SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[X] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
AMERICAN CHAMPION ENTERTAINMENT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
AMERICAN CHAMPION ENTERTAINMENT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1998
TO THE SHAREHOLDERS:
The Annual Meeting of Stockholders of American Champion
Entertainment, Inc. (the "Company"), a Delaware corporation and
holding company for America's Best Karate, a California corporation,
which wholly owns American Champion Media, Inc., a Delaware corporation,
will be held at the Park Hyatt Hotel, 333 Battery Street, San Francisco,
California on Friday, May 29, 1998, at 7:00 p.m. for the following
purposes:
1. To elect seven (7) directors to serve until the next
Annual Meeting of Stockholders or until their
successors are elected;
2. To amend the Company's Certificate of Incorporation to
increase the authorized amount of capital stock from
10,000,000 shares to 23,000,000 shares, of which
20,000,000 shall be common stock, $0.0001 par value,
and 3,000,000 shall be preferred stock;
3. To increase the number of shares of common stock,
$0.0001 par value, subject to issuance under the
Company's 1997 Stock Plan from 350,000 to 800,000;
4. To ratify the appointment of Moss Adams LLP as the
Company's independent certified public accountants for
the 1998 fiscal year; and
5. To transact such other business as may properly come
before the meeting.
The foregoing items of business are more fully described in
the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on
April 1, 1998 as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
By Order of the Board of Directors,
/s/ Anthony K. Chan, Secretary
Hayward, California
April 24, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POST-PAID ENVELOPE.
PROXY STATEMENT
OF
AMERICAN CHAMPION ENTERTAINMENT, INC.
26203 PRODUCTION AVENUE, SUITE 5
HAYWARD, CALIFORNIA 94545
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished in connection with the
solicitation of the enclosed proxy by, and on behalf of, the Board of
Directors of American Champion Entertainment, Inc. (the "Company"), a
Delaware corporation and holding company for America's Best Karate, a
California corporation, which wholly owns American Champion Media, Inc.,
a Delaware corporation ("AC Media"), for use at the Annual Meeting of
Stockholders of the Company to be held at the Park Hyatt Hotel, 333
Battery Street, San Francisco, California on Friday, May 29, 1998, at
7:00 p.m. (the "Meeting"). Only stockholders of record on April 1,
1998, (the "Record Date") will be entitled to vote at the Meeting. At
the close of business on the Record Date, the Company had outstanding
3,832,345 shares of its $0.0001 par value common stock (the "Common
Stock").
Any person giving a proxy in the form accompanying this
Proxy Statement has the power to revoke it prior to its exercise. Any
proxy given is revocable prior to the Meeting by an instrument revoking
it or by a duly executed proxy bearing a later date delivered to the
Secretary of the Company. Such proxy is also revoked if the stockholder
is present at the Meeting and elects to vote in person.
The Company will bear the entire cost of preparing,
assembling, printing and mailing the proxy materials furnished by the
Board of Directors to stockholders. Copies of the proxy materials will
be furnished to brokerage houses, fiduciaries and custodians to be
forwarded to the beneficial owners of the Common Stock. In addition to
the solicitation of proxies by use of the mail, some of the officers,
directors and regular employees of the Company may (without additional
compensation) solicit proxies by telephone or personal interview, the
costs of which the Company will bear.
This Proxy Statement and the accompanying form of proxy is
being sent or given to stockholders on or about April 24, 1998.
Stockholders of the Company's Common Stock are entitled to
one vote for each share held. Votes may not be cumulated as provided by
Section 7 of the Company's Bylaws.
Each validly returned proxy (including proxies for which no
specific instruction is given) which is not revoked will be voted
"FOR" each of the proposals as described in this Proxy Statement and,
at the proxy holders' discretion, on such other matters, if any, which
may come before the Meeting (including any proposal to adjourn the
Meeting).
Determination of whether a matter specified in the Notice of
Annual Meeting of Stockholders has been approved will be determined as
follows. Those persons will be elected directors who receive a
plurality of the votes cast at the Meeting in person or by proxy and
entitled to vote on the election. Accordingly, abstentions or
directions to withhold authority will have no effect on the outcome of
the vote. For each other matter specified in the Notice of Annual
Meeting of Stockholders, the affirmative vote of a majority of the
shares of Common Stock present at the Meeting in person or by proxy and
entitled to vote on such matter is required for approval. Abstentions
will be considered shares present in person or by proxy and entitled to
vote and, therefore, will have the effect of a vote against the matter.
Broker non-votes will be considered shares not present for this purpose
and will have no effect on the outcome of the vote. Directions to
withhold authority to vote for directors, abstentions and broker
non-votes will be counted for purposes of determining whether a quorum
is present for the Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE COMPANY
The authorized number of Directors to be elected at the
Meeting is seven (7). Each Director will hold office until the next
Annual Meeting of Stockholders and until his or her successor is elected
and qualified.
