LEGACY
COMMUNICATIONS CORPORATION
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TABLE OF
CONTENTS
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SALE
AND PURCHASE
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PURCHASE
PRICE AND PAYMENT
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2.1
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Amount
of Purchase Price
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2.2
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Payment
of Purchase Price
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CLOSING
AND TERMINATION
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3.1
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Closing
Date
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3.2
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Termination
of Agreement
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3.3
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Procedure
Upon Termination
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3.4.
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Effect
of Termination
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3
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4.1
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Organization
and Good Standing
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4.2
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Authorization
of Agreement
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4.3
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Capitalization
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4.4
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4.5
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Corporate
Records
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4.6
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Conflicts;
Consents of Third Parties
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4.7
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Financial
Statements
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4.8
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Liabilities
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4.9
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Absence
of Certain Developments
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4.10
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Taxes
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4.11
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Property
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4.12
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Litigation
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4.13
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Compliance
with Laws
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4.14
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Environmental
Matters
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4.15
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No
Misrepresentation
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4.16
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Financial
Advisors
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REPRESENTATIONS
AND WARRANTIES OF PURCHASER
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5.1
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Organization
and Good Standing
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5.2
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Authorization
of Agreement and Transaction Documents
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5.3
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Conflicts;
Consents of Third Parties
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5.4
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Litigation
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5.5
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Investment
Intention
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5.6
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Investment
Experience
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5.7
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Accredited
Investor
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5.8
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Restrictions
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5.9
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Financial
Advisors
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COVENANTS
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6.1
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Access
to Information
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6.2
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Conduct
of the Business Pending the Closing
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6.3
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Other
Actions
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6.4
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Non
Negotiation; Non-Solicitation
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6.5
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Preservation
of Records
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Publicity
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Use
of Name
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Payment
and Transfer of Assets and Liabilities
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Fairness
Opinion
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CONDITIONS
TO CLOSING
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Conditions
Precedent to Obligations of the Purchaser
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Conditions Precedent to Obligations of the
Company and
Majority Stockholders
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13
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INDEMNIFICATION
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Indemnification
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Limitations on Indemnification for Breaches of
Representations and Warranties
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16
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Indemnification
Procedures
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Tax
Matters
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Preparation
of Tax Returns; Payment of Taxes
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Tax
Treatment of Indemnity Payments
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MISCELLANEOUS
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Certain
Definitions
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Survival
of Representations and Warranties
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Expenses
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Specific
Performance
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Further
Assurances
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Submission to Jurisdiction; Consent to
Service of Process; Arbitration
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24
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Entire
Agreement; Amendments and Waivers
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Governing
Law
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Notices
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Severability
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Binding
Effect: Assignment
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Non-Recourse
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Counterparts
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Exhibit A
- Major Stockholders
Exhibit B
- Trust Receipt Irrevocable Instructions and Irrevocable
Proxy
Exhibit D
- Excluded Obligations
Exhibit E
- Opinion of Franklin, Cardwell & Jones, PC
Exhibit F
- Escrow Agreement
Exhibit G
- Form of Designation of Series A Convertible Redeemable Preferred
Stock
Exhibit I
- Form of Officer's Certificate of the Company Concerning
Accuracy
Exhibit J
- Form of Officer's Certificate of the Purchaser Concerning
Accuracy
Exhibit L
- Form of Note Purchase Agreement
STOCK PURCHASE AGREEMENT,
dated as of July 18, 2008 (the "Agreement"), by and among Three
Irons, Inc., a Nevada corporation (the "Purchaser"), Legacy Communications
Corporation, a Nevada corporation (the "Company"), and the Subsidiaries
listed on Exhibit H attached hereto (the "Subsidiaries"). The Purchaser, the
Company and the Subsidiaries are each referred to herein as a "Party" and
collectively referred to herein as the "Parties".
WHEREAS, the Company has
designated 185,000 shares as Series A Convertible Redeemable Preferred Stock,
$.001 par value per share (the "Preferred Shares"). The Company has
issued 40,000 Preferred Shares and the remaining 145,000 Preferred Shares are
authorized and unissued; and
WHEREAS, the Company desires
to issue and sell and the Purchaser desires to purchase 145,000 Preferred
Shares, subject to the conditions and upon the terms set out herein;
and
WHEREAS, certain terms used in
this Agreement are defined in Section 9.1.;
NOW, THEREFORE, in
consideration of the premises and the mutual covenants and agreements
hereinafter contained, the Parties hereby agree as follows:
Upon the
terms and subject to the conditions contained herein, on the Closing Date, the
Company shall issue, sell, assign, transfer, convey and deliver to the
Purchaser, and the Purchaser shall purchase from the Company, 145,000 of the
authorized and unissued Preferred Shares. The purchase and sale of the Preferred
Shares pursuant to this Agreement shall be effective as of the close of business
on the Closing Date (the "Effective
Time").
PURCHASE
PRICE AND PAYMENT
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2.1.
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Amount
of Purchase Price.
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The
purchase price for the Preferred Shares shall be ONE HUNDRED FORTY-FIVE THOUSAND
AND NO/100 UNITED STATES DOLLARS ($145,000.00) payable in cash at the Closing in
accordance with this Agreement (the "Purchase Price").
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2.2.
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Payment
of Purchase Price.
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On the
Closing Date, the Purchaser shall deposit the Purchase Price with the Escrow
Agent to be held and distributed in accordance with the Escrow Agreement. Any
payment required to be made by the Company with respect to Section 6.9 or
Article VIII of this Agreement shall be paid first from the Escrow
Amount.
