AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan") is made this 13th day of
November, 1998, among Entertainment 21, Inc., a Nevada corporation
("Entertainment"); PCG, Inc., a Nevada corporation (previously known as
Portcullis Management Group, Inc., ("PCG") and its shareholders
("Shareholders").
ENTERTAINMENT wishes to acquire one hundred percent (100%) of the issued and
outstanding stock of PCG for and in exchange for stock of Entertainment, in a
stock for stock transaction intending to qualify as a tax-free exchange
pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended. The parties intend for this Plan to represent the terms and
conditions of such tax-free reorganization, which Plan the parties hereby
adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the holders of all the
issued and outstanding stock of PCG agree to assign, transfer, and deliver to
Entertainment, free and clear of all liens, pledges, encumbrances, charges,
restrictions or known claims of any kind, nature or description, all of their
shares of PCG stock, and Entertainment agrees to acquire such shares on the
date thereof, or as soon as practicable thereafter, by issuing and delivering
in exchange therefore solely common shares of Entertainment's stock, par value
$.001, in the aggregate of 7,000,000 shares. Subsequent to the date hereof,
the Shareholders shall, upon the surrender to Entertainment of the PCG
certificates representing their respective beneficial and record ownership of
one hundred percent (100%) of the issued and outstanding shares of PCG or as
soon as practicable thereafter, and further provided an exemption from the
registration provisions of Section 5 of the Securities Act of 1933 is
available for the issuance thereof, the Shareholders shall be entitled to
receive a certificate(s) evidencing shares of the exchanged Entertainment
stock as provided for herein. Upon the consummation of the transaction
contemplated herein, Entertainment shall merge with PCG and become the
surviving corporation.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number of
Entertainment shares to be issued and delivered pursuant to this Plan shall be
appropriately adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in Entertainment
common stock, which may occur between the date of the execution of this Plan
and the date of the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to
Entertainment at the closing provided for in Section 2 (the "Closing") the
shares of common stock of PCG listed opposite their respective names on
Exhibit A hereto (the "PCG shares") in exchange for shares of the common stock
of Entertainment as outlined above in Section 1.1 hereof (the "Entertainment
Stock"). All of such shares of Entertainment stock shall be issued at the
closing to the Shareholders, in the numbers shown opposite their respective
names in Exhibit "A." The transfer of PCG shares by the Shareholders shall be
effected by the delivery to Entertainment at the Closing of certificates
representing the transferred shares endorsed in blank or accompanied by stock
powers executed in blank, with all signatures guaranteed by a national bank
and with all necessary transfer taxes and other revenue stamps affixed and
acquired at the Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from time to
time thereafter, the Shareholders shall execute such additional instruments
and take such other action as Entertainment may request in order to more
effectively sell, transfer and assign clear title and ownership in the PCG
shares to Entertainment.
Section 2
Closing
2.1 Closing. The Closing contemplated by Section 1.3 shall be held on or
before November 30, 1998 or at such other time or place as may be mutually
agreed upon in writing by the parties. The Closing may also be accomplished
by wire, express mail or other courier service, conference telephone
communications or as otherwise agreed by the respective parties or their duly
authorized representatives. In any event, the closing of the transactions
contemplated by this Plan shall be effected as soon as practicable after all
of the conditions contained herein have been satisfied.
2.2 Closing Events. At the Closing, each of the respective parties hereto
shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
Representations, Warranties and Covenants of Entertainment
Entertainment represents and warrants to, and covenants with, the Shareholders
and PCG as follows:
3.1 Corporate Status. Entertainment is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada.
Entertainment has full corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances,
and orders of public authorities to own all of its properties and assets and
to carry on its business on all material respects as it is now being
conducted, and there is no jurisdiction in which the character and location of
the assets owned by it, or the nature of the business transacted by it,
requires qualification. Included in the Entertainment schedules (defined
below) are complete and correct copies of its Articles of Incorporation and
Bylaws as in effect on the date hereof. The execution and delivery of this
Plan does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Entertainment's Articles of Incorporation
or Bylaws. Entertainment has taken all action required by law, its Articles
of Incorporation, its Bylaws, or otherwise, to authorize the execution and
delivery of this Plan.
3.2 Capitalization. The authorized capital stock of Entertainment as of the
date hereof consists of 50,000,000 common shares, par value $.001 and
10,000,000 preferred shares, par value $.001. As of the date hereof there
are 1,250,000 common shares of Entertainment issued and outstanding. There
are no preferred shares issued and outstanding. The common shares of
Entertainment issued and outstanding are fully paid, non-assessable shares.