All proxies will be voted for the election of the following
seven (7) nominees recommended by the Board of Directors, all of whom
are incumbent directors, unless authority to vote for the election of
directors is withheld. If any of the nominees should unexpectedly
decline or be unable to act as a director, the proxies may be voted for
a substitute nominee to be designated by the Board of Directors. The
Board of Directors has no reason to believe that any nominee will become
unavailable and has no present intention to nominate persons in addition
to or in lieu of those named below.
<TABLE>
<CAPTION>
Director
Nominee Position with Company Age Since
- ------------------- ------------------------------------------ ----- --------
<S> <C> <C> <C>
Don Berryessa Vice President and Director 27 1997
Anthony K. Chan President, Chief Executive Officer, Chief 43 1997
Financial Officer, and Director
George Chung Chairman and Director 36 1997
William T. Duffy Director 42 1997
Alan Elkes Director 52 1997
Jan D. Hutchins Director 49 1997
Ronald M. Lott Director 38 1997
</TABLE>
The following information with respect to the principal
occupation or employment of each nominee for director, the principal
business of the corporation or other organization in which such
occupation or employment is carried on, and such nominee's business
experience during the past five years, has been furnished to the Company
by the respective director nominees.
Don Berryessa. Mr. Berryessa has served as Vice President
and Director of the Company since February 1997, and as Vice President
and General Manager of America's Best Karate since July 1993. Mr.
Berryessa received his Bachelor's of Science degree in marketing and
economics from San Jose State University in 1992 while working as
America's Best Karate's District Manager. As America's Best Karate's
District Manager, Mr. Berryessa was in charge of marketing and sales and
played an instrumental role in the expansion of America's Best Karate
from one location to 10. Prior to working with America's Best Karate he
served as a member of the United States Army & Army Reserve as a combat
military policeman.
Anthony K. Chan. Mr. Chan has served as President, Chief
Executive Officer, Chief Financial Officer and a Director of the Company
since February 1997, and as Chief Executive Officer and Chief Financial
Officer of America's Best Karate since 1991. From 1985 to 1990, Mr.
Chan served as the Director of Chinese Affairs for the Eisenberg
Company, a diversified business enterprise, where Mr. Chan's principal
duty was to negotiate contracts in the People's Republic of China.
Prior to 1985, Mr. Chan was employed by the Bank of America NT & SA as
an economic forecaster. Mr. Chan received his MBA from the University
of California at Berkeley. Mr. Chan's martial arts training began in
1968 in Hong Kong. He was the first American allowed to train as a
professional in the People's Republic of China. He is a published
author and has been featured in newspapers, magazine covers, television
and motion pictures. He was inducted into the Black Belt Hall of Fame
in 1981.
George Chung. Mr. Chung has served as Chairman of the Board
and a Director of the Company since February 1997, and as President of
America's Best Karate since 1991. From 1981 to 1991, Mr. Chung owned
and operated a karate studio in Los Gatos, California. Mr. Chung was
inducted into the Black Belt Hall of Fame in 1983. He is regarded in the
martial arts industry as a pioneer in the modernization of what is known
as contemporary martial arts training, which includes the use of music
in both training and performance. He has been featured in magazines,
books, television and motion pictures. He is a published author and
wrote "Defend Yourself," a worldwide published self-defense system for
Sybervision Systems. In 1995, he was awarded a "Superbowl Ring" from
the San Francisco 49ers in recognition for his outstanding martial arts
work with their championship football team.
William T. Duffy. Mr. Duffy has served as Vice-President of
Business Operations and Chief Financial Officer for the San Francisco
49ers since June 1996. He is responsible for all non-football related
business and provides financial guidance and support for all the team's
football related activities. Mr. Duffy's previous experience has
included serving as Director of Compliance for the National Football
League from October 1993 to May 1996, Treasurer of Robbie Stadium
Corporation from June 1990 to September 1993 and Director of Finance of
the Miami Dolphins from March 1988 to May 1990. Mr. Duffy, a CPA, is a
graduate of Princeton University and received his Masters of Accounting
from New York University.
Alan Elkes. Mr. Elkes has served as Chief Executive Officer
of Dalton Kent Securities Group, Inc., an investment banking and
brokerage firm, since June 1996. From September 1994 to June 1996, Mr.
Elkes served as Financial and Operations Manager at a branch office of
Corporate Securities Group Inc., an investment banking and brokerage
company. From February 1991 to September 1994, Mr. Elkes owned and
operated Minuteman Press, a printing company. Mr. Elkes began his
career in the stock brokerage industry in 1968. He has an MBA in
accounting from St. Johns University in New York and is also a licensed
CPA in the State of New York.
Jan D. Hutchins. Mr. Hutchins has served as President of AC
Media, since February 1997. From July 1994 to November 1995, Mr.
Hutchins was one of a four person management team for GolfPro
International, an emerging company designing and marketing a terrain-
based, personal service robot. From 1993 to 1994, Mr. Hutchins was
community services director for the San Francisco Giants professional
baseball team. From 1991 to 1993, Mr. Hutchins developed, produced and
hosted the HOOKED ON GOLF radio program for KNBR 68 in San Francisco.
From 1972 to 1991, Mr. Hutchins served in various capacities in the
television field, including news anchor, sports director, sports
anchor/reporter and television host.