Subject to the satisfaction of the
conditions set forth in Sections 7.1 hereof (or the waiver thereof by the Party entitled to waive
that condition), the sale and purchase of the Preferred Shares provided
for in Article I hereof shall take place within five (5) business days after the
last to occur of: (a) the delivery to the Escrow Agent of original documents
representing the Excluded Obligations, duly endorsed for transfer, and (b) the
delivery to the Escrow Agent of original certificates representing 145,000
Preferred Shares registered in the name of the Purchaser or the Purchaser's
nominee. The Closing shall take place at 10:00 a.m. at the offices of Sonfield
& Sonfield located at 770 South Post Oak Lane, Houston, Texas 77056, or at
such other place or date as the Company and the Purchaser may agree. The date on
which the closing shall be held is referred to in this Agreement as the "Closing Date".
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3.2.
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Termination
of Agreement.
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This
Agreement may be terminated prior to the closing as follows:
(a) at
the election of the Company if any one or more to the conditions to closing
specified in Section 7.2 have not occurred on or before July 31,
2008;
(b) at
the election of the Company if the Purchaser shall be in breach or default of
any obligation under this Agreement which breach or default has not been
remedied within 10 days after notice thereof is given to the Purchaser (or if
such breach or default is not remediable within such 10 days, the Purchaser has
not commenced and is not diligently pursuing such remedy within such 10-day
period);
(c) at
the election of the Purchaser if any one or more of the conditions to closing
specified in Section 7.1 have not occurred on or before July 31,
2008;
(d) at
the election of the Purchaser if the Company shall be in breach or default of
any obligation under this Agreement which breach or default has not been
remedied within 10 days after notice thereof is given to the Company (or if such
breach or default is not remediable within such 10 days, the Company has not
commenced and is not diligently pursuing such remedy within such 10-day
period);
(e) by
mutual written consent of the Company and the Purchaser; or
(f) by
the Company or the Purchaser if there shall be in effect a final non-appealable
Order of a Governmental Body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
it being agreed that the Parties hereto shall promptly appeal any adverse
determination which is not non-appealable (and pursue such appeal with
reasonable diligence).
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3.3.
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Procedure
Upon Termination.
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In the
event of termination by the Purchaser or the Company, or both, pursuant to
Section 3.2 hereof, written notice thereof shall be given to the other Party and
this Agreement shall terminate, and the purchase of the Preferred Shares
hereunder shall be abandoned, without further action by the Purchaser or the
Company. If this Agreement is terminated as provided herein each Party shall
return documents, work papers and other material of any other Party relating to
the transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the Party furnishing the same.
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3.4.
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Effect
of Termination.
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In the
event that this Agreement is validly terminated as provided herein, each of the
Parties shall be relieved of their duties and obligations arising under this
Agreement, other than pursuant to
Section 9.4 and any Confidentiality Agreement previously signed by the Parties,
after the date of such
termination and such termination shall be without liability to the Purchaser or
the Company; provided, however,
that the obligations of
the Parties set forth in Section 9.4 hereof shall survive any such
termination and shall be enforceable hereunder; provided, further,
however,
that nothing in this
Section 3.4 shall relieve the Purchaser or the Company of any liability for a
breach or default of this Agreement or limit the remedies that either the
Purchaser or the Company
may pursue in connection with any such breach or
default.
The
Company hereby represents and warrants to the Purchaser that:
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4.1.
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Organization
and Good Standing.
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The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now conducted. The Company is duly qualified or authorized to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction in which it owns or leases real property and each other
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization.
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4.2.
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Authorization
of Agreement.
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The
Company has all requisite power and authority to execute and deliver this
Agreement and each other Transaction Document, and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Company of this Agreement and each other Transaction Document
to which the Company is a party has been duly and validly authorized by all
necessary corporate action. This Agreement has been, and each other Transaction
Document to which the Company is a party will be prior to or at the closing,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement
constitutes, and each other Transaction Document to which the Company is a party
when so executed and delivered will constitute, the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(a) The
authorized capital stock of the Company consists of 50,000,000 shares of common
stock, $.001 par value ("Common
Stock") and 5,000,000 shares of preferred stock, $.001 par
value.
(b) As
of the date hereof, there are 17,379,172 shares of Common Stock issued and
outstanding and no shares of Common Stock are held by the Company as treasury
stock. All of the issued and outstanding shares of Common Stock were duly
authorized for issuance and are validly issued, fully paid and
non-assessable.
(c) As
of the date hereof, there are designated 185,000 Preferred Shares, with terms
substantially in the form of Exhibit G hereto, of which 40,000 Preferred Shares
are issued and outstanding and no shares of Preferred Stock are held by the
Company as treasury stock.
(d) There
is no existing option, warrant, call, right, commitment or other agreement of
any character to which the Company is a party requiring, and there are no
securities of the Company outstanding which upon conversion or exchange would
require, the issuance, sale or transfer of any additional shares of capital
stock or other equity securities of the Company or other securities convertible
into, exchangeable for or evidencing the right to subscribe for or purchase
shares of capital stock or other equity securities of the
Company.
Exhibit H
hereto sets forth the names of the Subsidiaries, and, with respect to each
Subsidiary, the jurisdiction in which it is incorporated or organized, the
number of shares of its authorized capital stock, the number and class of shares
thereof duly issued and outstanding, the names of all stockholders or other
equity owners and the number of shares of stock owned by each stockholder or the
amount of equity owned by each equity owner. Except as set forth on Exhibit H,
the Company does not have any Subsidiaries.
(a) The
Company has delivered to the Purchaser true, correct and complete copies of the
Amended and Restated Certificate of Incorporation (certified by the Secretary of
State or other appropriate official of the applicable jurisdiction of
organization) and bylaws (certified by the secretary, assistant secretary or
other appropriate officer of the Company) or comparable organizational documents
of the Company.
(b) The
minute books of the Company previously made available to the Purchaser contain
complete and accurate records of all meetings and accurately reflect all other
corporate action of the stockholders and board of directors (including
committees thereof) of the Company. The stock certificate books and stock
transfer ledgers of the Company previously made available to the Purchaser are
true, correct and complete. All stock transfer taxes levied or payable with
respect to all transfers of shares of the Company and its Subsidiaries prior to
the date hereof have been paid and appropriate transfer tax stamps
affixed.