There are no outstanding options, warrants, obligations convertible into
shares of stock, or calls or any understanding, agreements, commitments,
contracts or promises with respect to the issuance of Entertainment's common
stock or with regard to any options, warrants or other contractual rights to
acquire any of Entertainment's authorized but unissued common shares. There
are no issued and outstanding preferred shares. As of the Closing,
Entertainment shall have not more than 8,250,000 shares issued and
outstanding.
3.3 Financial Statements.
(a) Entertainment hereby warrants and covenants to PCG that the audited
financial statements for the six months ended December 31, 1997 and the years
ended June 30, 1997 and June 30, 1996 fairly and accurately represent the
financial condition of Entertainment and that no material change has occurred
in the financial condition of Entertainment.
(b) Entertainment hereby warrants and represents that the audited financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of Entertainment as submitted
heretofore to PCG for examination and review.
3.4 Conduct of Business. Entertainment is a development stage company and
has not been engaged in any operational activities prior to the date hereof.
3.5 Options, Warrants and Rights. Entertainment has no options, warrants or
stock appreciation rights related to the authorized but unissued Entertainment
common stock. There are no existing options, warrants, calls, or commitments
of any character relating to the authorized and unissued Entertainment common
stock, except options, warrants, calls, or commitments, if any, to which
Entertainment is not a party and by which it is not bound.
3.6 Title to Property. Entertainment has good and marketable title to all of
its properties and assets, real and personal, proprietary or otherwise, as
will be reflected in the balance sheets of Entertainment, and the properties
and assets of Entertainment are subject to no mortgage, pledge, lien or
encumbrance, unless as otherwise disclosed in its financial statements.
3.7 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Entertainment, threatened by or against
or effecting Entertainment at law or in equity, or before any governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of
any kind; Entertainment does not have any knowledge of any default on its part
with respect to any judgment, order, writ, injunction, decree, warrant, rule,
or regulation of any court, arbitrator, or governmental agency or
instrumentality.
3.8 Books and Records. From the date hereof, and for any reasonable period
subsequent thereto, Entertainment and its present management will (i) give to
the Shareholders and PCG, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and PCG,
or their duly authorized representatives, may inspect them; and (ii) furnish
such information concerning the properties and affairs of Entertainment as the
Shareholders and PCG, or their duly authorized representatives, may reasonably
request. Any such request to inspect Entertainment's books shall be directed
to Entertainment's counsel, Xxxxxx X. Xxxxxxx, at the address set forth herein
under Section 10.4 Notices.
3.9 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Entertainment and its representatives will keep confidential any
information which they obtain from the Shareholders or from PCG concerning its
properties, assets and the proposed business operations of PCG. If the terms
and conditions of this Plan imposed on the parties hereto are not consummated
on or before 5:00 p.m. MST on November 30, 1998 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto,
Entertainment will return to PCG all written matter with regard to PCG
obtained in connection with the negotiations or consummation of this Plan.
3.10 Conflict with Other Instruments. The transactions contemplated by this
Plan will not result in the breach of any term or provision of, or constitute
a default under any indenture, mortgage, deed of trust, or other material
agreements or instrument to which Entertainment was or is a party, or to which
any of its assets or operations are subject, and will not conflict with any
provision of the Articles of Incorporation or Bylaws of Entertainment.
3.11 Corporate Authority. Entertainment has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder
and will deliver to the Shareholders and PCG, or their respective
representatives, at the Closing, a certified copy of resolutions of its Board
of Directors authorizing execution of this Plan by its officers and
performance thereunder.
3.12 Consent of Shareholders. Entertainment hereby warrants and represents
that the shareholders of Entertainment, being the owners of a majority of the
issued and outstanding stock of the Corporation consented in writing to the
authorization to execute this Agreement and Plan of Reorganization as between
Entertainment and PCG pursuant to a stock-for-stock transaction in which
Entertainment would acquire one hundred percent of the issued and outstanding
shares of PCG in exchange for the issuance of a total of 7,000,000 common
shares of Entertainment and thereby PCG shall merge with and into
Entertainment.
3.13 Resignation of Directors. Upon the Closing, the current directors of
Entertainment shall submit their resignations.
3.14 Name of the Corporation. At the Closing, the Board of Directors of
Entertainment will adopt a resolution to change the name of Entertainment to
PCG Media, Inc.
3.15 Special Covenants and Representations Regarding the Exchanged
Entertainment Stock. The consummation of this Plan and the transactions
herein contemplated include the issuance of the exchanged Entertainment shares
to the Shareholders, which constitutes an offer and sale of securities under
the Securities Act of 1933, as amended, and applicable states' securities
laws. Such transaction shall be consummated in reliance on exemptions from
the registration and prospectus requirements of such statutes which depend
interlace on the circumstances under which the Shareholders acquire such
securities. In connection with the reliance upon exemptions from the
registration and prospectus delivery requirements for such transactions, at
the Closing, Shareholders shall cause to be delivered to Entertainment a
Letter(s) of Investment Intent in the form attached hereto as Exhibit B and
incorporated herein by reference.