Ronald M. Lott. Mr. Lott spent 15 seasons in the National
Football League, playing for the San Francisco 49ers (1981-1990), Los
Angeles Raiders (1991-1992), New York Jets (1993-1994) and the Kansas
City Chiefs (1995). Mr. Lott was selected to play in the Pro Bowl 10
times and won four Superbowl Championships with the San Francisco 49ers.
In 1996, Mr. Lott joined FOX Sports as a studio analyst and, along with
James Brown, Howie Long and Terry Bradshaw, won an Emmy for their
pregame show, FOX NFL Sunday. Mr. Lott is also very active in civic and
community activities. He founded "All-Stars Helping Kids," a non-
profit charity to raise funds for youth organizations, is involved with
the national "Stay in School" program and hosts a number of events
such as golf tournaments and benefits to raise funds for worthwhile
causes. Mr. Lott is also the owner of Ronnie Lott's Club Fitness in San
Jose and Dream Sports, a sports marketing company.
No director or executive officer of the Company any family
relationship with any other director or executive officer of the
Company.
The proxy holders intend to vote the shares represented by
proxies for all of the Board's nominees, except to the extent authority
to vote for the nominees is withheld.
The Board of Directors recommends a vote FOR the election of
all the nominees for director.
PROPOSAL NO. 2
AMENDMENT OF THE CERTIFCATE OF INCORPORATION
The Board of Directors of the Company proposes amending the
Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock and to authorize shares of Preferred
Stock as more fully described below. The Company currently has
authorized capital stock of 10,000,000 shares and approximately
3,832,345 shares of Common Stock are outstanding. The Board believes
that the increase in authorized shares would provide the Company greater
flexibility with respect to the Company's capital structure for such
purposes as additional equity financing. The Board of Directors of the
Company believes that the following amendment to the Certificate of
Incorporation is in the best interest of the Company and its
shareholders.
Having a substantial number of authorized but unissued shares of
Common Stock that is not reserved for specific purposes would allow the
Company to take prompt action with respect to corporate opportunities
that develop, without the delay and expense of convening a special
meeting of shareholders for the purpose of approving an increase in the
Company's capitalization. The issuance of additional shares of Common
Stock may, depending upon the circumstances under which such shares are
issued, reduce shareholders' equity per share and may reduce the
percentage ownership of Common Stock by existing shareholders. It is
not the present intention of the Board of Directors to seek shareholder
approval prior to any issuance of shares of Common Stock that would
become authorized by the amendment unless otherwise required by law or
regulation. Frequently, opportunities arise that require prompt action,
and it is the belief of the Board of Directors that the delay
necessitated for shareholder approval of a specific issuance could be to the
detriment of the Company and its shareholders.
When issued, the additional shares of Common Stock authorized by
the amendment will have the same rights and privileges as the shares of Common
Stock currently authorized and outstanding. Holders of Common Stock have no
preemptive rights and, accordingly, shareholders would not have any
preferential rights to purchase any of the additional shares of Common Stock
when such shares are issued.
The Board of Directors recommends the authorization of Preferred
Stock to increase the Company's financial flexibility. The Board of Directors
believes that the complexity of modern business financing and acquisition
transactions requires greater flexibility in the Company's capital structure
than now exists. The Preferred Stock would be available for issuance from time
to time as determined by the Board of Directors for any proper corporate
purpose. Such purposes might include, without limitation, issuance in public or
private sales for cash as a means of obtaining additional capital for use in
the Company's business and operations, and issuance as part or all of the
consideration required to be paid by the Company for acquisitions of other
businesses or properties.
If the proposed amendment is approved, the Board of Directors
would be empowered, without the necessity of further action or authorization by
the Company's shareholders, unless required in a specific case by applicable
laws or regulations, to authorize the issuance of the Preferred Stock from time
to time in one or more series, and to fix by resolution or resolutions,
designations, preferences, limitations and relative rights of each such series.
Each series of Preferred Stock could, as determined by the Board of Directors
at the time of issuance, rank, with respect to dividends and redemption and
liquidation rights, senior to the Company's Common Stock. No preferred stock is
presently authorized by the Company's Certificate of Incorporation.
The amendment would authorize the Board of Directors to determine,
among other things, with respect to each series of Preferred Stock
which may be issued: (a) the distinctive designation and number of
shares constituting such series; (b) the dividend rates, if any, on the
shares of that series and whether dividends would be payable in cash,
property, rights or securities; (c) whether dividends would be non-
cumulative, cumulative to the extent earned, partially cumulative or
cumulative and, if cumulative, the date from which dividends on the
series would accumulate; (d) whether, and upon what terms and
conditions, the shares of that series would be convertible into or
exchangeable for other securities or cash or other property or rights;
(e) whether, and upon what terms and conditions, the shares of that
series would be redeemable; (f) the rights and preferences, if any, to which
the shares of that series would be entitled in the event of voluntary or
involuntary dissolution or liquidation of the Company; (g) whether a sinking
fund would be provided for the redemption of the series and, if so, the terms
of and amounts payable into such sinking fund; (h) whether the holders of such
securities would have voting rights and the extent of those voting rights; (i)
whether the issuance of any additional shares of such series, or of any other
series, shall be subject to restrictions as to issuance or as to the powers,
preferences or rights of any such other series; and (j) any other preferences,
privileges and relative rights of such series as the Board of Directors may
deem advisable. Holders of the Company's Common Stock have no preemptive right
to purchase or otherwise acquire any Preferred Stock that may be issued in the
future.