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4.6.
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Conflicts;
Consents of Third Parties.
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(a) None
of the execution and delivery by the Company of this Agreement or the
other Transaction
Documents to which it is a party, the consummation of the transactions
contemplated hereby or
thereby, or compliance by the Company with any of the provisions hereof or
thereof will conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or give rise to any obligation of the Company to make any payment under, or
to the increased, additional, accelerated or guaranteed rights or entitlements of any Person
under, or result in the creation of any Liens upon any of the properties or assets of the Company
under any provision of (i) the Amended and Restated Certificate of Incorporation
and bylaws or comparable organizational documents of the Company or any
Subsidiary; (ii) any Contract, or Permit to which the Company or any
Subsidiary is a Party or
by which any of the properties or assets of the Company or any Subsidiary are bound; (iii) any Order
of any Governmental Body applicable to the Company or any Subsidiary or
any of the properties or assets of the Company or any Subsidiary as of the date
hereof; or (iv) any applicable Law
(b)
No consent, waiver, approval, Order, Permit or authorization
of, or declaration or filing with, or notification to, any Person is required on
the part of the Company or any Subsidiary in connection (i) with the execution
and delivery of this Agreement or any other Transaction Document to which it is
a party or the compliance by the Company with any of the provisions hereof or
thereof, the consummation of the transactions contemplated hereby or thereby, or
the taking of any other action contemplated hereby or thereby, or (ii) the
continuing validity and effectiveness immediately following the closing of any
Permit or Contract of the Company or any Subsidiary, except in each case for
compliance with the applicable requirements of the HSR Act and compliance with
the applicable provisions of the Communications Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Communications Act").
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4.7.
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Financial
Statements.
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(a) The
Company has delivered to the Purchaser copies of (i) the audited consolidated
balance sheets of the Company and its Subsidiaries as at December 31, 2006 and
2007 and the related audited consolidated statements of income and of cash flows
of the Company and its Subsidiaries for the years then ended and (ii) the
unaudited consolidated balance sheet of the Company and its Subsidiaries as at
March 31, 2008 and the related unaudited consolidated statements of income and
cash flows of the Company and its Subsidiaries for the three-month period then
ended (such audited and unaudited statements, including the related notes and
schedules thereto, are referred to herein as the "Financial Statements"). Each of the
Financial Statements is complete and correct in all material respects, has been
prepared in accordance with GAAP consistently applied by the Company without
modification of the accounting principles used in the preparation thereof
throughout the periods presented and presents fairly the financial position,
results of operations and cash flows of the Company and its Subsidiaries as at
the dates and for the periods indicated. For the purposes hereof, the audited
consolidated balance sheet of the Company and its Subsidiaries as at December
31, 2007 is referred to as the "Balance
Sheet" and December 31, 2007 is referred to as the "Balance Sheet
Date".
(b) The
Company and its Subsidiaries make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of their respective assets. The Company and its Subsidiaries
maintain systems of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit the preparation of financial statements in conformity
with GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the actual levels at reasonable intervals and appropriate action is taken with
respect to any differences. Nothing in this representation shall be construed as
a representation that the Company's systems of internal controls or management's
review and assessment thereof complies with the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002 or that management has performed the assessment
required by Rule 13a-15 under the Exchange Act.
Neither
the Company nor any Subsidiary has any indebtedness, obligations or liabilities
of any kind (whether accrued, absolute, contingent or otherwise, and whether due
or to become due) that would have been required to be reflected in, reserved
against or otherwise described on the Balance Sheet or in the notes thereto in
accordance with GAAP which was not fully reflected in, reserved against or
otherwise described in the Balance Sheet or the notes thereto or was not
incurred in the Ordinary Course of Business since the Balance Sheet Date. The
Subsidiary has assumed and agreed to be responsible for, and the creditors have
agreed to look solely to the Subsidiary for the payment or performance of all
obligations of the Company other than the Excluded
Liabilities.
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4.9.
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Absence
of Certain Developments.
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Except as
expressly contemplated by this Agreement or the other Transaction Documents,
since the Balance Sheet Date (i) the Company has conducted the business in all
material respects only in the Ordinary Course of Business and in substantially
the same manner as previously conducted and (ii) there has not been any event,
change, occurrence or circumstance that has had or could reasonably be expected
to have a Material Adverse Effect.
(a) (i)
All Tax Returns required to be filed by or on behalf of the Company have been
properly prepared and duly filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns were true, complete and correct in all material respects, (ii) all
amounts shown on such Tax Returns (including interest and penalties) as due from
the Company, all Taxes payable by or on behalf of the Company on or in respect
of its income, assets or operations have been fully paid.; and (iii) the Company
has not executed or filed with the IRS or any other taxing authority any
agreement, waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of Taxes (including,
but not limited to, any applicable statute of limitation), and no power of
attorney with respect to any Tax matter is currently in
force.
(b) The
Company has complied in all material respects with all applicable laws, rules
and regulations relating to the payment and withholding of Taxes and has duly
withheld from employee salaries, wages and other compensation and has paid over
to the appropriate taxing authorities all amounts required to be so withheld and
paid over for all periods under all applicable laws.
The
Company's only assets consist of the stock of the Subsidiaries. All other
assets, whether real or personal, tangible or intangible, and all Contracts have
been transferred to the Subsidiaries.
There are
no Legal Proceedings pending or, to the knowledge of the Company, overtly
threatened against the Company which, if adversely determined, would prohibit or
restrain the ability of the Company to enter into this Agreement or any other
Transaction Document or consummate the transactions contemplated hereby or
thereby before any Governmental Body; nor to the knowledge of the Company is
there any reasonable basis for any such action, proceeding, or
investigation.
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4.13.
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Compliance
with Laws.
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The
Company is in compliance in all material respects with all Laws of any
Governmental Body applicable to its business or operations.
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4.14.
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Environmental
Matters.
