facts materially affecting
the business and prospects of Topaz. Topaz has not now and will not have, at the
closing date, withheld knowledge of any such events, conditions and facts which
it knows, or has reasonable ground to know, may materially affect the business
and prospects of Topaz. None of the representations and warranties of Topaz
herein, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary in order to make the
statements contained herein not misleading.
ARTICLE III
COVENANTS, REPRESENTATATIONS
AND WARRANTIES OF ADVANCE GEMS
AND BEST WORTH AS THEIR SOLE
PREFERRED SHAREHOLDER
LEGAL STATUS
Section 3.01. Advance Gems is a corporation duly organized, validly existing,
and in good standing under the laws of Thailand with corporate power to own
property and carry on its business as it is now being conducted.
SUBSIDIARIES
Section 3.02. Advance Gems has no subsidiaries nor any interest in any other
corporation, firm or partnership.
CAPITALIZATION
Section 3.03. Advance Gems has an authorized capitalization of 102,000,000 Baht
shares of common stock, all of which are issued and outstanding, fully paid, and
nonassessable representing fifty-one percent (51%) of its total capitalization.
Advance Gems is authorized to issue 98,000,000 Baht shares of preferred stock,
all of which are issued and outstanding, fully paid, and nonassessable,
representing forty-nine percent (49%) of its total capitalization. There are no
outstanding options, contracts, calls, commitments, or demands relating to the
authorized but unissued stock of Advance Gems.
FINANCIAL STATEMENTS
Section 3.04. (a) Advance Gems has delivered to Topaz its balance sheet as of
December 31, 1998, the related statements of income and retained earnings for
the year then ended, prepared internally and subject to normal changes resulting
from year-end audit.
(b) Other than changes in the usual and ordinary conduct of the business
since December 31, 1998, there have been, and at the closing date there will be,
no changes in such financial statements.
-4-
TITLE TO PROPERTIES
Section 3.05. All books assets of Advance Gems are in existence, and in its
possession, and are in good condition and repair and Advance Gems has good and
marketable title to such assets. Except for any liens or encumbrances shown on
the financial statements as of December 31, 1998, or which have arisen in the
ordinary course of business since the date of such financial statements and
which do not interfere with the conduct of its business in the ordinary course,
such assets are not subject to any mortgage, lien, or encumbrance.
INDEBTEDNESS
Section 3.06. Except as set forth in the balance sheet of Advance Gems as of
December 31, 1998, there is no outstanding indebtedness other than liabilities
incurred in the ordinary course of business or in connection with this
transaction. Advance Gems is not in default in respect of any terms or
conditions of indebtedness.
NO LITIGATION OR PROCEEDING PENDING OR THREATENED
Section 3.07. Advance Gems is not a party to, nor has it been threatened with,
any litigation or governmental proceeding which, if decided adversely to it,
would have a material adverse effect upon the transaction completed hereby, or
upon the financial condition, net worth, prospects, or business of the
corporation.
NO RESTRICTION PREVENTING TRANSACTION
Section 3.08. Advance Gems is not subject to any charter, bylaw, mortgage, lien,
lease, agreement, judgment, or other restriction of any kind which would prevent
consummation of the transaction contemplated by this agreement.
STATUS OF RECEIVABLES
Section 3.09. None of the accounts receivable or contracts receivable indicated
in the financial statements which Advance Gems has delivered to Topaz is subject
to any counterclaim or setoff, and all such accounts receivable and contracts
receivable are good and collectible at the aggregate recorded amount thereof.
TAXES
Section 3.10. Advance Gems has filed all applicable income, sales, and/or value
added tax returns which are required to be filed, has paid all taxes shown on
said returns as have become due, and has paid all assessments received to the
extent that such assessments have become due.
STATUS OF SHARES BEING TRANSFERRED
Section 3.11. The shares of preferred stock of Advance Gems which are to be
conveyed to Topaz pursuant to the terms of this Agreement, are validly
authorized and issued, and are fully paid and nonassessable; no shareholder of
Advance Gems will have any preemptive right of subscription or purchase in
respect thereof.
AUTHORITY TO EXECUTE AGREEMENT
Section 3.12. Best Worth has the legal power and right to enter this Agreement
and its consummation of this Agreement is not subject to the review or approval
of any governmental or regulatory agency.
SHARES BEING ACQUIRED FOR INVESTMENT
Section 3.13. Best Worth is acquiring the shares of preferred stock of Topaz for
investment and without any present intention to sell, distribute, transfer, or
otherwise dispose of the shares. Best Worth will execute and deliver to Topaz on
the closing date an investment letter substantially in the form attached hereto
as Exhibit "B".