It is not possible to state the precise effect of the
authorization of the Preferred Stock upon the rights of holders of the
Company's Common Stock until the Board of Directors determines the
respective preferences, limitations and relative rights of the holders
of one or more series of the Preferred Stock. However, such effect
might include: (a) reduction of the amount otherwise available for
payment of dividends on Common Stock, to the extent dividends are
payable on any issued shares of Preferred Stock, and restrictions on
dividends on Common Stock if dividends on the Preferred Stock are in
arrears; (b) dilution of the voting power of the Common Stock to the
extent the Preferred Stock has voting rights; and (c) the holders of
Common Stock not being entitled to share in the Company's assets upon
liquidation until satisfaction of any liquidation preference granted to
the Preferred Stock.
The adoption of the amendment may be viewed as having the effect
of discouraging an unsolicited attempt by another person or entity to
acquire control of the Company. The Board of Directors would have the
ability to issue a significant number of shares of Common and Preferred
Stock as a defense to an attempted takeover of the Company. Issuances
of authorized preferred shares can be implemented, and have been
implemented by some companies in recent years, with voting or
conversion privileges intended to make acquisition of the company more
difficult or more costly. Such an issuance could discourage or limit
the shareholders' participation in certain types of transactions that
might be proposed (such as a tender offer), whether or not such
transactions were favored by the majority of the shareholders, and
could enhance the ability of officers and directors to retain their
positions.
Article 4 of the Company's Certificate of Incorporation currently
provides as follows:
The total number of shares of stock which this
corporation shall have authority to issue is
10,000,000 shares of capital stock, and the par
value of each share is $0.0001 per share.
The Company's Board of Directors has approved the following
amendment to Article 4, subject to approval of such amendment by the
holders of the Company's Common Stock as specified below:
4. A. Classes of Stock. This
corporation is authorized to issue two classes of
shares of stock to be designated, respectively,
common stock ("Common Stock") and preferred
stock ("Preferred Stock"). The number of
shares of Common Stock authorized to be issued is
Twenty Million (20,000,000), par value $0.001 per
share, and the number of shares of Preferred
Stock authorized to be issued is Three Million
(3,000,000), par value $0.001 per share; the
total number of shares which the corporation is
authorized to issue is Twenty-Three Million
(23,000,000).
B. Rights, Preferences and
Restrictions of Preferred Stock. The Preferred
Stock may be issued from time to time in one or
more series, without further stockholder
approval. The Board of Directors is hereby
authorized, in the resolution or resolutions
adopted by the Board of Directors providing for
the issue of any wholly unissued series of
Preferred Stock, within the limitations and
restrictions stated in this Amended and Restated
Certificate of Incorporation, to fix or alter the
dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of
redemption (including sinking fund provisions),
the redemption price or prices, and the
liquidation preferences of any wholly unissued
series of Preferred Stock, and the number of
shares constituting any such series and the
designation thereof, or any of them, and to
increase or decrease the number of shares of any
series subsequent to the issue of shares of that
series, but not below the number of shares of
such series then outstanding, and any other
preferences, privileges and relative rights of
such series as the Board of Directors may deem
advisable. In case the number
of shares of any series shall be so decreased,
the shares constituting such decrease shall
resume the status that they had prior to the
adoption of the resolution originally fixing the
number of shares of such series.
The proposed amendment increases the authorized amount of capital
stock of the Company to 23,000,000 shares of which 20,000,000 is Common
Stock and 3,000,000 is preferred stock. The proposed amendment
authorizes the Company's Board of Directors to issue preferred stock
from time to time in one or more series without further stockholder
approval. Under the proposed amendment, the Board may specify the
rights, preferences and restrictions of any series of preferred stock
issued which rights, preferences and restrictions may be superior to
those of the Common Stock. Such rights and preferences may provide, but
is not limited to, specific dividend rights, dividend rates, conversion
rights, voting rights, redemption rights and liquidation preferences.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock,
while providing desirable flexibility, could also have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company.
While the Company currently has adequate working capital, it
anticipates commencing production of another 30 episodes of the
"Adventures with Kanga Roddy" show in the summer of 1998. In order to
produce these episodes, the Company will require additional financing.
The Company may need to raise such additional funds through public or
private offerings. The Company has received several proposals for
equity financings that involve the issuance of preferred stock. There
can be no assurance that such additional financing will be available or,
if available, will be on terms satisfactory to the Company.
Amending the Certificate of Incorporation of the Company requires
the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Company.
The Board of Directors of the Company recommends a vote FOR
Proposal No. 2.