3.16 Undisclosed or Contingent Liabilities. Entertainment hereby represents
and warrants that it has no undisclosed or contingent liabilities which have
not been disclosed to PCG in writing or in this Agreement or in any Exhibit
attached hereto.
3.17 Information. The information concerning Entertainment set forth in this
Plan, and the Entertainment schedules attached hereto, are complete and
accurate in all material respects and do not contain, or will not contain,
when delivered, any untrue statement or a material fact or omit to state a
material fact the omission of which would be misleading to PCG in connection
with this Plan.
3.18 TITLE and Related Matters. Entertainment has good and marketable title
to all of its properties, interests in properties, and assets, real and
personal, which are reflected, or will be reflected, in the Entertainment
balance sheets, free and clear of any and all liens and encumbrances.
3.19 Contracts or Agreements. Entertainment is not bound by any material
contracts, agreements or obligations which it has not already disclosed to PCG
in writing or in this Agreement or in any Exhibit attached hereto.
3.20 Governmental Authorizations. Entertainment has all licenses,franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof.
3.21 Compliance with Laws and Regulations. Entertainment has complied with
all applicable statutes and regulations of any federal, state, or other
applicable jurisdiction or agency thereof, except to the extent that
noncompliance would not materially and adversely effect the business,
operations, properties, assets, or condition of Entertainment or except to the
extent that noncompliance would not result in the occurrence of any material
liability, not otherwise disclosed to PCG.
3.22 Approval of Plan. The Board of Directors of Entertainment has
authorized the execution and delivery of this Plan by Entertainment and have
approved the Plan and the transactions contemplated hereby. Entertainment has
full power, authority, and legal right to enter into this Plan and to
consummate the transactions contemplated hereby.
3.23 Investment Intent. Entertainment is acquiring the PCG shares to be
transferred to it under this Plan for the purpose of merging with PCG and not
with a view to the sale or distribution thereof, and Entertainment shall
cancel the PCG shares upon the completion of the merger.
3.24 Unregistered Shares and Access to Information. Entertainment
understands that the offer and sale of the PCG shares have not been registered
with or reviewed by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or with or by any state securities law
administrator, and no federal, state securities law administrator has reviewed
or approved any disclosure or other material concerning PCG or the PCG shares.
Entertainment has been provided with and reviewed all information concerning
PCG, the PCG shares as it has considered necessary or appropriate as a prudent
and knowledgeable investor to enable it to make an informed investment
decision concerning the PCG shares. Entertainment has made an investigation
as to the merits and risks of its acquisition of the PCG Shares and has had
the opportunity to ask questions of, and has received satisfactory answers
from, the officers and directors of PCG concerning PCG, the PCG shares and
related matters, and has had an opportunity to obtain additional information
necessary to verify the accuracy of such information and to evaluate the
merits and risks of the proposed acquisition of the PCG shares.
3.25 Obligations. Entertainment has no outstanding obligations to any of its
employees or consultants.
3.26 Entertainment Schedules. Entertainment has delivered to PCG the
following items listed below, hereafter referred to as the "Entertainment
Schedules", which are hereby incorporated by reference and made a part hereof.
A certification executed by a duly authorized officer of Entertainment on or
about the date of the Plan will be executed to certify that the Entertainment
Schedules are true and correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Financial statements;
(c) Shareholder list;
(d) Resolutions of Directors approving Plan;
(e) Consent of Shareholders approving Plan.
(f) Officers' Certificate as required under Section 6.2 of the Plan;
(g) Opinion of counsel as required under Section 6.4 of the Plan;
(h) Certificate of Good Standing;
Section 4
Representations, Warranties and Covenants of PCG
PCG represents and warrants to, and covenants with, the Shareholders and
Entertainment as follows:
4.1 CORPORATE Status. PCG is a corporation duly organized, validly existing
and in good standing under the laws of Nevada, incorporated on December 17,
1996. PCG has full corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances,
and orders of public authorities to own all of its properties and assets and
to carry on its business on all material respects as it is now being
conducted, and there is no jurisdiction in which the character and location of
the assets owned by it, or the nature of the business transacted by it,
requires qualification. Included in the PCG schedules (defined below) are
complete and correct copies of its Articles of Incorporation and Bylaws as in
effect on the date hereof. The execution and delivery of this Plan does not,
and the consummation of the transactions contemplated hereby will not, violate
any provision of PCG's Articles of Incorporation or Bylaws. PCG has taken all
action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution and delivery of this Plan.
