PLAN AND AGREEMENT OF REORGANIZATION made as of October 22, 1996, by
and among BNN Corporation, a Nevada corporation ("BNN"), and those persons
executing this Agreement whose names and addresses are set forth in the
signature page (collectively, the "Acquired Company Shareholders"), own all of
the issued and outstanding shares of Kaleidoscope Media Group, Inc., a Delaware
corporation (the "Acquired Company").
INTRODUCTION
WHEREAS, BNN is a public corporation which commenced an entertainment
and promotional business;
WHEREAS, the Acquired Company is a holding company for various
corporations engaged in the entertainment and promotional business;
WHEREAS, the Acquired Company Shareholders own 1,609,740 shares
("Acquired Company Shares") constituting all of the issued and outstanding
shares of the Acquired Company;
WHEREAS, the Acquired Company Shareholders desire to exchange (the
"Exchange") their Acquired Company Shares in a tax free exchange on the basis of
one Acquired Company share for [5.6061] shares of Common Stock of BNN (the "BNN
Shares") with the result that the Acquired Company will become a wholly owned
subsidiary of BNN and the Acquired Company Shareholders will receive a total of
9,500,000 BNN Shares of a total of 23,583,062 shares, upon completion of the
Exchange;
WHEREAS, the parties intend by executing this Agreement, to adopt a
Plan of Reorganization within the meaning of Section 368 of the Internal Revenue
Code.
NOW, THEREFORE, in consideration of the premises, the parties hereto do
mutually agree as follows:
ARTICLE I
The Exchange
1.1 Exchange. On the Closing Date as provided for in Section 1.2, each
of the Acquired Company Shares shall be exchanged solely for BNN Shares as set
forth in Schedule 1 hereto. No Acquired Company Shareholder shall have any
rights to receive fractional shares.
1.2 Closing. The closing of the Exchange contemplated hereby (the
"Closing") shall be held simultaneously herewith.
- 1 -
ARTICLE II
DEFINITIONS, DISCLOSURE SCHEDULE
2.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings indicated below:
The "Acquired Company Financial Statements" shall refer to (A) the
balance sheets of each of the Consolidated Entities of the Acquired Company as
of December 31, 1995 and December 31, 1994 audited by Paneth Xxxxx and
Xxxxxxxxx, LLP (the "Auditors") and the statement of operations, cash flow and
stockholder equity for the periods then ended ("Audited Statements") and (B)
unaudited consolidated balance sheets of the Acquired Company as of June 30,
1996 and statement of operations, stockholder deficit and cash flow for the
period ending on such date reflecting the acquisition of the "Consolidated
Entities" as hereinafter defined by the Acquired Company ("Combined
Statements").
The "Acquired Company Balance Sheet" shall refer to the unaudited
balance sheet as of June 30, 1996 included in the Acquired Company's Financial
Statements and June 30, 1996 shall be referred to as the "Balance Sheet Date."
"Accounts Receivable" shall mean all accounts, notes and/or other
rights to payment which the Acquired Company owns, or which may arise in favor
of Acquired Company in the future.
"BNN Financial Statements" shall refer to the audited balance sheets of
BNN as of December 31, 1994 and December 31, 1995 audited by Xxxxxxx Xxxx (the
"BNN Auditors") and the statement of operations, cash flow and stockholder
equity for the period then ended and the unaudited balance sheet at June 30,
1996 and the statement of operations, cash flow and stockholder equity for the
period ending on such date, all as contained in BNN's SEC Reports to be
delivered herewith pursuant to Section 5.7 and Article 7.
"BNN Balance Sheet" shall refer to the balance sheet of BNN as of June
30, 1996 and included in the BNN Financial Statements and June 30, 1996 shall be
referred to as the "BNN Balance Sheet Date."
"BNN SEC Reports" shall refer to the reports set forth in Section 5.7.
"Consolidated Entities" shall refer to Seagull Entertainment, Inc.
("Seagull") and People and Properties, Inc. and Kaleidoscope Entertainment, Inc.
(collectively referred to as "Kaleidoscope Group").
"Contract" shall mean any agreement, contract, license, indenture,
lease, mortgage, license, plan, arrangement, commitment or instrument (whether
written or oral).
- 2 -
"Environmental Laws" shall mean all federal, state, local and foreign
laws, statutes, regulations having the force and effect of law, permits, court
decrees, judgments, injunctions and written orders concerning (i) public health
and safety relating to exposure of humans to toxic or hazardous substances or
(ii) pollution or protection of the environment or nature resources.
"Enforceability Exceptions" shall mean the extent to which
enforceability of an obligation may be limited by applicable bankruptcy,
insolvency, re-organization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
"Knowledge" shall mean with respect to a party's awareness of the
presence or absence of a fact, event or condition shall mean (a) actual
knowledge plus, if different, (b) the knowledge that would be obtained if such
party conducted itself faithfully and exercised a sound discretion in the
management of his own affairs.
"Laws" shall mean all laws, common laws, rules, regulations,
ordinances, codes, judgments, injunctions, orders, decrees, permits, policies,
guidelines and other requirements of all foreign, federal, state and local
governments and all agencies and instrumentalities thereof.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, adverse
claim or restriction of any kind affecting title or resulting in an encumbrance
against property, real or personal, tangible or intangible, or a security
interest of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any third party option or other
agreement to sell and any filing of or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statute) of any
jurisdiction).
"Material Adverse Effect" or "Material Adverse Change" with respect to
a party means an adverse change which would in the aggregate have material
adverse effect on the assets, liabilities (whether absolute, accrued, contingent
or otherwise), condition (financial or otherwise), results of operations,
business or prospects on a consolidated or combined basis of such party.
"Person" shall mean any natural person, corporation, division of a
corporation, partnership, trust, joint venture, association, company, estate,
unincorporated organization or Governmental Entity.
"Subsidiary" shall refer to any corporations or other entities in which
the Acquired Company has a majority interest or which is otherwise controlled by
the Acquired Company.
"Transactions" shall mean, in respect of any party, all transactions
set forth in or contemplated by this Agreement that involve, relate to or affect
such party, including, without limitation, this Exchange.