PROPOSAL NO. 3
INCREASE IN NUMBER OF SHARES OF COMMON STOCK
UNDER THE 1997 STOCK PLAN
Stockholders are being asked to approve an amendment for the
Company's 1997 Stock Plan (the "Plan"), which would increase in the
number of shares subject to issuance under from 350,000 to 800,000.
Currently, there are 378,000 shares underlying options granted under the
Plan, exceeding the number of shares currently subject to the Plan by
28,000 Shares. The terms and provisions of the Plan are summarized
below. This summary is qualified in its entirety by reference to the
Plan, a copy of which may be obtained without charge by sending a
request to Anthony K. Chan, President, American Champion Entertainment,
Inc., 26203 Production Avenue, Suite 5, Hayward, California 94545,
telephone (510) 782-8168.
The Plan was adopted by the Board of Directors and stockholders of
the Company in March 1997 and became effective upon the closing of the
Company's initial public offering on August 5, 1997. The Plan provides
for the grant of stock options (including incentive stock options as
defined in Section 422 of the Code and non-qualified stock options),
stock appreciation rights ("SARs") and other stock awards (including
restricted stock awards and stock bonuses) to employees of the Company
or its affiliates or any consultant or advisor engaged by the Company
who renders bona fide services to the Company or the Company's
affiliates in connection with its business.
The Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee") which is comprised of at least
two non-employee directors within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended. Prior to the initial
public offering, the Plan was administered by the Company's Board of
Directors. Stock options may be granted by the Committee on such terms,
including vesting and payment forms, as it deems appropriate in its
discretion; provided, that no option may be exercised later than ten
years after its grant, and the purchase price for incentive stock
options and non-qualified stock options shall not be less than 100% and
85% of the fair market value of the Common Stock at the time of grant,
respectively.
SARs may be granted by the Committee on such terms, including
payment forms, as the Committee deems appropriate, provided that a SAR
granted in connection with a stock option shall become exercisable and
lapse according to the same vesting schedule and lapse rules established
for the stock option (which shall not exceed ten years from the date of
grant). A SAR shall not be exercisable during the first six months of
its term and only when the fair market value of the underlying Common
Stock exceeds the SAR's exercise price and is exercisable subject to any
other conditions on exercise imposed by the Committee.
In the event of a change in control of the Company (as defined in
the Plan), the Committee retains the discretion to accelerate the
vesting of stock options and SARs and to remove restrictions on transfer
of restricted stock awards. Unless earlier terminated by the Board of
Directors, the Plan continues until December 2007.
Many employees of the Company and other persons contributed a
great deal to the Company's progress to date, including but not limited
to, the completion of the initial public offering, the 13 episodes of
the Kanga Roddy series and the promotion of the series. The Company has
rewarded such employees and persons with the grant of stock options and
the Company has exceeded the number of shares reserved under the Plan.
Options granted to persons which exceeded the current number of shares
reserved under the Plan are subject to the stockholder approval of this
Proposal No. 3. Approximately 28,000 shares underlying options granted
exceed the number of shares currently subject to the Plan.
The Committee and the Board of Directors of the Company believe it
is an important operating strategy to continue to provide incentives to
these employees, other individuals and to recruit competent persons to
join the Company. The Committee and the Board of Directors have
concluded that an increase to 800,000 shares reserved under the Plan
provides adequate flexibility to provide such incentives. The increase
in the number of shares available under the Plan by 450,000 represents
approximately 11.7% of the outstanding shares of the Company.
This amendment to the Plan is subject to approval of the Company's
stockholders. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company is required to approve
the Plan, as amended.
The Board of Directors recommends a vote FOR Proposal No. 3.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Effective October 8, 1997, the Board of Directors dismissed Moore
Stephens, P.C. ("Moore Stephens") as the Company's principal
accountant. Moore Stephens' report on the Company's financial
statements dated February 5, 1997 did not contain an adverse opinion or
a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles. Moore Stephens'
report on the financial statements for the past two years relating to
America's Best Karate, the predecessor to the Company, dated January 31,
1997, did not contain an adverse opinion or a disclaimer of opinion and
was not qualified or modified as to audit scope or accounting
principles; however, such report did include a modification of the
auditors' standard report, noting that certain factors raised
substantial doubt about America's Best Karate's ability to continue as a
going concern. During 1996 and the interim period through October 8,
1997, there were no disagreements between the Company or its predecessor
and Moore Stephens on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which,
if not resolved to the satisfaction of Moore Stephens, would have caused
it to make reference to the subject matter of the disagreements in
connection with its report.
Effective October 8, 1997, the Company engaged Moss Adams LLP as
its principal accountant. During 1996 and the interim period through
October 8, 1997, the Company did not consult Moss Adams LLP regarding
the application of accounting principals to a specified transaction, the
type of audit opinion that might be rendered on the Company's financial
statements or any matter that was the subject of disagreement or a
reportable event.