4.2 CAPITALIZATION. The authorized capital stock of PCG as of the date
hereof consists of 25,000,000 common shares, par value $.001. As of the date
hereof there are 1,070 common shares of PCG issued and outstanding. The
foregoing shares are fully paid, non-assessable shares. There are no
outstanding options, warrants, obligations convertible into shares of stock,
or calls or any understanding, agreements, commitments, contracts or promises
with respect to the issuance of PCG's common stock or with regard to any
options, warrants or other contractual rights to acquire any of PCG's
authorized but unissued common shares.
4.3 CONDUCT of Business. PCG will use its best efforts to maintain and
preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of Entertainment,
enter into any material commitments from the date of execution of the Plan and
through the closing of the Plan.
PCG agrees that PCG will conduct itself in the following manner pending the
Closing:
(a) Certificate of Incorporation and Bylaws. No change will be made in the
Certificate of Incorporation or Bylaws of PCG.
(b) CAPITALIZATION, etc. PCG will not make any change in its authorized or
issued shares of any class, declare or pay any dividend or other distribution,
or issue, encumber, purchase or otherwise acquire any of its shares of any
class.
4.4 TITLE to Property. PCG has good and marketable title to all of its
properties and assets, real and personal, proprietary or otherwise, as will be
reflected in the balance sheets of PCG, and the properties and assets of PCG
are subject to no mortgage, pledge, lien or encumbrance, unless as otherwise
disclosed in its financial statements.
4.5 LITIGATION. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of PCG, threatened by or against or
effecting PCG at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
PCG does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, warrant, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
4.6 BOOKS and RECORDS. From the date hereof, and for any reasonable period
subsequent thereto, PCG and its present management will (i) give to
Entertainment, or their duly authorized representatives, full access, during
normal business hours, to all of its books, records, contracts and other
corporate documents and properties so that Entertainment, or their duly
authorized representatives, may inspect them; and (ii) furnish such
information concerning the properties and affairs of PCG as the Shareholders
and PCG, or their duly authorized representatives, may reasonably request.
Any such request to inspect PCG's books shall be directed to PCG's
representative, at the address set forth herein under Section 10.4 Notices.
4.7 CONFIDENTIALITY. Until the Closing (and thereafter if there is no
Closing), PCG and its representatives will keep confidential any information
which they obtain from the Shareholders or from PCG concerning its properties,
assets and the proposed business operations of PCG. If the terms and
conditions of this Plan imposed on the parties hereto are not consummated on
or before 5:00 p.m. MST on November 30, 1998 or otherwise waived or extended
in writing to a date mutually agreeable to the parties hereto, PCG will return
to Entertainment all written matter with regard to Entertainment obtained in
connection with the negotiations or consummation of this Plan.
4.8 INVESTMENT Intent. The Shareholders represent and covenant that they are
acquiring the unregistered and restricted common shares of Entertainment to be
delivered to them under this Plan for investment purposes and not with a view
to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to
Entertainment on the date of Closing or no later than the date on which the
restricted shares are issued and delivered to the Shareholders, their assigns,
or designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.9 UNREGISTERED Shares and Access to Information. PCG and the Shareholders
understand that the offer and sale of Entertainment shares to be exchanged for
the PCG shares have not been registered with or reviewed by the securities and
Exchange Commission under the Securities Act of 1933, as amended, or with or
by any state securities law administrator, and no federal or state securities
law administrator has reviewed or approved any disclosure or other material
facts concerning Entertainment or Entertainment stock. PCG and the
Shareholders have been provided with and reviewed all information concerning
Entertainment and Entertainment shares, to be exchanged for the PCG shares as
they have considered necessary or appropriate as prudent and knowledgeable
investors to enable them to make informed investment decisions concerning the
Entertainment shares, to be exchanged for the PCG shares. PCG and the
Shareholders have made an investigation as to the merits and risks of their
acquisition of the Entertainment shares, to be exchanged for the PCG shares
and have had the opportunity to ask questions of, and have received
satisfactory answers from, the officers and directors of Entertainment
concerning Entertainment shares to be exchanged for the PCG shares and related
matters, and have had an opportunity to obtain additional information
necessary to verify the accuracy of such information and to evaluate the
merits and risks of the proposed acquisition of the Entertainment shares to be
exchanged for the PCG shares.
4.10 TITLE to Shares. The Shareholders are the beneficial and record owners,
free and clear of any liens and encumbrances, of whatever kind or nature, of
all of the shares of PCG of whatever class or series, which the Shareholders
have contracted to exchange.