- 3 -
2.2 Disclosure Schedules. Simultaneously with the execution of this
Agreement, (a) the Acquired Company Shareholders shall deliver schedules to BNN
relating to the Acquired Company ("Acquired Company Disclosure Schedule"), and
(b) BNN shall deliver to the Acquired Company Shareholders schedules relating to
BNN (the "BNN Disclosure Schedule"). The BNN Disclosure Schedule and the
Acquired Company Disclosure Schedule shall be referred to as the "Disclosure
Schedules". The Disclosure Schedules shall set forth the matters required or
permitted to be set forth therein as described elsewhere in this Agreement and
shall be deemed to be part of this Agreement.
III.
CLOSING DELIVERIES
3.1 Acquired Company Shareholder's Closing Deliveries. At the Closing,
in addition to documents referred elsewhere, the Acquired Company Shareholders,
without recourse except as provided in Section 11.1, shall deliver, or cause to
be delivered, to BNN certificates representing Acquired Company Shareholder
Stock owned by all of the Acquired Company Stockholders accompanied by transfer
documents satisfactory to BNN and its counsel.
3.2 Closing Deliveries to the Acquired Company Shareholders. At the
Closing, in addition to documents referred to elsewhere, BNN shall deliver to
the Acquired Company Shareholders certificates representing the BNN Shares
issuable upon consummation of the Exchange.
IV.
REPRESENTATIONS AND WARRANTIES OF THE
ACQUIRED COMPANY SHAREHOLDERS
Except as set forth in the Acquired Company Disclosure Schedule, the
Acquired Company Shareholders jointly and severally represent and warrant to BNN
as follows, with the knowledge and understanding that BNN and is relying
materially upon such representations and warranties. References to Schedule
numbers shall be deemed references to the Acquired Company Disclosure Schedule.
4.1 Organization and Standing of the Acquired Company. Each of the
Acquired Company and any Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the state of incorporation and
has the corporate power to carry on its business as now conducted and to own its
assets and is duly qualified to transact business as a foreign corporation in
each state where such qualification is necessary except where the failure to
qualify will not have a Material Adverse Effect. The copies of the Certificate
of Incorporation and By-laws of the Acquired Company and any Subsidiary as
amended to date, and delivered to BNN, are true and complete copies of those
documents as now in effect.
- 4 -
4.2 Subsidiaries. Except as set forth in the Acquired Company
Disclosure Schedule, the Acquired Company has no Subsidiary and no interest in
any other corporation, partnership, joint venture or other entity. The Acquired
Company Disclosure Schedule lists the name of any such Subsidiary or other
entity, together with the number of shares or other interest owned by the
Acquired Company and the Acquired Company's percentage of ownership thereof.
Each of such Subsidiaries are wholly owned by the Acquired Company or the
Acquired Company has entered into an agreement to acquire any minority interest
thereof. Any such agreement is described in Schedule 4.3.
4.3 Capitalization. Schedule 4.3 sets forth the authorized capital
stock of the Acquired Company and each Subsidiary, the number of shares of
capital stock which are issued and outstanding, the par value thereof and the
record and beneficial holders thereof. All of such shares of capital stock that
are issued and outstanding are duly authorized, validly issued and outstanding,
fully paid and nonassessable, and were not issued in violation of the preemptive
rights of any person. There are no (a) outstanding options, warrants or rights
to purchase or subscribe for any equity securities, or other ownership interests
of the Acquired Company or Subsidiary, (b) outstanding options or rights to sell
to any equity securities or other ownership interests of any other business
entity, (c) obligations of the Acquired Company or Subsidiary, whether absolute
or contingent, to issue any shares of equity securities or other ownership
interests, (d) indebtedness or securities directly or indirectly convertible
into any equity securities of the Acquired Company or (e) any shareholder
agreements, options, rights of first refusal or other similar rights with
respect to the Capital Stock.
4.4 Share Ownership. Each of the Acquired Company Shareholders is the
record and beneficial owner of the number of Acquired Company Shares listed
after such shareholders name in Schedule 1 free and clear of all liens and
encumbrances and claims of any kind. Upon transfer pursuant to the Exchange, BNN
shall receive such shares free and clear of all liens and encumbrances and
claims of third parties.
4.5 Investment. Each Acquired Company Shareholder hereby represents,
warrants and agrees that he or it will be acquiring the BNN Shares for
investment, for his or its own account, and not with a view to the distribution
of the BNN Shares. In such connection, the Acquired Company Shareholders further
represent and warrant that he or it understands that BNN is issuing the BNN
Shares to him or it in reliance upon an exemption from registration requirements
pursuant to Section 5 of the Securities Act of 1933, as amended (the "Act") and
the rules and regulations thereunder. The Acquired Company Shareholders
acknowledge that the BNN Shares may not be sold, transferred, pledged,
hypothecated, assigned or otherwise disposed of by him or it unless BNN shall
have been supplied with evidence satisfactory to it and counsel that such
transfer is not in violation of the Act. Furthermore, the Acquired Company
Shareholders understand that the certificates for the BNN Shares shall bear an
appropriate restrictive legend and stop transfer instructions will be placed
against the BNN Shares with respect thereto, to reflect the foregoing
restriction. The
- 5 -
Acquired Company Shareholders consent to the placing of such legend on the
certificates for the BNN Shares.
4.6 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by the Acquired
Company shareholders in accordance herewith, the valid and binding obligations
of Acquired Company shareholders, enforceable in accordance with their
respective terms, subject to the Enforceability Exceptions.
4.7 Assets. The Acquired Company has good and marketable title to or
licenses to all of the assets and properties which it purports to own as
reflected on the Acquired Company balance sheet, or thereafter acquired. The
Acquired Company has a valid leasehold interest in all material properties of
which it is the lessee and each such lease is valid, binding and enforceable
against the Acquired Company, as applicable, and, to their knowledge, and the
other parties thereto in accordance with its terms. No material portion of the
assets of the Acquired Company is subject to any lien or any governmental decree
or order to be sold or is being condemned, expropriated or otherwise taken by
any public authority with or without payment of compensation therefor, nor, to
their knowledge, has any such condemnation, expropriation or taking been
proposed. None of the material assets of the Acquired Company is subject to any
restriction which would prevent continuation of the use currently made thereof
or materially adversely affect the value thereof.