The firm of Moss Adams LLP has been selected by the Board of
Directors of the Company to be its independent certified public
accountants for the 1998 fiscal year. Moss Adams LLP has no interest,
financial or otherwise, in the Company. All proxies will be voted
"FOR" ratification of such selection unless authority to vote for the
ratification of such selection is withheld or an abstention is noted.
Representatives from the accounting firm of Moss Adams LLP will be
present at the Meeting will be afforded the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
The Board of Directors of the Company recommends a vote FOR
Proposal No. 4.
PRINCIPAL STOCKHOLDERS
The Company has only one class of shares, Common Stock,
outstanding. The following table sets forth certain information
regarding ownership of the Company's Common Stock as of April 1, 1998,
by all persons known by the Company to be beneficial owners of five
percent (5%) or more of its outstanding Common Stock.
<TABLE>
<CAPTION>
Amount
and Name of Percent
Name and Address of Beneficial of
Beneficial Owner Office Ownership (1) Class (2)
- ----------------------- ---------------------- --------------- --------
<S> <C> <C> <C>
Don Berryessa (3) Vice President 193,600 (4) 5.0%
and Director
Anthony K. Chan (3) President, Chief 593,438 (5) 15.1%
Executive Officer,
Chief Financial
Officer, and Director
George Chung (3) Chairman and Director 597,838 (6) 15.3%
Joe Montana (3) -- 258,455 (7) 6.6%
</TABLE>
- -----------------------
(1) All shares are calculated on the basis of the number of current
shares held plus shares subject to options that are currently
exercisable or will become exercisable within sixty (60) days
after the Record Date.
(2) All percentages are calculated on the basis of the number of
shares outstanding as of the Record Date plus shares subject to
options held by such person that are currently exercisable or will
become exercisable within sixty (60) days after the Record Date.
(3) The address for the stockholder is the same of that of the
Company.
(4) Includes 25,000 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan and 28,100 shares held
by his spouse.
(5) Includes 87,500 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan.
(6) Includes 87,500 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan and 4,400 shares held
by his spouse.
(7) Includes 158,455 shares held by the Montana Family Trust and
100,000 shares subject to presently exercisable options granted
under the Company's 1997 Stock Plan.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding
Common Stock beneficially owned as of the Record Date by those persons
nominated by the Board of Directors for election as directors, as well
as all directors and officers of the Company as a group. Each person
named in the table possesses sole voting power, except as otherwise
indicated in the notes to the table.
<TABLE>
<CAPTION>
Amount
and Name of Percent
Name and Address of Beneficial of
Beneficial Owner Office Ownership (1) Class (2)
- ----------------------- ---------------------- --------------- --------
<S> <C> <C> <C>
Don Berryessa (3) Vice President 193,600 (4) 5.0%
and Director
Anthony K. Chan (3) President, Chief 593,438 (5) 15.1%
Executive Officer,
Chief Financial
Officer, and Director
George Chung (3) Chairman and Director 597,838 (6) 15.3%
William T. Duffy (3) Director -- --
Alan Elkes (3) Director -- --
Jan D. Hutchins (3) Director 24,000 (7) *
Ronald M. Lott (3) Director 31,131 (8) *
All directors and 1,440,007 36.8%
executive officers as a
group (7 persons)
</TABLE>
- -----------------------
* Owns less than 1%.
(1) All shares are calculated on the basis of the number of current
shares held plus shares subject to options that are currently
exercisable or will become exercisable within sixty (60) days
after the Record Date.
(2) All percentages are calculated on the basis of the number of
shares outstanding as of the Record Date plus shares subject to
options held by such person that are currently exercisable or will
become exercisable within sixty (60) days after the Record Date.
(3) The address for the stockholder is the same of that of the
Company.
(4) Includes 25,000 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan and 28,100 shares held
by his spouse.
(5) Includes 87,500 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan.
(6) Includes 87,500 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan and 4,400 shares held
by his spouse.
(7) Includes 20,000 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan.
(8) Includes 10,000 shares subject to presently exercisable options
granted under the Company's 1997 Stock Plan.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid
(for services rendered in all capacities) during the Company's past
three fiscal years to Anthony K. Chan, President, Chief Executive
Officer and Chief Financial Officer of the Company and to George Chung,
Chairman of the Board, the only executive officer other than the Chief
Executive Officer whose total annual salary and bonus exceeded $100,000
in 1997, (together, "named executive officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards/
Name Position Year(1) Salary Options(1)(2)
- ------------------ --------------------------- -------- --------- ------------
<S> <C> <C> <C> <C>
Anthony K. Chan President, Chief Executive 1997 $101,704 87,500
Officer, Chief Financial 1996 57,600 --
Officer, and Director 1995 43,000 --
George Chung Chairman of the Board 1997 $107,284 87,500
1996 57,600 --
1995 43,000 --
</TABLE>
- ----------------
(1) Information provided for 1995 and 1996 represent
compensation received by Messrs. Chan and Chung, as
President and Chief Executive Officer, respectively, of
America's Best Karate, the predecessor to the Company.
(2) Options were granted under the Company's 1997 Stock Plan.