4.11 CONTRACTS.
(a) PCG is not a party to any contracts, written or oral, or any other
commitments to which PCG is a party or by which PCG or its properties are
bound.
(b) PCG is not a party to any contract, agreement, corporate restriction, or
subject to any judgment, order, writ, injunction, decree, or award, which
materially and adversely effect the business, operations, properties, assets,
or conditions of PCG.
(c) PCG is not a party to any material oral or written (i) contract for
employment of any officer which is not terminable on 30 days (or less) notice;
(ii) profit sharing, bonus, deferred compensation, stock option, severance, or
any other retirement plan of arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended, or otherwise covered; (iii)
agreement providing for the sale, assignment or transfer of any of its rights,
assets or properties, whether tangible or intangible, except sales of its
property in the ordinary course of business with a value of less than $2,000;
or (iv) waiver of any right of any value which in the aggregate is
extraordinary or material concerning the assets or properties scheduled by
PCG, except for adequate value and pursuant to contract. PCG has not entered
into any material transaction which is not listed in the PCG Schedules or
reflected in the PCG financial statements.
4.12 Material Contract Defaults. PCG is not in default in any material
respect under the terms of any contract, agreement, lease or other commitment
which is material to the business, operations, properties or assets, or
condition of PCG, and there is no event of default or event which, with notice
of lapse of time or both, would constitute a default in any material respect
under any such contract, agreement, lease, or other commitment in respect of
which PCG has not taken adequate steps to prevent such default from occurring,
or otherwise compromised, reached a satisfaction of, or provided for
extensions of time in which to perform under any one or more contract
obligations, among others.
4.13 CONFLICT with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or other
material agreement or instrument to which PCG was or is a party, or to which
any of its assets or operations are subject, and will not conflict with any
provision of the Articles of Incorporation or Bylaws of PCG.
4.14 GOVERNMENTAL Authorizations. PCG is in good standing in the State of
Nevada. Except for compliance with federal and state securities laws, no
authorization, approval, consent or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection
with the execution and delivery by PCG of this Plan and the consummation by
PCG of the transactions contemplated hereby.
4.15 COMPLIANCE with Laws and Regulations. PCG has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of PCG or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to Entertainment.
4.16 APPROVAL of Plan. The Board of Directors of PCG have authorized the
execution and delivery of this Plan by PCG and have approved the Plan and the
transactions contemplated hereby. PCG has full power, authority, and legal
right to enter into this Plan and to consummate the transactions contemplated
hereby.
4.17 INFORMATION. The information concerning PCG set forth in this Plan, and
the PCG Schedules attached hereto, are complete and accurate in all material
respects and do not contain, or will not contain, when delivered, any untrue
statement or a material fact or omit to state a material fact the omission of
which would be misleading to Entertainment in connection with this Plan.
4.18 PCG Schedules. PCG has delivered to Entertainment the following items
listed below, hereafter referred to as the "PCG Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of PCG on or about the date within the Plan is
executed to certify that the PCG Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Financial Statements;
(c) Resolutions of Board of Directors approving Plan;
(d) Consent of Shareholders approving Plan;
(e) A list of key employees, including current compensation, with notation as
to job description and whether or not such employee is subject to written
contract, and if subject to a contract or employment agreement a copy of the
same;
(f) A schedule showing the name and location of each bank or other
institution with which PCG has an account;
(g) A schedule setting forth the shareholders, together with the number of
shares owned beneficially or of record by each (also attached as Exhibit A);
(h) Officers' Certificate as required by Section 7.2 of the Plan;
(i) Certificate of Good Standing.
Section 5
Special Covenants
5.1 RESIGNATION of Directors. At the Closing, all of Entertainment's
current officers and directors will resign from their respective positions, in
seriatim.
5.2 NAME of the Corporation. At the Closing, the Board of Directors of
Entertainment will adopt a resolution to change the name of Entertainment to
PCG, Inc.
5.3 PCG Information Incorporated in Entertainment's Reports. PCG represents
and warrants to Entertainment that all the information furnished under this
Plan shall be true and correct in all material respects and that there is no
omission of any material fact required to make the information stated not
misleading. PCG agrees to indemnify and hold Entertainment harmless,
including each of its Directors and Officers, and each person, if any, who
controls such party, under any applicable law from and against any and all
losses, claims, damages, expenses or liabilities to which any of them may
become subject under applicable law, or reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such actions, whether or not resulting in liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based on any untrue statement, alleged untrue statement, or omission of a
material fact contained in such information delivered hereunder.