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The
operations of the Company are and have been in compliance with all applicable
Environmental Laws which compliance includes obtaining, maintaining in good
standing and complying with all Permits required by Environmental Laws ("Environmental Permits") and no action
or proceeding is pending or, to the knowledge of the Company, threatened to
revoke, modify or terminate any such Environmental Permit, and, to the Company's
knowledge, no facts, circumstances or conditions currently exist that could
adversely affect such continued compliance with Environmental Laws and
Environmental Permits or require currently unbudgeted capital expenditures to
achieve or maintain such continued compliance with Environmental Laws and
Environmental Permits.
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4.15.
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No
Misrepresentation.
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Neither
this Agreement nor any other Transaction Document, nor any document, certificate
or instrument furnished in connection herewith or therewith contains, with
respect to the Company, any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein not
misleading.
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4.16.
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Financial
Advisors.
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No Person
has acted, directly or indirectly, as a broker, finder or financial advisor for
the Company in connection with the transactions contemplated by this Agreement
or the other Transaction Documents and no Person is entitled to any fee or
commission or like payment in respect hereof or thereof.
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
The
Purchaser hereby represents and warrants to the Company that:
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5.1.
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Organization
and Good Standing.
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The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada.
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5.2.
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Authorization
of Agreement and Transaction
Documents.
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The
Purchaser has all requisite power and authority to execute and deliver this
Agreement and each other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Purchaser of this Agreement and each other
Transaction Document to which it is a party has been duly and validly authorized
by all necessary corporate action. This Agreement has been, and each other
Transaction Document to which the Purchaser is a party will be prior to or at
the closing, executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each other Transaction Document to which the
Purchaser is a party when so executed and delivered will constitute, the legal, valid and
binding obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in
equity).
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5.3.
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Conflicts;
Consents of Third Parties.
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(a) None
of the execution and delivery by the Purchaser of this Agreement or the other
Transaction Documents to which it is a party, the consummation of the
transactions contemplated hereby or thereby, or compliance by the Purchaser with
any of the provisions hereof or thereof will conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or give rise to any
obligation of the Purchaser to make any payment under, or to the increased,
additional, accelerated or guaranteed rights or entitlements of any Person
under, or result in the creation of any Liens upon any of the properties or
assets of the Purchaser under any provision of (i) the Certificate of
Incorporation and bylaws or comparable organizational documents of the
Purchaser; (ii) any Contract, or Permit to which the Purchaser is a Party or by
which any of the properties or assets of the Purchaser are bound; (iii) any
Order of any Governmental Body applicable to the Purchaser or any of the
properties or assets of the Purchaser as of the date hereof; or (iv) any
applicable Law
(b) No
consent, waiver, approval, Order, Permit or authorization of, or declaration or
filing with, or notification to, any Person is required on the part of the
Purchaser in connection with the execution and delivery of this Agreement or any
other Transaction Document to which it is a party or the compliance by the
Purchaser with any of the provisions hereof or thereof, the consummation of the
transactions contemplated hereby or thereby, or the taking of any other action
contemplated hereby or thereby, except for compliance with the applicable
requirements of the HSR Act and compliance with the applicable provisions of the
Communications Act.
There are
no Legal Proceedings pending or, to the knowledge of the Purchaser, overtly
threatened against the Purchaser which, if adversely determined, would prohibit
or restrain the ability of the Purchaser to enter into this Agreement or any
other Transaction Document or consummate the transactions contemplated hereby or
thereby before any Governmental Body; nor to the knowledge of the Purchaser is
there any reasonable basis for any such action, proceeding, or
investigation.
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5.5.
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Investment
Intention.
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The
Purchaser is acquiring the Preferred Shares for its own account, for investment
purposes only and not with a view to the distribution thereof, as such term is
used in Section 2(11) of the Securities Act of 1933, as amended, and the rules
and regulations adopted thereunder (the "Securities Act"). The Purchaser
understands that the Preferred Shares have not been registered under the
Securities Act and cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is
available.
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5.6.
|
Investment
Experience.
|
The
Purchaser has received all the information it considers necessary or appropriate
for deciding whether to purchase the Preferred Shares and represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the business, properties, prospects and financial condition of the
Company. The Purchaser acknowledges that it can bear the economic risk of its
investment and that it has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Preferred Shares.
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5.7.
|
Accredited
Investor.
|
The
Purchaser is an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act.
The
Purchaser understands that immediately following its purchase of the Preferred
Shares hereunder, the Preferred Shares will be characterized as "restricted
securities" under the Securities Act inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that the
Preferred Shares may be resold without registration under the Securities Act,
only in certain limited circumstances. The Purchaser acknowledges that
certificates representing the Preferred Shares will bear the following
restrictive legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CERTIFICATE OF
DESIGNATIONS FOR THE SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK FILED WITH
THE SECRETARY OF STATE OF THE STATE OF NEVADA. THE HOLDER OF THIS CERTIFICATE
MAY OBTAIN A COPY OF THE CERTIFICATE OF DESIGNATIONS WITHOUT COST UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY.
THE
SERCURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH SECURITIES MY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
No Person
has acted, directly or indirectly, as a broker, finder or financial advisor for
the Purchaser in connection with the transactions contemplated by this Agreement
or the other Transaction Documents and no person is entitled to any fee or
commission or like payment in respect hereof or thereof.
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6.1.
|
Access
to Information.
|
Prior to
the Closing Date, the Purchaser shall be entitled, through its officers,
employees and representatives (including, without limitation, its legal advisors
and accountants), to make such investigation of the properties, businesses and
operations of the Company and its Subsidiaries and such examination of the
books, records and financial condition of the Company and its Subsidiaries as it
reasonably requests and to make extracts and copies of such books and records.
