AGREEMENT OF EXCHANGE
of convertible preferred the voting stock of
CHANCELLOR CORPORATION
in exchange for one hundred percent (100%)
of the issued and outstanding preferred shares of
CREATIVE GEMS & JEWELRY CO., LTD.
Chancellor Corporation ("Chancellor") is a development stage company
presently listed for trading on the NASDAQ Bulletin Board; Creative Gems &
Jewelry Co., Ltd. ("Creative") 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 Creative which constitutes all of the voting and
dividend rights of the Creative. Chancellor, Creative 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 Creative it
owns for stock representing a majority of Chancellor shareholders' 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. Chancellor, Creative, and Best Worth agree to the exchange of
stock as follows:
(a) Best Worth will transfer to Chancellor 98,000,000 Baht shares of the
preferred stock of Creative, which constitutes all of the issued and outstanding
shares of preferred stock of Creative.
(b) In exchange for the transfer shares by Best Worth in "a", Chancellor
will issue and cause appropriate share certificates to be delivered to Best
Worth as follows:
(i) at the closing of this Agreement, 11,375,000 shares of the voting
convertible preferred stock of Chancellor representing eighty-one and 25/100
percent (81.25%) of the voting and dividend rights of Chancellor, and
(ii) immediately upon receipt of the auditor's report of earnings by
Creative for 1999, an additional number of shares of the voting convertible
preferred stock of Chancellor equal to the percentage increase in Creative's
1999 earnings over 1998 earnings times eight million (8,000,000). (For example,
and the 1999 earnings of Creative the amount to an increase of fifty percent
(50%) over its 1998 earnings, there would be an additional issuance of four
million (4,000,000) shares.
ARTICLE II
COVENANTS, REPRESENTATIONS AND
WARRANTIES OF CHANCELLOR
LEGAL STATUS
Section 2.01. Chancellor 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 and to carry on its business as it is now being conducted.
SUBSIDIARIES
Section 2.02. Chancellor has one subsidiary, U.S. Heritage Corporation and no
interest in any other corporation, firm, or partnership.
CAPITALIZATION
Section 2.03. Chancellor 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 preferred
stock, $.001 par value, none of which are presently issued and outstanding.
There are no outstanding options, contracts, calls, commitments, or demands
relating to the authorized but unissued stock of Chancellor.
FINANCIAL STATEMENTS
Section 2.04. (a) Chancellor has delivered to Best Worth the balance sheet of
Chancellor as of December 31, 1997, the related statements of income and
retained earnings for that 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 Chancellor are in existence, are in its
possession, and are in good condition and repair. Chancellor 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.
INDEBTEDNESS
Section 2.06. Except as set forth in the balance sheet of Chancellor 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. Chancellor is not in default in respect of any terms or conditions
of indebtedness.
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NO LITIGATION OR PROCEEDING PENDING OR THREATENED
Section 2.07. Chancellor 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 Chancellor.
NO RESTRICTION PREVENTING TRANSACTION
Section 2.08. Chancellor 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 Chancellor 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. Chancellor had 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 Chancellor 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 Chancellor will have any preemptive right of
subscription or purchase in respect thereof.
AUTHORITY TO EXECUTE AGREEMENT
Section 2.12. Chancellor 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. Chancellor 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".
DISCLOSURE
Section 2.13. At the date of this agreement Chancellor has, and at the closing
date it will have, disclosed all events, conditions, and facts materially
affecting the business and prospects of Chancellor. Chancellor 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 a reasonable ground to know, may
materially affect the business and prospects of Chancellor. None of the
representations and warranties of Chancellor 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.
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ARTICLE III
COVENANTS. REPRESENTATIONS
AND WARRANTIES OF BEST WORTH AS SOLE
PREFERRED SHAREHOLDER OF CREATIVE
LEGAL STATUS
Section 3.01. Creative 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. Creative has no subsidiaries nor any interest in any other
corporation, firm, or partnership.
CAPITALIZATION
Section 3.03. Creative has an authorized capitalization of 102,000,000 Baht
shares of common stock, all of which are issued and outstanding, fully paid, and
nonassessable and represent fifty-one percent (51%) of the total capitalization
of Creative. Creative is authorized to issue 98,000,000 Baht shares of preferred
stock, all of which are issued and outstanding, fully paid, and nonassessable
and represent forty-nine percent (49%) of the total capitalization of Creative.
There are no outstanding options, contracts, calls, commitments, or demands
relating to the authorized but unissued stock of creative.
FINANCIAL STATEMENTS
Section 3.04. (a) Creative has delivered to Chancellor the balance sheet of
Creative as of September 30, 1998, the related statements of income and retained
earnings for the nine (9) months 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 September 30, 1998, there have been, and at the closing there will be, no
changes in such financial statements.