5.4 ENTERTAINMENT Information Incorporated in PCG's Reports. Entertainment
represents and warrants to PCG that all the information furnished under this
Plan shall be true and correct in all material respects and that there is no
omission of any material fact required to make the information stated not
misleading. Entertainment and the current officers and directors of
Entertainment agree to indemnify and hold PCG harmless, including each of its
Directors and Officers, and each person, if any, who controls such party,
under any applicable law from and against any and all losses, claims, damages,
expenses or liabilities to which any of them may become subject under
applicable law, or reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
actions, whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based on
any untrue statement, alleged untrue statement, or omission of a material fact
contained in such information delivered hereunder.
5.5 SPECIAL Covenants and Representations Regarding the Exchanged
Entertainment Stock. The consummation of this Plan and the transactions
herein contemplated, including the issuance of the Entertainment shares in
exchange for one hundred percent (100%) of the issued and outstanding shares
of PCG to the Shareholders constitutes the offer and sale of securities under
the Securities Act and the applicable state statutes, which depend, inter
alia, on the circumstances under which the Shareholders acquire such
securities. Entertainment intends to rely on the exemption of the
registration provision of Section 5 of the Securities Act as provided for
under Section 4.2 of the Securities Act of 1933, which states "transactions
not involving a public offering", among others. Each Shareholder upon
submission of his PCG shares and the receipt of the Entertainment shares
exchanged therefor, shall execute and deliver to Entertainment a letter of
investment intent to indicate, among other representations, that the
Shareholder is exchanging the PCG shares for Entertainment shares for
investment purposes and not with a view to the subsequent distribution
thereof. A proposed Investment Letter is attached hereto as Exhibit B and
incorporated herein by reference for the general use by the Shareholders, as
they may determine.
5.6 Action Prior to Closing. Upon the execution hereof until the Closing
date,
(a) PCG and Entertainment will (i) perform all of their obligations under
material contracts, leases, insurance policies and/or documents relating to
their assets and business; (ii) use their best efforts to maintain and
preserve their business organization intact, to retain their key employees,
and to maintain its relationship with existing potential customers and
clients; and (iii) fully comply with and perform in all material respects all
duties and obligations imposed on them by all federal and state laws and all
rules, regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither PCG nor Entertainment will (i) make any change in their Articles
of Incorporation or Bylaws except and unless as contemplated pursuant to
Section 3 and Section 5 of this Plan; (ii) enter into or amend any contract,
agreement, or other instrument of the types described in the parties'
schedules, except that a party may enter into or amend any contract or other
instrument in the ordinary course of business involving the sale of goods or
services, provided that such contract does not involve obligations in excess
of $10,000.
Section 6
Conditions Precedent to Obligations of
PCG and the Shareholders
All obligations of PCG and the Shareholders under this Plan are subject to the
satisfaction, on or before the Closing date, except as otherwise provided for
herein, or waived or extended in writing by the parties hereto, of the
following conditions:
6.1 Accuracy of Representations. The representations and warranties made by
Entertainment in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, Entertainment shall have performed and complied with
all aspects of this Agreement, unless waived or extended in writing by the
parties hereto. PCG shall have been furnished with a certificate, signed by a
duly authorized executive officer of Entertainment and dated the Closing date,
to the foregoing effect.
6.2 Officers' Certificate. PCG and the Shareholders shall have been
furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of Entertainment, to the effect that no
litigation, proceeding, investigation, claim, demand or inquiry is pending, or
to the best knowledge of Entertainment, threatened, which might result in an
action to enjoin or prevent the consummation of the transactions contemplated
by this Plan, or which might result in any material adverse change in the
assets, properties, business, or operations of Entertainment, and that this
Agreement has been complied with in all material respects.
6.3 No Material Adverse Change. Prior to the Closing date, there shall have
not occurred any material adverse change in the financial condition, business
or operations of Entertainment, nor shall any event have occurred which, with
lapse of time or the giving of notice or both, may cause or create any
material adverse change in the financial condition, business or operations of
Entertainment, except as otherwise disclosed to PCG.
6.4 Opinion of Counsel of Entertainment. Entertainment shall furnish to PCG
and the Shareholders an opinion dated as of the Closing date and in form and
substance satisfactory to PCG and the Shareholders to the effect that:
(a) Entertainment is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of Entertainment, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of PCG, does not require it to register it to do business as a foreign
corporation on any jurisdiction other than under the jurisdiction of its
Articles of Incorporation or Bylaws and Entertainment has complied to the best
of its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, and Secretary of State for the State of Nevada, all
statements and reports required to be filed.
(c) The authorized and outstanding capital stock of Entertainment as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings pending or
threatened against Entertainment of any court or before or by any governmental
body which might materially effect the business of Entertainment or the
financial condition of Entertainment as a whole and no such claims, suits or
legal proceedings are contemplated by governmental authorities against
Entertainment.