Any such investigation and examination shall be conducted during regular
business hours and under reasonable circumstances, and the Company and its
Subsidiaries shall cooperate fully therein. No investigation by the Purchaser
prior to or after the date of this Agreement shall dimmish or obviate any of the
representations, warranties, covenants or agreements of the Company contained in
this Agreement. In order that the Purchaser may have full opportunity to make
such physical, business, accounting and legal review, examination or
investigation as it may reasonably request the Company shall cause the officers,
employees, consultants, agents, accountants, attorneys and other representatives
of the Company and its Subsidiaries to cooperate fully with such representatives
in connection with such review and examination.
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6.2.
|
Conduct
of the Business Pending the
Closing.
|
(a) Except
as otherwise expressly contemplated by this Agreement, the other Transaction
Documents, or with the prior written consent of the Purchaser, the Company shall
conduct the business of the Company only in the Ordinary Course of
Business;
(b) Except
as otherwise expressly contemplated by this Agreement, the other Transaction
Documents, or with the prior written consent of the Purchaser, the Company shall
not:
(i) repurchase,
redeem or otherwise acquire any outstanding shares of the capital stock or other
securities of or other ownership interests in, the Company;
(ii)
transfer, issue, sell or dispose of any shares of
capital stock or other securities of the Company or grant options, warrants,
calls or other rights to purchase or otherwise acquire shares of the capital
stock or other securities of the Company;
(iii)
effect any recapitalization, reclassification,
stock split or like change in the capitalization of the Company, other than as
reflected in the Preliminary Schedule 14C filed with the Securities and Exchange
Commission on June 12, 2008;
(v)
enter into or agree to enter into any merger or consolidation
with, any corporation or other entity, and not engage in any new business or
invest in, make a loan, advance or capital contribution to, or otherwise acquire
the securities of any other Person other than in the Ordinary Course of
Business; or
(vi)
agree to do anything prohibited by this Section 6.2 or anything which
would make any of the representations and warranties of the Company in this
Agreement or in any other Transaction Document untrue or incorrect in any
material respect as of any time through and including the Effective
Time.
Each of
the Company and the Purchaser shall use its best efforts to (i) take all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement and the other Transaction Documents, and (ii) cause the fulfillment at
the earliest practicable date of all of the conditions to their respective
obligations to consummate the transactions contemplated by this
Agreement.
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6.4.
|
Non
Negotiation; Non-Solicitation.
|
Neither
the Company nor any of the Company's directors, officers, employees,
representatives or agents (collectively, the "Representatives") shall (i) discuss,
negotiate, undertake, authorize, recommend, propose or enter into, either as the
proposed surviving, merged, acquiring or acquired corporation, any transaction
involving a merger, consolidation, business combination, purchase or disposition
of any significant amount of the assets or capital stock or other equity
interest in the Company (each, an "Acquisition") other than the
transactions contemplated by this Agreement or the other Transaction Documents;
(ii) facilitate, encourage, solicit or initiate discussions, negotiations or
submissions of proposals or offers in respect of any Acquisition; (iii) furnish
or cause to be furnished, to any Person, any information concerning the
business, operations, properties or assets of the Company in connection with any
Acquisition, or (iv) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing.
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6.5.
|
Preservation
of Records.
|
The
Company agrees that it shall preserve and keep the records held by it relating
to the business of the Company for a period of seven (7) years from the Closing
Date and shall make such records and personnel available to the Purchaser in
connection with, among other things, any insurance claims by, legal proceedings
against or governmental investigations of the Purchaser or any of its Affiliates
or in order to enable the Purchaser to comply with its obligations under this
Agreement and each Transaction Document. In the event the Company wishes to
destroy such records after that time, the Company shall first give ninety (90)
days prior written notice to the Purchaser and the Purchaser shall have the
right at its option and expense, upon prior written notice given to the Company
within that ninety (90) day period, to take possession of the records within one
hundred and eighty (180) days after the date of such notice.
Neither
the Company nor the Purchaser shall issue any press release or public
announcement concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of the other Party hereto, which
approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of the Company or the Purchaser, disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange on which the
Company lists securities; provided, however that, to
the extent required by applicable Law, the Party intending to make such release
shall use its best efforts consistent with such applicable Law to consult with
the other Party with respect to the text thereof.
Promptly
after the Closing Date, and in any event before the expiration of 90 days after
the Closing Date, the Company shall change its corporate name and shall cease to
use the name "Legacy Communications Corporation" or any variation thereof in any
of its businesses.
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6.8
|
Payment
and Transfer of Assets and
Liabilities.
|
On or
prior to the Closing Date, the Company shall either pay and discharge or cause
to be transfer to and assumed by the Subsidiaries all of its liabilities and
obligations of every description other than the obligations describe on Exhibit
D hereto (the "Excluded
Obligations"). The Company shall also transfer all of its assets and
operations to the Subsidiaries and obtain such releases, novations and other
agreements from its creditors as necessary to fully and completely release the
Company from all outstanding indebtedness and liabilities other than the
Excluded Obligations.
On or
prior to the Closing Date, the Company shall deliver all ownership interests in
the Subsidiaries to the Major Stockholders, in trust according to the terms of
the Trust Receipt, Irrevocable Instructions and Irrevocable Proxy in the form of
Exhibit B attached to this Agreement, and shall cause each of the Major
Stockholders to deliver to the Trustee, in trust under the Trust Receipt,
Irrevocable Instructions and Irrevocable Proxy, the number of shares of Common
Stock set forth opposite their respective names on Exhibit A.
On or
prior to the Closing Date, the Purchaser shall obtain for the benefit of the
Company an opinion from a qualified expert and in form and substance
satisfactory to the Company and the Major Stockholders regarding the fairness to
the other stockholders of the Company of the exchange of all of the issued and
outstanding shares and other ownership interests in the Subsidiaries for
13,654,318 shares of Common Stock held by the Major
Stockholders.