-5-
ACTIVITIES SINCE BALANCE SHEET DATE
Section 3.14. Since its balance sheet as of December 31, 1998, Advance Gems has
not, and prior to the closing date will not have:
(a) Issued or sold any stock, bond, or other corporate securities.
(b) Except for current liabilities incurred and obligations under contracts
entered into in the ordinary course of business, incurred any obligation or
liability, absolute or contingent.
(c) Except for current liabilities shown on the balance sheet and current
liabilities incurred since that date in the ordinary course of business,
discharged or satisfied any lien or encumbrance, or paid any obligation or
liability, absolute or contingent.
(d) Mortgaged, pledged, or subjected to lien or any other encumbrance, any
of its assets, tangible or intangible.
(e) Except in the ordinary course of business, sold or transferred any of
its tangible assets or canceled any debts or claims.
(f) Sold, assigned, or transferred any patents, formulas, trademarks, trade
names, copyrights, licenses, or other intangible assets.
(g) Suffered any extraordinary losses, been subjected to any strikes or
other labor disturbances, or waived any rights of any substantial value.
(h) Except for transactions contemplated by this agreement, entered into
any transaction other than in the ordinary course of business.
DISCLOSURE
Section 3.15. At the date of this agreement Advance Gems has, and at the closing
date it will have, disclosed all events, conditions, and facts materially
affecting their business and prospects and it has not now and will not have, at
the closing date, withheld knowledge of any such events, conditions, and facts
which it knows, or has reasonable ground to know, may materially affect
-6-
their business and prospects. None of the representations and warranties made by
Advance Gems herein, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary in order to make
the statements contained herein not misleading.
ARTICLE IV
Conduct of Business of
Topaz Pending Closing
ACCESS TO INFORMATION AND DOCUMENTS
Section 4.01. (a) Topaz will afford Best Worth, from the date hereof until
consummation of the Agreement, full access during normal business hours to all
properties, books, accounts, contracts, commitments, and records of every kind
of Topaz in order that Best Worth may have full opportunity to make such
investigation as it shall desire to make of, and to keep itself informed with
respect to, the affairs of Topaz.
(b) In addition, Topaz will permit Best Worth to make extracts or copies of
all such books, accounts, contracts, commitments, and records and will furnish
to Best Worth, within 10 days after demand, such further financial in operating
data as other information with respect to the business and assets of Topaz as
Best Worth shall reasonably request from time to time.
(c) Best Worth will use any information so secured only for its own
purposes in connection with the consummation of the transaction contemplated
hereby and will not divulge the information to any persons not entitled thereto.
CARRY ON BUSINESS AS USUAL
Section 4.02. Topaz look carry on its business in substantially the same manner
as heretofore.
SATISFY CONDITIONS PRECEDENT
Section 4.03. Topaz we use its best efforts to cause the satisfaction of all
conditions precedent contained in this Agreement.
ARTICLE V
Conduct of Business of
Advance Gems Pending Closing
ACCESS TO INFORMATION AND DOCUMENTS
Section 5.01. (a) Best Worth will cause Advance Gems to afford Topaz, from the
date hereof until consummation of the Agreement, full access during normal
business hours to all of the properties, books, accounts, contracts,
commitments, and records of every kind in order that Topaz may have full
opportunity to make such investigation as it shall desire to make of, and to
keep itself informed with respect to, the affairs of Advance Gems.
-7-
(b) In addition, Best Worth will cause Advance Gems to permit Topaz to make
extracts or copies of all such books, accounts, contracts commitments, and
records and will furnish to Topaz, within 10 days after demand, such further
financial and operating data and other information with respect to their
respective businesses and assets as Topaz shall reasonably request from time to
time.
(c) Topaz will use any information so secured only for its own purposes in
connection with the consummation of the transaction contemplated hereby and will
not divulge the information to any persons not entitled thereto.
SATISFY CONDITIONS PRECEDENT
Section 5.02. Best Worth will use its best efforts to cause the satisfaction of
all conditions precedent contained in this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATION
OF TOPAZ TO CLOSE
Section 6.01. The obligations of Topaz to consummate the Agreement shall be
subject to the following conditions precedent:
TRUTH OF REPRESENTATIONS AND WARRANTIES AND
COMPLIANCE WITH COVENANTS
(a) Representations and warranties of Best Worth contained herein shall be
true as of the closing date with the same effect as though made on the closing
date. Best Worth shall have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied with by him
prior to the closing date.
COMMITMENT AS TO INVESTMENT PURPOSE
(b) Best Worth shall have delivered to Topaz, prior to the closing date, a
written commitment in form satisfactory to Topaz, that it is taking the shares
of common stock of Topaz for purposes of investment and will not dispose of the
shares received by it hereunder in a manner which would result in a violation of
the Securities Act of 1933.