STOCK OPTIONS GRANTS AND EXERCISES
The following table shows the stock options granted to the
named executive officers during the last completed fiscal year:
Options/SAR Grants in Last Fiscal Year
- --------------------------------------------------------------
<TABLE>
<CAPTION>
% of
Total
Options
Number of Granted Exercise
Securities to or
Underlying Employees Base Expir-
Options in Fiscal Price ation
Name Granted(#) Year ($/Sh) Date
- ------------------- ----------- --------- -------- --------
<S> <C> <C> <C> <C>
Anthony K. Chan 87,500 37.0% $6.00 7/30/07
George Chung 87,500 37.0% $6.00 7/30/07
</TABLE>
The following table shows the value at December 31, 1997, of
unexercised options held by the named executive officers:
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of securities
Shares underlying unerercised Value of Unexercised
Acquired options at fiscal year-end In-the-money
on (#) options at fiscal year-end($)
Exercise Value -------------------------- ---------------------------
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ -------- ----------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Anthony K. Chan -- -- 87,500 -- $164,063 $ --
George Chung -- -- 87,500 -- $164,063 $ --
</TABLE>
EMPLOYMENT CONTRACTS
In March 1997, the Company entered into employment agreements,
effective as of August 5, 1997, the closing date of the Company's
initial public offering, with each of Mr. Chung, Mr. Chan and Mr.
Berryessa pursuant to which Mr. Chung continues to serve as the
Company's Chairman of the Board, Mr. Chan continues to serve as the
Company's President, Chief Executive Officer and Chief Financial Officer
and Mr. Berryessa continues to serve as the Company's Vice-President.
Each agreement has a term of five years. Pursuant to the agreements, in
1997 the Company paid to Messrs. Chung, Chan and Berryessa a base salary
of $100,000, $100,000 and $65,000 per year, respectively. Each
agreement also provides for the following bonuses: (i) options to
purchase 87,500, 87,500 and 25,000 shares of Common Stock of the
Company, respectively, exercisable at 120% of the Company's initial
public offering price of the Common Stock of the Company which was
$6.00, which options were granted on July 30, 1997 (ii) $200,000,
$200,000 and $100,000, respectively, if all of the warrants issued to
the Company's initial public offering are exercised by the holders
thereof within the five-year exercise period of such warrants. In
addition, the executives are also entitled to certain fringe benefits.
If any of Messrs. Chung, Chan or Berryessa is terminated other than for
cause, death or disability, the Company is obligated to pay such
executive an amount equal to his base salary then in effect for the
remaining term of the agreement.
In March 1997, the Company and AC Media, entered into a two-year
employment agreement with Jan D. Hutchins effective as of August 5,
1997, the closing date of the Company's initial public offering,
pursuant to which Mr. Hutchins serves as President of AC Media and is
responsible for supervising the production and marketing of the AC
Media's media projects. Pursuant to the agreement Mr. Hutchins received
an annual base salary of $39,600 in 1997. The employment agreement also
provides for the following bonuses: (i) 4,000 shares of Common Stock of
the Company upon the public offering, subject to compliance with
applicable laws (these shares were issued at no cost to Mr. Hutchins and
were capitalized into the Company's film costs, because of Mr. Hutchins
contributions to the Company's film production, at their fair market
value at the time of issuance); (ii) options to purchase 20,000 shares
of Common Stock of the Company, exercisable at 120% of the public
offering price of the Common Stock of the Company which was $6.00, which
options were granted on July 30,1997; and (iii) $100,000 in cash if all
of the warrants issued to the public in the Company's initial public
offering are exercised by the holders thereof within two years of the
consummation of the offering. The employment agreement also provides
for certain fringe benefits. If Mr. Hutchins is terminated for reasons
other than for cause, death or disability, the Company is obligated to
pay Mr. Hutchins an amount equal to his base salary then in effect for
the remaining term of the agreement. None of the above-referenced
employment agreements contain non-competition provisions.
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash
compensation for service on the Board of Directors or any committee
thereof. Directors are eligible to receive stock options under the
Company's stock option plans.
COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997, the Board of
Directors of the Company held one regularly scheduled meeting and acted
by unanimous written consent ten times. Each director attended at least
75% of the aggregate number of Board of Directors' meetings and meetings
held by all committees of the Board on which each director served.
Information regarding the committees below is as of December 31, 1997.
The members of the Audit Committee are Messrs. Chan, Duffy
and Elkes. The committee (a) approves the selection and termination of
independent public accountants, (b) approves the scope of external audit
services, (c) reviews adjustments recommended by the independent public
accountant and address disagreements between the independent public
accountants and management, (d) reviews the adequacy of internal
controls and management's handling of identified material inadequacies
and reportable conditions in the internal controls over financial
reporting and compliance with laws and regulations, and (e) supervises
the internal audit function, which may include approving the selection,
compensation and termination of internal auditors. The Audit Committee
did not meet in 1997.
The members of the Compensation Committee are Messrs. Chan,
Chung, Duffy, Elkes and Berryessa. The purpose of the committee is to
ensure that the Company's directors and employees receive adequate and
fair compensation, including salaries and bonuses, and that such
compensation is competitive within the industry. The committee also
administers the Company's stock option plans. The Compensation
Committee acted by unanimous written consent three times in 1997.