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7.1.
|
Conditions
Precedent to Obligations of the
Purchaser.
|
The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Purchaser in whole or in part to the extent permitted by applicable
Law):
(a) all
representations and warranties of the Company contained herein that are
qualified as to materiality shall be true and correct, and all representations
and warranties of the Company contained herein that are not qualified as to
materiality shall be true and correct in all material respects, at and as of the
Closing Date with the same effect as though those representations and warranties
had been made again at and as of that time;
(b) the
Company shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing Date;
(c) there
shall not have been or occurred any Material Adverse Change;
(d) the
Purchaser shall have received a certificate (dated the Closing Date and
substantially in the form of Exhibit I) executed by, or on behalf of the Company
certifying as to the fulfillment of the conditions specified in Sections 7.1
(a), 7.1(b) and 7.1(c) hereof;
(e) no
Legal Proceedings shall have been instituted or threatened or claim or demand
made against the Company or the Purchaser seeking to restrain or prohibit or to
obtain substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any Order by a
Governmental Body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated
hereby;
(f) the
Escrow Agreement substantially in the form of Exhibit F attached to this
Agreement shall have been executed and delivered by the Company and each party
thereto (other than the Purchaser), and there shall exist no breach of any
representation or warranty or default of any obligation by any party thereto
(other than the Purchaser);
(g) Certificates
representing 145,000 Preferred Shares shall have been, or shall at the Closing
be, validly delivered to the Escrow Agent free of all Liens;
(h)
the Note Purchase Agreement substantially in the form of Exhibit L
attached to this Agreement, shall have been executed and delivered by each party
thereto (other than the Purchaser), and there shall exist no breach of any
representation or warranty or default of any obligation by any party thereto
(other than the Purchaser);
(i)
the Notes (as defined in the Note Purchase Agreement), duly endorsed by
the payee thereof for transfer, shall have been delivered to the Escrow Agent by
the payee in accordance with the Note Purchase Agreement;
(j)
the Trust Receipt, Irrevocable Instructions and
Irrevocable Proxy substantially in the form of Exhibit B attached to this
Agreement, shall have been executed and delivered by each party thereto, and
there shall exist no breach of any representation or warranty or default of any
obligation by any party thereto;
(k)
certificates representing the shares of Common Stock set forth
opposite the name of each Major Stockholder on Exhibit A attached to this
Agreement shall have been delivered to the Trustee by the Major Stockholders in
accordance with the Trust Receipt, Irrevocable Instruction and Irrevocable
Proxy, each of which is either endorsed in blank for transfer or accompanied by
an irrevocable stock power separate from certificate in blank and releases in
the form attached to the Trust Receipt, Irrevocable Instruction and Irrevocable
Proxy;
(1)
the Purchaser shall have received an opinion of counsel
to the Company substantially in the form of Exhibit E attached to this
Agreement;
(m)
the Purchaser shall have received the written resignations of
each director of the Company; and
(n)
if applicable, the waiting period under the HSR Act
shall have expired or early termination shall have been
granted.
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7.2.
|
Conditions
Precedent to Obligations of the Company and Majority
Stockholders.
|
The
obligation of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Company in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Purchaser contained herein that are
qualified as to materiality shall be true and correct, and all representations
and warranties of the Purchaser contained herein that are not qualified as to
materiality shall be true and correct in all material respects, at and as of the
Closing Date with the same effect as though those representations and warranties
had been made again at and as of that time;
(b) the
Purchaser shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing Date;
(c) the
Company shall have received a certificate (dated the Closing Date and
substantially in the form of Exhibit J) executed by, or on behalf of the
Purchaser certifying as to the fulfillment of the conditions specified in
Sections 7.2(a) and 7.2(b) hereof;
(d) no
Legal Proceedings shall have been instituted or threatened or claim or demand
made against the Company or the Purchaser seeking to restrain or prohibit or to
obtain substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any Order by a
Governmental Body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated
hereby;
(e) the
Escrow Agreement substantially in the form of Exhibit F attached to this
Agreement shall have been executed and delivered by the Purchaser and each party
thereto (other than the Company or any Subsidiary), and there shall exist no
breach of any representation or warranty or default of any obligation by any
party thereto (other than the Company or any Subsidiary);
(f) the
Purchaser shall have deposited the sum of TWO HUNDRED FIFTY-FIVE THOUSAND AND
NO/100 UNITED STATES DOLLARS ($255,000.00) with the Escrow Agent in immediately
available funds;
(g) the
Trust Receipt, Irrevocable Instructions and Irrevocable Proxy substantially in
the form of Exhibit B attached to this Agreement, shall have been executed and
delivered by each party thereto, and there shall exist no breach of any
representation or warranty or default of any obligation by any party thereto
(other than the Company or any Subsidiary);
(h)
certificates representing the number of shares of Legacy Media
Corporation Common Stock set forth opposite the name of each Major Stockholder
on Exhibit A attached to this Agreement shall have been delivered to the Major
Stockholders in accordance with the Trust Receipt, Irrevocable Instruction and
Irrevocable Proxy, each of which is either endorsed in blank for transfer or
accompanied by an irrevocable stock power separate from certificate in
blank;
(i)
the Purchaser shall have designated not less than four persons
for election to the board of directors of the Company;
(j)
the Company shall have received a fairness opinion in
form and substance satisfactory to the board of directors and the Major
Stockholders relating to the exchange of the shares of Legacy Media Corporation
for the shares of Common Stock set forth opposite the name of the Major
Stockholders on Exhibit A attached to this Agreement;
(k)
the fairness opinion received by the Company shall have been
approved and accepted by the disinterested members of the board of directors of
the Company and the exchange of the shares of Legacy Media Corporation for the
shares of Common Stock set forth opposite the name of the Major Stockholders on
Exhibit A attached to this Agreement has been approved by a majority of the
board of directors of the Company, none of whom are Major Stockholders;
and
(1)
if applicable, the waiting period under the HSR Act shall have
expired or early termination shall have been granted.