4.8 Contracts.
The Acquired Company Disclosure Schedule consists of a true
and complete list of all Contracts to which the Acquired Company or any
Subsidiary is a party or by which it is bound: (i) requiring payments or
receipts less than $10,000 per year and (ii) made in the ordinary course of
business and terminable by the Acquired Company or any Subsidiary on notice of
thirty (30) days or less without penalty or the Acquired Company being liable
for damages. All such contracts shall hereinafter be referred to as "Material
Contracts").
All of the Material Contracts are valid and binding upon the
Acquired Company or any Subsidiary, as applicable, and to their knowledge, the
other parties thereto and are in full force and effect and enforceable in
accordance with their terms, and neither the Acquired Company, nor to the
knowledge of the Acquired Company Shareholders, any other party to any Material
Contract has breached any material provision of, and no event has occurred
which, with the lapse of time or action by a third party, could result in a
material default under the terms thereof.
4.9 Litigation. There is no claim, action, proceeding, or investigation
pending or, to their knowledge, threatened against or affecting the Acquired
Company or any Subsidiary before or by any court, arbitrator or governmental
agency or authority which, in their reasonable judgment, could have a Material
Adverse Effect on the Acquired Company on a consolidated basis. There are no
decrees, injunctions or orders of any court, governmental department, agency or
arbitration outstanding against the Acquired Company and with respect to any
action or claim covered by
- 6 -
insurance, the Acquired Company has complied with all requirements of any such
policy which are conditions to the defense and continued defense of such claim
or action.
4.10 Taxes. For purposes of this Agreement, (A) "Tax" (and, with
correlative meaning, Taxes") shall mean any federal, state, local or foreign
income, alternative or add-on minimum, business, employment, franchise,
occupancy, payroll, property, sales, transfer, use, value added, withholding or
other tax, levy, impost, fee, imposition, assessment or similar charge together
with any related addition to tax, interest, penalty or fine thereon; and (B)
"Returns" shall mean all returns (including, without limitation, information
returns and other material information), reports and forms relating to Taxes.
Each of the Acquired Company and any Subsidiary has duly filed
all Returns required to be filed by it other than Returns (individually and in
the aggregate) where the failure to file would have no Material Adverse Effect
on the business or prospects of Acquired Company and Subsidiary on a
consolidated basis. All such Returns were, when filed, and to the knowledge of
the Acquired Company Shareholders are, accurate and complete in all material
respects and were prepared in conformity with applicable laws and regulations.
The Acquired Company has paid or will pay in full or has adequately reserved
against all Taxes otherwise assessed against it or Subsidiary through the
Closing Date.
The Acquired Company or Subsidiary is not a party to any
pending action or proceeding by any governmental authority for the assessment of
any Tax, and, to the knowledge of the Acquired Company, no claim for assessment
or collection of any Tax related to the Acquired Company has been asserted
against the Acquired Company that has not been paid. There are no Tax liens upon
the assets (other than the lien of property taxes not yet due and payable) of
the Acquired Company. There is no valid basis, to the knowledge of the Acquired
Company Shareholders or Subsidiary, except as set forth in the Acquired Company
Schedule, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any Tax to be issued to the Acquired Company by any
governmental authority.
4.11 Compliance with Laws and Regulations. To their knowledge, each of
the Acquired Company and any Subsidiary has complied and is presently complying,
in all material respects, with all laws, rules, regulations, orders and
requirements (federal, state and local and foreign) applicable to it in all
jurisdictions where the business of the Acquired Company is conducted or to
which the Acquired Company is subject, including, Environmental laws.
4.12 Insurance. The Acquired Company and each Subsidiary is covered by
adequate insurance policies, or renewals thereof.
4.13 Condition of Assets. The equipment, fixtures and other personal
property of the Acquired Company and each Subsidiary are in good operating
condition and repair (ordinary wear and tear excepted) for the conduct of its
business as presently being conducted.
- 7 -
4.14 No Breaches. The making and performance of this Agreement and any
other agreements contemplated hereby will not (i) conflict with or violate the
Certificate of Incorporation or the by-laws of the Acquired Company or any
Subsidiary, (ii) violate in any material respect any laws, ordinances, rules, or
regulations, or any order, writ, injunction or decree to which Acquired Company
or any Subsidiary is a party or by which any of its material assets, businesses,
or operations may be bound or affected or (iii) result in any breach or
termination of, or constitute a default under, or constitute an event which,
with notice or lapse of time, or both, would become a default under, or result
in the creation of any encumbrance upon any material asset under, or create any
rights of termination, cancellation or acceleration in any person under, any
Material Contract.
4.15 Financial Statements. Schedule 4.15 contains true and complete
copies of the Acquired Company's Financial Statements Sheets. These Financial
Statements (i) have been prepared from the books and records of the Acquired
Company or Consolidated Entities in accordance with GAAP consistently applied
with prior periods, (ii) are complete and correct and fairly represent, in each
case in all material respects, the [consolidated] financial condition and
[consolidated] results of operations of the Acquired Company as of the dates and
for the periods indicated thereon, and (iii) reflect all assets at the lower of
their cost or net realizable value. Audited Statements have been audited by the
Auditors.
The books and account of the Acquired Company have been
maintained in all material respects in accordance with sound business practices,
and to the best of the Acquired Company Shareholder's knowledge there have been
no transactions involving the Acquired Company that properly should have been
set forth therein in accordance with GAAP that have not been accurately so set
forth.