TITLE TO PROPERTIES
Section 3.05. All book assets of Creative are in existence, and in its
possession, and are in good condition and repair and Creative 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 September 30, 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, hold such assets subject to no mortgage, lien, or encumbrance.
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INDEBTEDNESS
Section 3.06. Except as set forth in the balance sheet of Creative as of
September 30, 1998, there is no outstanding indebtedness other than liabilities
incurred in the ordinary course of business or in connection with this
transaction. Creative is not in default in respect of any terms or conditions of
indebtedness.
NO LITIGATION OR PROCEEDING PENDING OR THREATENED
Section 3.07. Creative 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 Creative.
NO RESTRICTION PREVENTING TRANSACTION
Section 3.08. Creative 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 Creative has delivered to Chancellor 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. Creative 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 Creative which are to be conveyed
to Chancellor pursuant to the terms of this agreement, are validly authorized
and issued, and are fully paid and nonassessable; no shareholder of Creative
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.
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SHARES BEING ACQUIRED FOR INVESTMENT
Section 3.13. Best Worth is acquiring the shares of preferred stock of
Chancellor for investment and without any present intention to sell, distribute,
transfer, or otherwise dispose of the shares. Best Worth will execute and
deliver to Chancellor on the closing date an investment letter substantially in
the form attached hereto as Exhibit "B".
ACTIVITIES SINCE BALANCE SHEET DATE
Section 3.14. Since its balance sheet as of September 30, 1998, Creative 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 Creative has, and at the closing
date it will have, disclosed all events, conditions, and facts materially
affecting the business and prospects of Creative 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 the business and prospects of Creative. None of the representations and
warranties made by Creative 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.
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ARTICLE IV
CONDUCT OF BUSINESS OF
CHANCELLOR PENDING CLOSING
ACCESS TO INFORMATION AND DOCUMENTS
Section 4.01. (a) Chancellor 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 Chancellor 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 Chancellor.
(b) In addition, Chancellor 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 hereto for.
SATISFY CONDITIONS PRECEDENT
Section 4.03. Topaz will 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 Gem.
(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.
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(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 Chancellor, prior to the closing
date, a written commitment in form satisfactory to Chancellor, that it is taking
the shares of common stock of Chancellor 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 Chancellor, the form and
substance of all papers and proceedings hereunder shall be reasonably acceptable
to counsel for Chancellor.
APPROVAL OF SHAREHOLDERS
(d) The principal terms of this agreement shall have been approved by the
outstanding shares of the stock of Chancellor as required by the Nevada Revised
Statutes.
FINANCIAL STATEMENTS
(e) Best Worth shall cause to be delivered to Chancellor, unaudited
financial statements of Creative for the fiscal year ended December 31, 1998.
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ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BEST WORTH TO CLOSE
Section 7.01. The obligation 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 Chancellor contained herein shall be
true as of the closing date with the same effect as though made on the closing
date. Chancellor 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 CHANCELLOR
(b) On the closing date, there shall be furnished to Best Worth an opinion
from Counsel to Chancellor dated the closing date and in form satisfactory to
Best Worth and/or its counsel, to the effect that Chancellor 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 Chancellor 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 Chancellor.
ARTICLE VIII
CONSUMMATION OF TRANSACTION
CONSIDERATION OF BEST WORTH
Section 8.01. Best Worth shall deliver to Chancellor on the closing date,
certificates representing all of the issued and outstanding shares of preferred
stock of Creative.
CONSIDERATION OF CHANCELLOR
Section 8.02. (a) Chancellor shall deliver to Best Worth on the closing
date, certificates representing 11,375,000 shares of common stock of
Chancellor.
(b) Upon delivery to Chancellor of the auditor's report of the 1999
earnings of Creative, Chancellor shall deliver to Best Worth, certificates
representing the number of preferred shares of Chancellor determined as provided
in Section 1.01(b)(ii).
EXPENSES
Section 8.03. Creative shall pay the expenses and costs incident to the
consummation of this agreement.
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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 Chancellor, to: 3030 BRIDGEWAY, SUITE 100, SAUSALITO, CA
94965 or to such other person or address as Chancellor 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 Chancellor for that purpose.
(c) In the case of Creative to: 126/1 KRUNGTHONBURI ROAD, KLONGSARN,
BANGKOK THAILAND or to such other person or address as Creative may from time to
time furnish to Chancellor for that purpose.
ASSIGNMENT
Section 9.02. (a) Except 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, as well as 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
same instrument.
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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.
Executed on April 30, 1999 at SAUSALITO, CA
/s/
------------------------------------------
Ms. Jariya Sae-Fa, Mr. Kiattichai Tantikitmanee
(for Creative Gems & Jewelry Co. Ltd.)
/s/
------------------------------------------
Jane Kelly, Secretary Topaz Group, Inc.
/s/
------------------------------------------
Jariya Sae-Fa, Director Best Worth (BVI)