ARTICLE
VIII
INDEMNIFICATION
(a) Subject
to Sections 8.2 and 8.4 hereof, the Subsidiaries hereby agree to indemnify and
hold the Purchaser, the Company, and their respective directors, officers,
employees, Affiliates, agents, successors and assigns (collectively, the "the Purchaser Indemnified
Parties") harmless from and against any and all assessments, losses,
liabilities, judgments, obligations, damages, costs, penalties and expenses
(including attorneys' and other professionals' fees and disbursements)
(collectively, "Losses")
incident to any notices, actions, suits, proceedings, or claims relating
to:
(i)
any and all liabilities of the Company or any of its
Subsidiaries of every kind, nature and description, absolute or contingent,
existing as against the Company or any of its Subsidiaries prior to and
including the Closing Date or thereafter coming into being or arising by reason
of any facts or circumstances existing, or any transaction entered into, on or
prior to the Closing Date, except the Excluded Obligations;
(ii)
subject to Section 8.3, the failure of any representation or warranty of
the Company set forth in Section 4 hereof, or any representation or warranty
contained in any certificate delivered by or on behalf of the Company pursuant
to this Agreement or any other Transaction Document, to be true and correct in
all respects as of the date made;
(iii)
the breach of any covenant or other agreement on the part of the
Company or any Subsidiary under this Agreement or any Transaction Document;
or
(iv) violations
of Environmental Laws arising from or related to any condition, act or omission,
by the Company or any Subsidiary or any predecessor thereof or related to the
operations of the Company, any Subsidiary or any predecessor thereof at any real
property currently or formerly owned, operated or leased by the Company or any
Subsidiary, whether known or unknown, accrued or contingent, to the extent
existing on or prior to the Closing Date, including, but not limited to any
Environmental Costs and Liabilities, any liabilities including those imposed
pursuant to common law associated with a Release of Hazardous Materials, or any
breach of Section 4.14.
(b) Subject
to Sections 8.2 hereof, the Purchaser hereby agrees to indemnify and hold the
Subsidiaries and their directors, officers, employees, Affiliates, agents,
successors and assigns (collectively, the "Subsidiary Indemnified
Parties") harmless from and against any and all Losses incident to any
notices, actions, suits, proceedings, or claims relating to:
(i) the
Excluded Liabilities;
(ii) subject
to Section 8.3, the failure of any representation or warranty of the Purchaser
set forth in Section 5 hereof, or any representation or warranty contained in
any certificate delivered by or on behalf of the Purchaser pursuant to this
Agreement or any Transaction Document, to be true and correct as of the date
made; and
(ii) the
breach of any covenant or other agreement on the part of the Purchaser under
this Agreement or any Transaction Document.
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8.2.
|
Limitations
on Indemnification for Breaches of Representations and
Warranties.
|
An
indemnifying party shall not have any liability under Section 8.1(a)(ii) or
Section 8.1(b)(ii) hereof unless the aggregate amount of Losses to the
indemnified parties finally determined to arise thereunder based upon,
attributable to or resulting from the failure of any representation or warranty
to be true and correct, without regard to any materiality qualifiers contained
in the representations and warranties, exceeds $ 25,000 (the "Basket") and, in such event, the
indemnifying Party shall be required to pay the entire amount of all such Losses
including those used to compute the Basket.
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8.3.
|
Indemnification
Procedures.
|
(a) In
the event that any Legal Proceedings shall be instituted or that any claim or
demand ("Claim") shall be
asserted by any Person in respect of which payment may be sought under Section
8.1 hereof (regardless of the Basket referred to above), the indemnified party
shall reasonably and promptly cause written notice of the assertion of any Claim
of which it has knowledge which is covered by this indemnity to be forwarded to
the indemnifying party. The indemnifying party shall have the right, at its sale
option and expense, to be represented by counsel of its choice, which must be
reasonably satisfactory to the indemnified party, and to defend against,
negotiate, settle or otherwise deal with any Claim which relates to any Losses
indemnified against hereunder. If the indemnifying party elects to defend
against, negotiate, settle or otherwise deal with any Claim which relates to any
Losses indemnified against hereunder, it shall within five (5) days (or sooner,
if the nature of the Claim so requires) notify the indemnified party of its
intent to do so. If the indemnifying party elects not to defend against,
negotiate, settle or otherwise deal with any Claim which relates to any Losses
indemnified against hereunder, fails to notify the indemnified party of its
election as herein provided or contests its obligation to indemnify the
indemnified party for such Losses under this Agreement, the indemnified party
may defend against, negotiate, settle or otherwise deal with such Claim. If the
indemnified party defends any Claim, then the indemnifying party shall reimburse
the indemnified party for the expenses of defending such Claim upon submission
of periodic bills. If the indemnifying party shall assume the defense of any
Claim, the indemnified party may participate, at his or its own expense, in the
defense of such Claim; provided, however, that such
indemnified party shall be entitled to participate in any such defense with
separate counsel at the expense of the indemnifying party if so requested by the
indemnifying party to participate or (ii) in the reasonable opinion of counsel
to the indemnified party, a conflict or potential conflict exists between the
indemnified party and the indemnifying party that would make such separate
representation advisable; and provided, further, that the
indemnifying party shall not be required to pay for more than one such counsel
for all indemnified parties in connection with any Claim. The Parties hereto
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such Claim.
(b) After
any final judgment or award shall have been rendered by a court, arbitration
board or administrative agency of competent jurisdiction and the expiration of
the time in which to appeal therefrom, or a settlement shall have been
consummated, or the indemnified Party and the indemnifying Party shall have
arrived at a mutually binding agreement with respect to a Claim hereunder, the
indemnified Party shall forward to the indemnifying Party notice of any sums due
and owing by the indemnifying Party pursuant to this Agreement with respect to
such matter and the indemnifying Party shall be required to pay all of the sums
so due and owing to the indemnified Party by wire transfer of immediately
available funds within 10 business days after the date of such
notice.
(c) The
failure of the indemnified party to give reasonably prompt notice of any Claim
shall not release, waive or otherwise affect the indemnifying party's
obligations with respect thereto except to the extent that the indemnifying
party can demonstrate actual loss and prejudice as a result of such
failure.