4.16 Absence of Certain Changes or Events. Except as set forth in
Schedule 4.16, since the Balance Sheet Date, to the Acquired Company
Shareholder's knowledge, there has not occurred nor, has any fact or
circumstance arisen which may lead to:
(a) Any adverse change in the assets, liabilities
(whether absolute, accrued, contingent or otherwise), condition (financial or
otherwise), results of operations, business or prospects of the Acquired Company
or any Subsidiary not reflected in the Acquired Company's Financials and that
has resulted in a Material Adverse Effect;
(b) Any material increase in liabilities over the
level reflected on the Balance Sheet, any guarantee by the Acquired Company or
any Subsidiary of any obligations, or any mortgage, pledge or encumbrance on any
of the properties or assets of the Acquired Company or any Subsidiary;
(c) Any increase not in the ordinary course of
business in the compensation (including, without limitation, the rate of
commissions) payable to, or any payment of a cash bonus to, any officer,
director or employee of, or consultant to, the Acquired Company in excess of Ten
Thousand Dollars ($10,000);
- 8 -
4.17 Government Licenses, Permits, Etc. Each of the Acquired Company
and each Subsidiary is duly licensed, with all requisite permits and
qualifications, as required by applicable law for the purpose of conducting its
business or owning its properties or both, in each jurisdiction in which it does
business or owns property or in which such license, permit or qualification is
otherwise required except where the failure to be so qualified or authorized
would not in the aggregate have a Material Adverse Effect on the assets,
liabilities (whether absolute, contingent or otherwise), results of operations,
business or prospects of the Acquired Company or any Subsidiary.
4.18 Employee Benefit Plans; ERISA. Except for those plans set forth on
Schedule 4.18 hereto (the "Plans"), neither the Acquired Company nor any member
of a "controlled group" (within the meaning of Section 4971(e)(2)(B)of the Code)
of which the Acquired Company is a member has ever maintained or contributed to
any "employee benefit plan", as that term is defined in Section 3(3) of ERISA,
or any stock purchase plan, stock option plan, fringe benefit plan, bonus plan
or any other deferred compensation agreement, plan or funding arrangement,
whether or not such plan has been terminated and whether or not such plan is of
legally binding nature in the form of an informal understanding. With respect to
the Plans, the requirements of ERISA and the Code, as applicable, have been
fulfilled in all material respects and no event has occurred nor does any
condition exist which would subject the Acquired Company to any material
penalty, excise tax or liability.
4.19 Intellectual Property; Computer Software.
(a) Schedule 4.19 sets forth (i) a complete and
correct list of each patent and patent application and each copyright, copyright
application, trademark, trademark application (in any such case, whether
registered or to be registered in the United States of America or elsewhere),
process, invention, trade secret, trade name, computer program, formula and
customer list (collectively, the "Intangible Personal Property") of the Acquired
Company, and (ii) a complete and correct list of all material licenses or
similar agreements or arrangements ("Licenses") to which the Acquired Company is
a party either as licensee or licensor for each such item of Intangible Personal
Property.
(b) Except as set forth on Schedule 4.19 to the best
of the Acquired Shareholder's knowledge:
(i) There are no pending actions or other judicial or
adversary proceedings involving the Acquired Company concerning any
item of Intangible Personal Property, and, to Acquired Company's
knowledge, no such action or proceeding is threatened and no claim or
other demand has been made or threatened by any person relating to any
item of Intangible Personal Property;
- 9 -
(ii) The Acquired Company has the right and authority
to use each item of Intangible Personal Property in connection with the
conduct of its businesses in the manner presently conducted and to
convey such right and authority, and such use does not conflict with,
infringe upon or violate any patent, trademark or registration of any
other person or entity;
(iii) There are no outstanding or, to the Acquired
Company's knowledge, threatened disputes or disagreements with respect
to any Licenses; and
(iv) The conduct by the Acquired Company of its
business does not conflict with the valid patents, trademarks, trade
secrets or trade names of others.
4.20 Existing Arrangements. Except as set forth in Schedule 4.20 of the
Acquired Company Disclosure Schedule, to the best of their knowledge, no person
having an arrangement with the Acquired Company will cease to conduct business
with the Acquired Company after the Closing Date in substantially the same
manner as it has conducted business with the Acquired Company in the past.
4.21 Governmental Approvals. No authorization, license, permit,
franchise, approval, order or consent of, and no registration, declaration or
filing by the Acquired Company with, any governmental authority, domestic or
foreign, federal, state or local, is required in connection with the Acquired
Company's execution, delivery and performance of this Agreement.
4.22 Transactions with Affiliates. Except as set forth in Schedules
4.23 and 4.15(b), the Acquired Company is not indebted for money borrowed,
either directly or indirectly, from any of its officers, directors, or any
Affiliate (as defined below), in any amount whatsoever; nor are any of its
officers, directors, or Affiliates indebted for money borrowed from the Acquired
Company; nor are there any transactions of a continuing nature between the
Acquired Company and any of its officers, directors, or Affiliates (other than
by or through the regular employment thereof by the Acquired Company) not
subject to cancellation which will continue beyond the Closing Date, including,
without limitation, use of the assets of the Acquired Company for personal
benefit with or without adequate compensation. For purposes of this Agreement,
the term "Affiliate" shall mean any person that, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified. As used in the foregoing definition, the
term (i) "control" shall mean the power through the ownership of voting
securities, contract or otherwise to direct the affairs of another person and
(ii) "person" shall mean an individual, firm, trust, association, corporation,
partnership, government (whether federal, state, local or other political
subdivision, or any agency or bureau of any of them) or other entity.
4.23 Accounts Receivable. Schedule 4.24 is an accurate aging of the
Accounts Receivable at the Balance Sheet Date. To the Acquired Company's
knowledge, the Accounts Receivable, including any Accounts Receivable arising
since the date of the Interim Balance Sheet, are fully collectible, net of the
reserves set forth in the most recent Interim Balance Sheet delivered to BNN
prior to the date hereof.
- 10 -
4.24 Liabilities. The Acquired Company has no material direct or
indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, xxxxxx or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
("Liabilities"), whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement, other than (i)
Liabilities fully and adequately reflected or reserved against on the Balance
Sheet, (ii) Liabilities incurred since the Balance Sheet Date in the ordinary
course of the business of the Acquired Company, or (iii) Liabilities otherwise
disclosed in this Agreement, including the Exhibits hereto and Disclosure
Schedule.
4.25 No Omissions or Untrue Statements. No representation or warranty
made by the Acquired Company in this Agreement, the Acquired Company Disclosure
Schedule or in any certificate required to be delivered to BNN pursuant to the
terms of this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading as of the date hereof
and as of the Closing Date.