(e) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of Entertainment, or
any contract, agreement, indenture, mortgage, or order by which Entertainment
is bound.
(f) This Plan constitutes a legal, valid and binding obligation of
Entertainment enforceable in accordance with its terms, subject to the effect
of any bankruptcy, insolvency, reorganization, moratorium, or similar law
effecting creditors' rights generally and general principles of equity
(regardless of whether such principles are considered in a proceeding in
equity or law).
(g) The execution and delivery of this Plan and the consummation of the
transactions contemplated hereby have been ratified by a majority of the
Shareholders of Entertainment and have been duly authorized by its Board of
Directors.
(h) Entertainment has not, nor will it undertake any action, the result of
which would endanger the tax-free nature of the Plan.
6.5 Good Standing. PCG shall have received a Certificate of Good Standing
from the State of Nevada, dated within ninety (90) days prior to Closing, but
in no event later than ten days subsequent to the execution hereof certifying
that Entertainment is in good standing as a corporation in the State of
Nevada.
6.6 Other Items. PCG and the Shareholders shall have received such further
documents, certifications or instruments relating to the transactions
contemplated hereby as PCG and the Shareholders may reasonably request.
Section 7
Conditions Precedent to Obligations of Entertainment
All obligations of Entertainment under this Plan are subject, at its option,
to the fulfillment, before the Closing, of each of the following conditions:
7.1 ACCURACY of Representations. The representations and warranties made by
PCG and the Shareholders under this Plan were true when made and shall be true
as of the Closing date (except for changes therein permitted by this Plan)
with the same force and effect as if such representations and warranties were
made at and as of the Closing date; and, Entertainment shall have performed
and complied with all aspects of this Agreement, unless waived or extended in
writing by the parties hereto. Entertainment shall have been furnished with a
certificate, signed by a duly authorized executive officer of PCG and dated
the Closing date, to the foregoing effect.
7.2 OFFICERS' Certificate. Entertainment shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of PCG, to the effect that no litigation, proceeding, investigation,
claim, deed, or inquiry is pending, or to the best knowledge of PCG,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of PCG, and that this Agreement has been complied with in all
material respects.
7.3 NO Material Adverse Change. Prior to the Closing date, there shall have
not occurred any material adverse change in the financial condition, business
or operations of Entertainment, nor shall any event have occurred which, with
lapse of time or the giving of notice or both, may cause or create any
material adverse change in the financial condition, business or operations of
PCG, except as otherwise disclosed to Entertainment.
7.4 Dissenters' Rights Waived. Shareholders representing one hundred percent
(100%) of the issued and outstanding shares of PCG, and each of them, have
agreed and hereby waive any dissenters' rights, if any, under the laws of the
State of Nevada in regards to any objection to this Plan as outlined herein
and otherwise consent to and agree and authorize the execution and
consummation of the within Plan in accordance to the terms and conditions of
this Plan by PCG.
7.5 OTHER Items. Entertainment shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as Entertainment may reasonably request.
7.6 Execution of Investment Letter. The Shareholders shall have executed and
delivered copies of Exhibit B to Entertainment.
Section 8
Termination
8.1 Termination by PCG or the Shareholders. This Plan may be terminated at
any time prior to the Closing date by action of PCG or the Shareholders, if
Entertainment shall fail to comply in any material respect with any of the
covenants or agreements contained in this Plan, or if any of its
representations and warranties contained herein shall be inaccurate in any
material respect.
8.2 TERMINATION by Entertainment. This Plan may be terminated at any time
prior to the Closing date by action of Entertainment if PCG shall fail to
comply in any material respect with any of the covenants or agreements
contained in this Plan, or if any of its representations or warranties
contained herein shall be inaccurate in any material respect.
8.3 TERMINATION by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing date by
mutual consent of Entertainment, expressed by action of its Board of
Directors, PCG or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan shall be of
no further force and effect and no obligation, right or liability shall arise
hereunder. Each party shall bare its own costs in connection herewith.
Section 9
Shareholders' Representative
The Shareholders hereby irrevocably designate and appoint Xx Xxxxx, as their
agent and attorney in fact (the "Shareholders' Representative") with full
power and authority until the Closing to execute, deliver and receive on their
behalf all notices, requests and other communications hereunder; to fix and
alter on their behalf the date, time and place of the Closing; to waive, amend
or modify any provisions of this Plan and to take such other action on their
behalf in connection with this Plan, the Closing and the transactions
contemplated hereby as such agent deems appropriate; provided, however, that
no such waiver, amendment or modification may be made if it would decrease the
number of shares to be issued to the Shareholders under Section 1 hereof or
increase the extent of their obligation to Entertainment hereunder, unless
agreed in writing by the Shareholders.