The Company has no nominating committee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's officers and directors, and any person who owns
more than ten percent (10%) of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than ten-percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Ronald M. Lott (Director) failed to include the beneficial
ownership of 10,000 shares of Common Stock underlying an option on the
Form 5 filed on February 12, 1998. An amended Form 5 has been filed
with the SEC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Chung and Chan are the guarantors of two loans to the
Company from Karen T.I. Shen and Thomas Jung Woo originally totaling
$27,000 and bearing interest at 14% per annum which are due and payable
in 1999 and 2000, and are the direct obligors on a loan in the original
principal amount of $100,000 from the Michael Triantos M.D. Inc. Money
Purchase and Profit Sharing Pension Plans Trust which bears interest at
the rate of 12% per annum, is due December 15, 1999 and which is being
treated as a debt of the Company. Messrs. Chung and Chan are also the
guarantors of a bank credit line of the Company with a credit limit of
$35,000 (outstanding balance as of March 31, 1998 of approximately
$32,000), and of one property lease of the Company and are the direct
obligors on two property leases which are being treated as leases of the
Company.
In a letter dated October 29, 1996, the Company agreed to pay Joe
and Jennifer Montana, significant stockholders of the Company, $50,000
in cash, payable 30 days prior to the release of the Company's second
fitness product, entitled "MONTANA EXERCISE VIDEO" and a royalty
payment of $1.00 per videotape sold. In such letter, the Company also
agreed to pay Joe and Jennifer Montana an additional $50,000 from
proceeds of the Company's initial public offering, and such payment was
made in 1997.
None of the transactions with officers or shareholders of the
Company and their affiliates were made on terms less favorable to the
Company than those available from unaffiliated parties.
SHAREHOLDER PROPOSALS
The 1999 Annual Meeting of Stockholders is anticipated to be
held on May 21, 1999. The deadline for stockholders to submit proposals
to be considered for inclusion in the Company's Proxy Statement and form
of proxy for next year's Annual Meeting of Stockholders is December 25,
1998.
OTHER PROPOSED ACTION
The Board of Directors is not aware of any other business
which will come before the Meeting, but if any such matters are properly
presented, the proxies solicited hereby will be voted in accordance with
the best judgment of the persons holding the proxies. All shares
represented by duly executed proxies will be voted at the Meeting.
A COPY OF THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1997 ON FORM 10-KSB, ACCOMPANIES THIS PROXY
STATEMENT. ADDITIONAL COPIES OF THE ANNUAL REPORT ARE AVAILABLE UPON
REQUEST TO ANTHONY CHAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER OF THE COMPANY.
AMERICAN CHAMPION ENTERTAINMENT, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1998
The undersigned holder of Common Stock acknowledges receipt of a copy
of the Notice of Annual Meeting of Shareholders of American Champion
Entertainment, Inc., and the accompanying Proxy Statement dated April 22,
1998, and revoking any Proxy heretofore given, hereby constitutes and appoints
Anthony K. Chan and George Chung, and each of them, with full power of
substitution, as attorneys and Proxies to appear and vote all of the shares of
Common Stock of American Champion Entertainment, Inc, a Delaware corporation,
standing in the name of the undersigned which the undersigned could vote if
personally present and acting at the Annual Meeting of Shareholders of
American Champion Entertainment, Inc., to be held at the Park Hyatt Hotel, 333
Battery Street, San Francisco, California on Friday, May 29, 1998, at 7:00
p.m. or at any adjournments thereof, upon the following items as set forth in
the Notice of Meeting and Proxy Statement and to vote according to their
discretion on all other matters which may be properly presented for action at
the Meeting or any adjournments thereof. The above-named proxy holders are
hereby granted discretionary authority to cumulate votes represented by the
shares covered by this proxy in the election of Directors.
1. To elect seven (7) directors from the nominees listed below, to serve until
the next Annual Meeting of Stockholders or until their successors are elected.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
all nominees
(except as marked to the contrary below) listed below.
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below:
Don Berryessa; Anthony K. Chan; George Chung; William T. Duffy;
Alan Elkes; Jan D. Hutchins; Ronald M. Lott
2. To amend the Certificate of Incorporation to increase the authorized amount
of capital stock from 10,000,000 shares to 23,000,000 shares, of which
20,000,000 shall be common stock, $0.0001 par value, and 3,000,000 shall be
preferred stock.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To increase the number of shares of common stock, $0.0001 par value,
subject to issuance under the Company's 1997 Stock Plan from 350,000 to
800,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment of Moss Adams LLP as the Company's independent
certified public accountants for the 1998 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To transact such other business as may properly come before the
meeting.
OVER>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS,
NOMINATED BY THE BOARD OF DIRECTORS, AND "FOR" PROPOSALS NOS. 2, 3 AND 4. THE
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSALS NOS. 2, 3 AND 4.
DATE: ________________________________________, 1998
SIGNATURE: _______________________________________