4.26 Absence of Certain Practices. To their knowledge, neither the
Acquired Company nor any employee, agent or other person acting on the Acquired
Company's behalf has directly or indirectly given or agreed to give any gift or
similar benefit to any customer, supplier, competitor or government employee or
official (domestic or foreign) (i) that would subject the Acquired Company to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding or (ii) that if not given in the past would have a Material Adverse
Effect on the Acquired Company.
V.
REPRESENTATIONS AND WARRANTIES OF BNN
Except as set forth in the BNN Disclosure Schedule, BNN represents and
warrants to, and agree with, the Acquired Company Shareholders as follows as of
the date hereof and as of the Closing Date:
5.1 Organization and Standing of BNN. BNN is a corporation duly
organized, validly existing and in good standing under the laws of the state of
incorporation and has the corporate power to carry on its business as now
conducted and to own its assets and is duly qualified to transact business as a
foreign corporation in each state where such qualification is necessary except
where the failure to qualify will not have a Material Adverse Effect. The copies
of the Certificate of Incorporation and By-laws of BNN and delivered to BNN, are
true and complete copies of those documents as now in effect.
- 11 -
5.2 Subsidiaries. Except as set forth in the BNN Disclosure Schedule,
BNN has no Subsidiaries and no interest in any other corporation, partnership,
joint venture or other entity.
5.3 Capitalization. The Authorized capital stock of BNN consists of
50,000,000 shares of Common Stock, par value $.01 and 5,000,000 shares of
Preferred Stock, $.001 par value. As of the date hereof, 14,083,062 shares of
Common Stock and no shares of Preferred stock were issued and outstanding. The
Company contemplates issuing shares pursuant to proposed acquisitions and
options to management. Such outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, and non-assessable. The BNN Common Stock
to be issued pursuant to this Agreement, when issued in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable. Except for options to purchase shares issued pursuant to various
BNN option or stock plans or as set forth in Schedule 5.3 attached hereto, as of
the date of this Agreement, there are no outstanding rights, subscriptions,
warrants, puts, calls, unsatisfied preemptive rights, option or other agreements
of any kind relating to any of the outstanding authorized but unissued,
unauthorized or treasury shares of the capital stock or any other security of
BNN and there are no authorized or outstanding securities convertible or into
exchangeable for any such capital stock or other security of BNN.
5.4 Governmental Approval; Consents. Except for the reports required to
be filed in the future by BNN, as a mandatory reporting company, under the
Securities Exchange Act (the "Exchange Act"), and under the Securities Act, no
authorization, license, permit, franchise, approval, order or consent of, and no
registration, declaration or filing by BNN with, any governmental authority,
domestic or foreign, federal, state or local, is required in connection with
BNN's execution, delivery and performance of this Agreement. No consents of any
other parties are required to be received by or on the part of BNN to enable BNN
to enter into and carry out this Agreement.
5.5 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by BNN in
accordance herewith, the valid and binding obligations of BNN enforceable in
accordance with their respective terms, subject to the Enforceability
Exceptions.
5.6 Assets. BNN has good and marketable title or leases to all of the
assets and properties which it purports to own as reflected on the BNN Balance
Sheet, or thereafter acquired. BNN has a valid leasehold interest in all
material properties of which it is the lessee and each such lease is valid,
binding and enforceable against BNN, as applicable, and, to their knowledge, and
the other parties thereto in accordance with its terms. No material portion of
the assets of BNN is subject to any lien or any governmental decree or order to
be sold or is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to its
knowledge, has any such condemnation, expropriation or taking been proposed.
- 12 -
None of the material assets of BNN is subject to any restriction which would
prevent continuation of the use currently made thereof or materially adversely
affect the value thereof.
5.7 BNN's SEC Reports. BNN has previously delivered to the Acquired
Company Shareholders true and complete copies, of (i) its Annual Report on Form
10-K for 1994 and Quarterly Reports on Form 10-Q for quarters ending March 31,
1995, June 30, 1995 and September 30, 1995, and (ii) will deliver its annual
Report on Form 10-K for 1995 and quarterly reports on form 10-Q for the quarters
ended thereafter ("Post Closing Filings"), pursuant to Article VII
(collectively, "BNN's SEC Reports"). BNN's SEC Reports do not contain any untrue
statement of a material fact, or fail to state any material fact required to be
stated therein or necessary to make the statements made therein not materially
misleading and the financial statements therein fairly present the financial
position and results of operations of BNN as of the dates and for the periods
indicated, prepared in accordance with GAAP.
5.8 Contracts.
The BNN Disclosure Schedule consists of a true and complete
list of all Contracts to which BNN is a party or by which it is bound: (i)
requiring payments or receipts less than $10,000 per year and (ii) made in the
ordinary course of business and terminable by BNN on notice of thirty (30) days
or less without penalty or being liable for damages. All such contracts shall
hereinafter be referred to as "Material Contracts").
All of the Material Contracts are valid and binding upon BNN
as applicable, and to their knowledge, the other parties thereto and are in full
force and effect and enforceable in accordance with their terms, and neither BNN
nor to its knowledge, any other party to any Material Contract has breached any
material provision of, and no event has occurred which, with the lapse of time
or action by a third party, could result in a material default under the terms
thereof.
5.9 Litigation. Except as listed on the Disclosure Schedule, there is
no claim, action, proceeding, or investigation pending or, to their knowledge,
threatened against or affecting BNN before or by any court, arbitrator or
governmental agency or authority which, in their reasonable judgment, could have
a Material Adverse Effect on BNN on a consolidated basis. There are no decrees,
injunctions or orders of any court, governmental department, agency or
arbitration outstanding against BNN and with respect to any action or claim
covered by insurance, BNN has complied with all requirements of any such policy
which are conditions to the defense and continued defense of such claim or
action.