ACCEPTABILITY OF PAPERS AND PROCEEDINGS
(c) To the extent reasonably requested by Topaz, the form and substance of
all papers and proceedings hereunder shall be reasonably acceptable to counsel
for Topaz.
APPROVAL OF SHAREHOLDERS
(d) The principal terms of this Agreement shall have been approved by the
outstanding shares of the stock of Topaz as required by the Nevada Revised
Statutes.
-8-
FINANCIAL STATEMENTS
(e) Best Worth shall cause to be delivered to Topaz, unaudited financial
statements of Advance Gems for the fiscal year ended December 31, 1998.
ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BEST WORTH TO CLOSE
Section 7.01. The obligations of Best Worth to consummate the Agreement shall be
subject to the following conditions precedent:
TRUTH OF REPRESENTATIONS AND WARRANTIES
AND COMPLIANCE WITH COVENANTS
(a) Representations and warranties of Topaz contained herein shall be true
as of the closing date with the same effect as though made on the closing date.
Topaz shall have performed all obligations and complied with all covenants
required by this agreement to be performed or complied with by it prior to the
closing date.
OPINION FROM COUNSEL FOR TOPAZ
(b) On the closing date, there shall be furnished to Best Worth an opinion
from Counsel to Topaz dated the closing date and in form satisfactory to Best
Worth ad/or its counsel, to the effect that Topaz is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nevada and that the shares of preferred stock of Topaz delivered to Best Worth
on the closing date have been duly authorized, issued and delivered and are
validly issued and outstanding, fully paid in nonassessable shares of preferred
stock of Topaz.
ARTICLE VIII
CONSUMMATION OF TRANSACTION
CONSIDERATION OF BEST WORTH
Section 8.01. Best Worth shall deliver to Topaz on the closing date,
certificates representing all of the issued and outstanding shares of preferred
stock of Advance Gems.
CONSIDERATION OF TOPAZ
Section 8.02. (a) Topaz shall deliver to Best Worth on the closing date,
certificates representing 26,000,000 shares of common stock of Topaz.
(b) Upon delivery to Topaz of the auditor's report of the 1999 profits of
Advance Gems, Topaz shall deliver to Best Worth, certificates representing the
number of preferred shares of Topaz determined as provided in Section
1.01(b)(ii).
-9-
EXPENSES
Section 8.03. Topaz shall pay the expenses and costs incident to the
consummation of this agreement.
ARTICLE IX
Interpretation and Enforcement
NOTICES
Section 9.01. Any notice or other communication required or permitted hereunder
shall be deemed to be properly given when deposited in the United States mails
for transmittal by certified or registered mail, postage prepaid, or deposited
with a public telegraph company for transmittal, charges prepaid, if such
communication is addressed.
(a) In the case of Topaz, to: 3030 BRIDGEWAY, SUITE 100, SAUSALITO, CA
94965
or to such other person or address as Topaz may from time to time furnish to
Best Worth for that purpose.
(b) In the case of Best Worth to: 126/1 KRUNGTHONBURI ROAD, KLONGSARN,
BANGKOK THAILAND or to such other person or address as Best Worth may from time
to time furnish to Topaz for that purpose.
(c) In the case of Advance Gems to: 126/1 KRUNGTHONBURI ROAD, KLONGSARN,
BANGKOK THAILAND.
or to such other person or address as Advance Gems may from time to time furnish
to Topaz for that purpose.
ASSIGNMENT
Section 9.02. (a) Receipt as limited by the provisions of subsection (b), this
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties.
(b) Any assignment of this Agreement or the rights hereunder of any party,
without the written consent of the other parties shall be void.
ENTIRE AGREEMENT; COUNTERPARTS
Section 9.03. This instrument and the exhibits hereto contain the entire
Agreement between the parties with respect to the transaction contemplated
hereby. It may be executed in any number of counterparts each of which shall be
deemed an original, but such counterparts together constitute only one in the
sworn instrument.
-10-
CONTROLLING LAW
Section 9.04. The validity, interpretation and performance of this Agreement
shall be controlled by and construed under the laws of the State of Nevada.
-11-
Executed on April 30, 1999 at SAUSALITO, CA
/s/
- ------------------------------------------------------
MS. JARIYA SAE-FA, MR. KIATTICHAI TANTIKITMANEE
/s/
- ------------------------------------------------------
JANE KELLY, SECRETARY TOPAZ GROUP, INC.
/s/
- ------------------------------------------------------
JARIYA SAE-FA, DIRECTOR BEST WORTH (BVI)
-12-