Section 10
General Provisions
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
10.2 Consolidated Financial Statements. As soon as practicable after the
closing PCG and the Shareholders shall cause to have consolidated financial
statements prepared.
10.3 Payments of Costs and Fees. Entertainment and PCG shall each bear their
own costs and expenses, including any legal and accounting fees in connection
with the negotiation, execution and consummation of the Plan.
10.4 Press Release and Shareholders' Communications. On the date of Closing,
or as soon thereafter as practicable, PCG and the Shareholders shall cause to
have promptly prepared and disseminated a news release concerning the
execution and consummation of the Plan, such press release and communication
to be released promptly and within the time required by the laws, rules and
regulations as promulgated by the United States Securities and Exchange
Commission, and concomitant therewith to cause to be prepared a full and
complete letter to Entertainment's shareholders which shall contain
information required by Regulation 240.14f-1 as promulgated under Section
14(f) as mandated under the Securities and Exchange Act of 1934, as amended.
10.5 Notices. All notices and other communications required or permitted
hereunder shall be sufficiently given if personally delivered, sent by
registered mail, or certified mail, return receipt requested, postage prepaid,
or by facsimile transmission addressed to the following parties hereto or at
such other addresses as follows:
If to Entertainment: Entertainment 21, Inc.
000 Xxxxx 000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
With a copy to: Xxxxxx X. Xxxxxxx, Esq.
000 Xxxxx 000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
If to PCG: PCG, Inc.
000 Xxxx 00xx Xx., Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
If to the Shareholders: Xx X. Xxxxx
000 Xxxx 00xx Xx., Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.6 Entire Agreement. This Plan represents the entire agreement between the
parties relating to the subject matter hereof, including any previous letters
of intent, understandings, or agreements between Entertainment, PCG and the
Shareholders with respect to the subject matter hereof, all of which are
hereby merged into this Plan, which alone fully and completely expresses the
agreement of the parties relating to the subject matter hereof. Excepting the
foregoing agreement, there are no other courses of dealing, understandings,
agreements, representations, or warranties, written or oral, except as set
forth herein.
10.7 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Nevada, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.8 Tax Treatment. The transaction contemplated by this Plan is intended to
qualify as a "tax-free" reorganization under the provisions of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. PCG and
Entertainment acknowledge, however, that each are being represented by their
own tax advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.9 Attorney Fees. In the event that any party prevails in any action or
suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.10 Amendment of Waiver. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at law
or in equity, and may be enforced concurrently or separately, and no waiver by
any party of the performance of any obligation by the other shall be construed
as a waiver of the same or any other default then, therefore, or thereafter
occurring or existing. Any time prior to the expiration of thirty (30) days
from the date hereof, this Plan may be amended by a writing signed by all
parties hereto, with respect to any of the terms contained herein, and any
term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.11 Counterparts. This Plan may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original,
and all of which together shall constitute one and the same instruments.
10.12 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.13 Parties in Interest. Except as may be otherwise expressly provided
herein, all terms and provisions of this Plan shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
Entertainment 21, Inc.
Attest:
_____________________ By /s/ Xxxx X. Xxxxxx
------------------
Its President
PCG MEDIA, Inc.
Attest:
/s/ Xxxxx X. Port By /s/ Xx X. Xxxxx
----------------- ---------------
Its President
SHAREHOLDERS
Attest:
Xxxxx & Co.
/s/ Xxxxx X. Port By /s/ Xx X. Xxxxx
----------------- ---------------
Attest:
Xxxxx X. Xxxxx
/s/ Xxxxx X. Port By /s/ Xx X. Xxxxx
----------------- ----------------
Attest:
Xxxxxx X. Huwalat
/s/ Xxxxx X. Port By /s/ Xx X. Xxxxx
----------------- -----------------------------
Xx x. Xxxxx, Authorized Agent
Xxxxxxx X. Xxxxxx
/s/ Xxxxx X. Port By /s/ Xx X. Xxxxx
----------------- -----------------------------
Xx x. Xxxxx, Authorized Agent
Xxxx X. Xxxxxx
/s/ Xxxxx X. Port By /s/ Xx X. Xxxxx
----------------- -----------------------------
Xx x. Xxxxx, Authorized Agent
Xxxxx Trust UTA 10/24/89
/s/ Xxxxx X. Port By /s/ Xx X. Xxxxx
----------------- --------------------
Xx x. Xxxxx, Trustee
Carolina Supplies Corporation
/s/ Xx Xxxxx By /s/ Xx X. Xxxxx
----------------- -----------------------------
Xxxxx X. Port, Authorized Agent