5.10 Taxes. For purposes of this Agreement, (A) "Tax" (and, with
correlative meaning, Taxes") shall mean any federal, state, local or foreign
income, alternative or add-on minimum, business, employment, franchise,
occupancy, payroll, property, sales, transfer, use, value added, withholding or
other tax, levy, impost, fee, imposition, assessment or similar charge together
with any related addition to tax, interest, penalty or fine thereon; and (B)
"Returns" shall mean all returns
- 13 -
(including, without limitation, information returns and other material
information), reports and forms relating to Taxes.
BNN has duly filed all Returns required to be filed by it
other than Returns (individually and in the aggregate) where the failure to file
would have no Material Adverse Effect on the business or prospects of Acquired
Company and Subsidiary on a consolidated basis. All such Returns were, when
filed, and to the knowledge of BNN are, accurate and complete in all material
respects and were prepared in conformity with applicable laws and regulations.
BNN has paid or will pay in full or has adequately reserved against all Taxes
otherwise assessed against it or Subsidiary through the Closing Date.
BNN is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and, to the knowledge of
BNN, no claim for assessment or collection of any Tax related to BNN has been
asserted against BNN that has not been paid. There are no Tax liens upon the
assets (other than the lien of property taxes not yet due and payable) of BNN.
There is no valid basis, to the knowledge of BNN, except as set forth in the BNN
Schedule, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any Tax to be issued to BNN by any governmental authority.
5.11 Compliance with Laws and Regulations. To BNN's knowledge, BNN has
complied and is presently complying, in all material respects, with all laws,
rules, regulations, orders and requirements (federal, state and local and
foreign) applicable to it in all jurisdictions where the business of BNN is
conducted or to which BNN is subject, including Environmental laws.
5.12 Insurance. BNN is covered by adequate insurance policies, or
renewals thereof.
5.13 No Breaches. The making and performance of this Agreement and any
other agreements contemplated hereby will not (i) conflict with or violate the
Certificate of Incorporation or the by-laws of BNN, (ii) violate in any material
respect any laws, ordinances, rules, or regulations, or any order, writ,
injunction or decree to which BNN is a party or by which any of its material
assets, businesses, or operations may be bound or affected or (iii) result in
any breach or termination of, or constitute a default under, or constitute an
event which, with notice or lapse of time, or both, would become a default
under, or result in the creation of any encumbrance upon any material asset
under, or create any rights of termination, cancellation or acceleration in any
person under, any Material Contract.
5.14 Financial Statements. Schedule 4.15 contains true and complete
copies of BNN Financial Statements. These Financial Statements (i) have been
prepared from the books and records of BNN in accordance with GAAP consistently
applied with prior periods, (ii) fairly present, in each case in all material
respects, the financial condition and results of operations of BNN as of the
dates and for the periods indicated thereon, and (iii) reflect all assets at the
lower of their cost or net realizable value. Audited Statements have been
audited by the BNN Auditors.
- 14 -
The books and account of BNN have been maintained in all
material respects in accordance with sound business practices, and to the best
of BNN's knowledge there have been no transactions involving BNN that properly
should have been set forth therein in accordance with GAAP that have not been
accurately so set forth.
5.15 Absence of Certain Changes or Events. Except as set forth in
Schedule 5.16, since the BNN Balance Sheet Date, to BNN's knowledge, there has
not occurred nor, has any fact or circumstance arisen which may lead to:
(a) Any adverse change in the assets, liabilities
(whether absolute, accrued, contingent or otherwise), condition (financial or
otherwise), results of operations, business or prospects of BNN not reflected in
the BNN's Financials and that has resulted in a Material Adverse Effect;
(b) Any material increase in liabilities over the
level reflected on the Balance Sheet, any guarantee by BNN of any obligations,
or any mortgage, pledge or encumbrance on any of the properties or assets of
BNN;
(c) Any increase not in the ordinary course of
business in the compensation (including, without limitation, the rate of
commissions) payable to, or any payment of a cash bonus to, any officer,
director or employee of, or consultant to, BNN in excess of Ten Thousand Dollars
($10,000);
5.16 Government Licenses, Permits, Etc. BNN is duly licensed, with all
requisite permits and qualifications, as required by applicable law for the
purpose of conducting its business or owning its properties or both, in each
jurisdiction in which it does business or owns property or in which such
license, permit or qualification is otherwise required except where the failure
to be so qualified or authorized would not in the aggregate have a Material
Adverse Effect on the assets, liabilities (whether absolute, contingent or
otherwise), results of operations, business or prospects of BNN.
5.17 Employee Benefit Plans; ERISA. Except for those plans set forth on
Schedule 4.18 hereto (the "Plans"), neither BNN nor any member of a "controlled
group" (within the meaning of Section 4971(e)(2)(B)of the Code) of which BNN is
a member has ever maintained or contributed to any "employee benefit plan", as
that term is defined in Section 3(3) of ERISA, or any stock purchase plan, stock
option plan, fringe benefit plan, bonus plan or any other deferred compensation
agreement, plan or funding arrangement, whether or not such plan has been
terminated and whether or not such plan is of legally binding nature in the form
of an informal understanding. With respect to the Plans, the requirements of
ERISA and the Code, as applicable, have been fulfilled in all material respects
and no event has occurred nor does any condition exist which would subject BNN
to any material penalty, excise tax or liability.
- 15 -
5.18 Existing Arrangements. BNN has no present revenue producing
business activity or arrangements.
5.19 Governmental Approvals. No authorization, license, permit,
franchise, approval, order or consent of, and no registration, declaration or
filing by BNN with, any governmental authority, domestic or foreign, federal,
state or local, is required in connection with BNN's execution, delivery and
performance of this Agreement.
5.20 Transactions with Affiliates. Except as set forth in Schedules
5.23 and 5.15(b), BNN is not indebted for money borrowed, either directly or
indirectly, from any of its officers, directors, or any Affiliate (as defined
below), in any amount whatsoever; nor are any of its officers, directors, or
Affiliates indebted for money borrowed from BNN; nor are there any transactions
of a continuing nature between BNN and any of its officers, directors, or
Affiliates (other than by or through the regular employment thereof by BNN) not
subject to cancellation which will continue beyond the Closing Date, including,
without limitation, use of the assets of BNN for personal benefit with or
without adequate compensation. For purposes of this Agreement, the term
"Affiliate" shall mean any person that, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, the person specified. As used in the foregoing definition, the term (i)
"control" shall mean the power through the ownership of voting securities,
contract or otherwise to direct the affairs of another person and (ii) "person"
shall mean an individual, firm, trust, association, corporation, partnership,
government (whether federal, state, local or other political subdivision, or any
agency or bureau of any of them) or other entity.
5.21 Accounts Receivable. BNN has no accounts receivable.
5.22 Intellectual Property. BNN has no intellectual property.
5.23 Liabilities. BNN has no material direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise ("Liabilities"), whether
or not of a kind required by generally accepted accounting principles to be set
forth on a financial statement, other than (i) Liabilities fully and adequately
reflected or reserved against on the Balance Sheet, (ii) Liabilities incurred
since the Balance Sheet Date in the ordinary course of the business of BNN or
(iii) Liabilities otherwise disclosed in this Agreement, including the Exhibits
hereto and Disclosure Schedule.
5.23 No Omissions or Untrue Statements. No representation or warranty
made by BNN in this Agreement, BNN Disclosure Schedule or in any certificate
required to be delivered to BNN pursuant to the terms of this Agreement contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained herein or
therein not misleading as of the date hereof and as of the Closing Date.
- 16 -
5.24 Absence of Certain Practices. To their knowledge, neither BNN nor
any employee, agent or other person acting on the Acquired Company's behalf has
directly or indirectly given or agreed to give any gift or similar benefit to
any customer, supplier, competitor or government employee or official (domestic
or foreign) (i) that would subject the Acquired Company to any damage or penalty
in any civil, criminal or governmental litigation or proceeding or (ii) that if
not given in the past would have a Material Adverse Effect on BNN.
VI
BROKERS
Brokers. BNN represents to the Acquired Company Shareholders,
and the Acquired Company Shareholders represent to BNN, that there is no broker
or finder entitled to a fee or other compensation for bringing the parties
together to effect the Exchange.
VII
Post Closing Filings. BNN shall use its best efforts to
complete and file the Post Closing Filing within 15 days after Closing.
VIII
ADJUSTMENT OF BNN SHARES
8.1 Adjustment for Claims . There shall be an adjustment in the BNN
Shares issued to the Acquired Company Shareholders in the event that either (i)
there is material breach of any BNN representations or BNN is subject as of the
Closing Date to any material liability arising out of the business or activities
of BNN and not disclosed in the BNN Financial Statements or any BNN SEC filings
or the BNN Disclosure Schedule and required to be disclosed therein ("BNN
Breach") or (ii) there is a material breach of the Acquired Company Shareholder
representations or the Acquired Company is subject as of the Closing Date to any
material liability arising out of the business or activities of the Acquired
Companies and not disclosed in the Acquired Company Financial Statements or in
the Acquired Company Disclosure Schedule and required to be disclosed therein
("Acquired Company Shareholder Breach"). No adjustment as hereinafter provided
shall be made, unless the total of damage, expenses and liability ("Liability")
incurred by BNN directly or indirectly by the Acquired Company exceeds $150,000
in connection with either a BNN Breach or the Acquired Company Breach (the
"Threshold Amount"). Upon a BNN Breach the Acquired Company Shareholders shall
receive additional BNN shares as determined herein and upon an Acquired Company
Shareholder Breach the Acquired Company Shareholders shall surrender such number
of BNN shares as determined hereafter. If after notice of any breach an
independent committee of the Board of Directors of BNN and the Acquired Company
Shareholders cannot agree on an adjustment, the matter shall be submitted to the
American Arbitration Association in New York City for
- 17 -
determination. All of the parties hereto consent to the jurisdiction of such
association and the rules thereunder. Except as hereinafter set forth, no
Acquired Company Stockholder shall have any personal liability to BNN pursuant
to this agreement whether prior to or subsequent to the Exchange nor shall an
officer, director or other representative of BNN have any liability to an
Acquired Company Shareholder pursuant to this Agreement whether prior to or
subsequent to the Closing. The parties' sole remedy shall be limited to the
adjustment of BNN Shares set forth above and BNN shall have no recourse against
any Acquired Company Shareholder and an Acquired Company Shareholder shall have
no recourse against an officer or director of BNN. Notwithstanding the
foregoing, each Acquired Company Shareholder shall have liability for breach of
representation set forth in Section 4.4 with respect to such shareholder's
Acquired Company Shares.
No adjustment shall be made unless the BNN breach or Acquired Company
Breach occurs within two years after the Closing Date, or notice is given to the
other party or parties within such time of facts which may result in such
Breach.
8.2 Market Value Adjustment. (a) As used herein the following terms
shall have the following definitions:
i. "Determination Date" shall refer to the sixteenth
business day following BNN's Annual Report on Form 10-K for the year 1997.
ii. "Determination Date Value" shall equal the
Market Value as hereinafter defined, multiplied by 9,500,000.
iii. "Market Value" shall mean the average Market
Price, as defined herein, of BNN's common shares during the fifteen business
days preceding the Determination Date.
iv. "Market Price" on any day shall mean the high
bid price if the BNN common stock is traded in the over-the-counter market on
the electronic bulletin board, or NASDAQ SmallCap or the closing price if such
stock is traded on NASDAQ National Market, or a national stock exchange.
v. "Projected Income" shall refer to the projected
net income of the Acquired Company for 1997 as set forth in Schedule A hereof.
vi. "Actual Income" shall refer to the Acquired
Company's net income for 1997 as reflected in the audited resulted to be
included in BNN's Form 10-K for 1997.
(b) Subject to Section 8.2(c), if on the Determination Date
the Determination Date Value is less than $50,000,000 then, subject to the
provisions of Section 8.2(c) , BNN shall promptly cause the issuance of
additional BNN Shares having an aggregate Market Value equal to the difference
between $50,000,000 and the Determination Date Value ("Differential Value").
- 18 -
(c) Notwithstanding the provisions of Section 8.2(b), BNN
shall not issue any additional shares of its common stock thereunder if the
Actual Income is less than 15% of the Projected Income. If Actual Income,
however, is less than fifty (50%) percent of the Projected Income but more than
15% of such income than the Acquired Company Shareholders, in lieu of receiving
shares calculated pursuant to Section 8.2(b), shall receive additional shares of
BNN common stock having aggregate Market Value equal to such proportion of the
Differential Value as the percent of Actual Income to Projected Income bears to
50%. For example, if Actual Income is 20% of the Projected Income, the Acquired
Company Shareholders shall receive 40% of the Differential Value. If the Actual
Income is thirty percent of the Projected Income then the Acquired Company
Shareholders will receive 60% of the Differential Value.
(d) Any additional shares shall be issued on a pro-rata basis
to the Acquired Company Shareholders based on their pro-rata BNN Shares received
upon the Exchange.
(e) If there is a dispute concerning the amount of adjustment
or if there is also a claim pursuant to section 8.1, then any such dispute or
disputes reflecting the amount of adjustment hereunder and thereunder shall be
determined in the same manner as a dispute pursuant to Section 8.1.
IX.
MISCELLANEOUS
9.1 Expenses. Except as otherwise provided herein, the Acquired Company
Shareholders and BNN shall each pay its own expenses incident to the
negotiation, preparation, and carrying out of this Agreement, including all fees
and expenses of its counsel and accountants for all activities of such counsel
and accountants undertaken pursuant to this Agreement, irrespective of whether
or not the transactions contemplated hereby are consummated.
9.2 Survival of Representations, Warranties and Covenants. All
statements contained in this Agreement or in any certificate delivered by or on
behalf of the Acquired Company Shareholders or BNN pursuant hereto, or in
connection with the transactions contemplated hereby shall be deemed
representations, warranties and covenants by the Acquired Company Shareholders
or BNN, as the case may be, hereunder. All representations, warranties, and
covenants made by the Acquired Company Shareholders or BNN in this Agreement, or
pursuant hereto, shall survive the Closing, but shall terminate two years from
the Closing Date.
9.4 Succession and Assignments; Third Party Beneficiaries. This
Agreement may not be assigned (either voluntarily or involuntarily) by any party
hereto without the express written consent of the other party. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the parties
hereto. There shall be no third party beneficiaries of this Agreement.
- 19 -
9.5 Notices. All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be (i) sent by
facsimile transmission, (ii) sent by the United States Postal Service,
registered or certified mail, return receipt requested, or (iii) personally
delivered by a nationally recognized express overnight courier service, charges
prepaid, to the following addresses (or such other addresses as the parties may
specify from time to time in accordance with this Section):
(a) To BNN :
BNN Corp.
000 Xxxx Xxxxxx Xx.
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn:
Fax No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx Xxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx XxXxxxxxxx, Esq.
Fax No.: (000) 000-0000
(b) To Acquired Company Shareholders
at the address set forth on the signature
page hereof
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (ii) the fifth business day
following the date deposited with the United States Postal Service, or (iii) 24
hours after shipment by such courier service.
9.6 Construction. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of New York without giving effect
to the principles of conflicts of law thereof.
- 20 -
9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
9.8 No Implied Waiver; Remedies. No failure or delay on the part of the
parties hereto to exercise any right, power, or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power, or privilege preclude any other
or further exercise thereof or the exercise of any other right, power, or
privilege. All rights, powers, and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
9.9 Entire Agreement. This Agreement, including the Exhibits and
Disclosure Schedules attached hereto, sets forth the entire understandings of
the parties with respect to the subject matter hereof, and it incorporates and
merges any and all previous communications, understandings, oral or written as
to the subject matter hereof, and cannot be amended or changed except in
writing, signed by the parties.
9.10 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
9.11 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted hereof and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
- 21 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
BNN CORPORATION
By:
----------------------------
Xxxxx Xxxxxx, President
NAME ADDRESS
-------------------------------
------------------------------ -------------------------------
Xxxxxxx Xxxxx
-------------------------------
------------------------------ -------------------------------
Xxxxxxx Xxxxxx
-------------------------------
------------------------------ -------------------------------
Xxxxx Xxxxxx
-------------------------------
------------------------------ -------------------------------
Xxxxx Xxxxxxx
-------------------------------
------------------------------ -------------------------------
Xxxxx Xxxxxx
-------------------------------
------------------------------ -------------------------------
Xxxx Xxxxxx
-------------------------------
------------------------------ -------------------------------
Xxxxxxx Xxxxxxx
BNN DISCLOSURE SCHEDULE
1. BNN acquired all shares of Celebrity Shopping Network, Inc.
("Celebrity") on March 3, 1995 and agreed to issue shares (6,295,000) to
subscribers of Celebrity shares. On November 3, 1995, the Company entered into a
Recission Agreement with the original shareholders of Celebrity and pursuant to
that agreement, returned Celebrity shares issued to them. The subscribers were
not signatories to this agreement (unless they were also original shareholders).
While BNN believes that the subscribers will have no claim for shares and the
Company has made separate "deals" with many subscribers, there is no guaranty
that a claim will not be made as a third party beneficiary for shares.
2. In March of 1995 a former director of BNN and officer and director
of Celebrity issued Celebrity Notes which also were purported to be issued by
BNN and convertible into BNN Shares [although not executed by BNN] in the
aggregate amount of approximately [$96,000]. The individual is also claiming
reimbursement of expenses. BNN denies all liability.
BNN entered into several letters of intent to acquire various
companies. These letters have all expired by their terms and the Company does
not believe it has any liability.
The Company has not filed its SEC reports on a current basis and has
received a telephone inquiry from the SEC.
- 22 -
SCHEDULE 1
SHARES
SHAREHOLDER KMG BNN
----------- -----------------------------------------
Xxxxxxx Xxxxx 432,997 2,555,364
Xxxxxxx Xxxxxx 21,412 126,365
Xxxxx Xxxxxx 21,412 126,365
Xxxxx Xxxxxxx 170,500 1,006,218
Xxxxx Xxxxxx 432,997 2,555,364
Xxxx Xxxxxx 432,997 2,555,364
Xxxxxxx Xxxxxxx 97,425 574,960
- 23 -