(a) The
Subsidiaries agree to be responsible for and to indemnify and hold the Company
and the Purchaser Indemnified Parties harmless from and against any and all
Taxes that may be imposed upon or assessed against the Company or the assets
thereof:
(i) with
respect to all taxable periods ending on or prior to the Closing
Date;
(ii) arising
by reason of any breach by the Company or inaccuracy of any of the
representations contained in Section 4.10 hereof;
(iii) with
respect to any and all Taxes of any member of a consolidated, combined or
unitary group of which the Company (or any predecessor) is or was a member on or
prior to the Closing Date, by reason of the liability of the Company pursuant to
Treasury Regulation Section 1. 1502-6(a) or any analogous or similar state,
local or foreign law or regulation;
(vi) with
respect to any losses, damages, liabilities, obligations, deficiencies, costs
and expenses (including, without limitation, reasonable expenses and fees for
attorneys and accountants) ("Related Costs") incurred in connection with the
Taxes for which the Subsidiaries are responsible to indemnify the Company and
the Purchaser Indemnified Parties pursuant to this Section 8.4(a) (or any
asserted deficiency, claim, demand, action, suit, proceeding, judgment or
assessment, including the defense or settlement thereof, relating to such Taxes)
or the enforcement of this Section 8.4( a);
(b) The
Purchaser and the Company agree to indemnify and hold harmless the Subsidiaries,
and each of their directors, officers, employees, Affiliates and agents from and
against any and all Taxes (i) of the Company with respect to any taxable period
of the Company beginning after the Closing Date and (ii) by reason of the
Company being or becoming a successor-in-interest of any Person as a result of
the transactions contemplated by this Agreement or the other Transaction
Documents or any transaction entered into after the Closing
Date.
(c) If
any indemnification payment under Section 8.4 is determined to be taxable to the
Party receiving such payment by any taxing authority, the paying Party shall
also indemnify the Party receiving such payment for any Taxes incurred by reason
of the receipt of such payment (taking into account any actual reduction in tax
liability to the receiving Party) and any Related Costs incurred by the Party
receiving such payment in connection with such Taxes (or any asserted
deficiency, claim, demand, action, suit, proceeding, judgment or assessment,
including the defense or settlement thereof, relating to such
Taxes).
|
8.5.
|
Preparation
of Tax Returns; Payment of Taxes.
|
(a) The
Company shall file all the federal, state, local and foreign Tax Returns
required to be filed by the Company after the Closing Date and shall pay any and
all Taxes due with respect to such returns. To the extent any Taxes shown due on
any such Tax Return are indemnifiable by the Subsidiaries, (i) such Tax Return
shall be prepared in a manner consistent with prior practice unless otherwise
required by applicable tax laws; (ii) the Company shall provide the Subsidiaries
with copies of such Tax Return at least 30 days prior to the due date for filing
such return; and (iii) the Subsidiaries shall have the right to review and
approve (which approval shall not be unreasonably withheld) such Tax Returns for
15 days following receipt thereof. The failure of the Subsidiaries to propose
any changes to any such Tax Return within such 15 days shall be deemed to be an
indication of its approval thereof. The Subsidiaries and the Company shall
attempt in good faith mutually to resolve any disagreements regarding such Tax
Returns prior to the due date for filing thereof. The Company shall file or
cause to be filed all such Tax Returns and shall, subject to receiving the
payments from the Subsidiaries referred to in Section 8.5, pay the Taxes shown
due thereon; provided,
however, that nothing contained in the foregoing shall in any manner
terminate, limit or adversely affect any right of the Purchaser Indemnified
Parties, the Subsidiaries or the Company to receive indemnification pursuant to
any provision in this Agreement.
(b) Not
later than 5 days before the due date for payment of Taxes with respect to any
Tax Returns, the Subsidiaries shall pay to the Purchaser an amount equal to that
portion of the Taxes shown on such return for which the Subsidiaries have an
obligation to indemnify the Company and the Purchaser Indemnified Parties
pursuant to the provisions of Section 8.4(a).
(c) For
federal income tax purposes, the taxable year of the Company shall end as of the
close of the Effective Time and, with respect to all other Taxes, the
Subsidiaries and the Company will, unless prohibited by applicable law, close
the taxable period of the Company as of the Effective Time. Neither the
Subsidiaries nor the Company shall take any position inconsistent with the
preceding sentence on any Tax Return. In any case where applicable Law does not
permit the Company to close its taxable year on the Effective Time or in any
case in which a Tax is assessed with respect to a taxable period which includes
the Closing Date (but does not begin or end on that day), then Taxes, if any,
attributable to the taxable period of the Company beginning before and ending
after the Closing Date shall be allocated (i) to the Subsidiaries for the period
up to and including the Closing Date, and (ii) to the Company for the period
subsequent to the Closing Date. Any allocation of income or deductions required
to determine any Taxes attributable to any period beginning before and ending
after the Closing Date shall be prepared by the Company and shall be made by
means of a closing of the books and records of the Company as of the Effective
Time, provided that exemptions, allowances or deductions that are calculated on
an annual basis (including, but not limited to, depreciation and amortization
deductions) shall be allocated between the period ending on the Closing Date and
the period after the Closing Date in proportion to the number of days in each
such period. The Company shall provide the Subsidiaries with a schedule showing
the computation of the allocation at least 30 days prior to the due date for
filing a Tax Return which includes the Closing Date. The Subsidiaries shall have
the right to review such schedule, and the Company and the Subsidiaries shall
attempt in good faith mutually to resolve any disagreements regarding the
determination of such allocation. Any amount owing from the Subsidiaries under
this Section 8.5(c) shall be paid no later than five (5) days prior to the
filing of the underlying Tax Return.
(d) The
Company and the Subsidiaries agree to furnish or cause to be furnished to each
other, and each at their own expense, as promptly as practicable, such
information (including access to books and records) and assistance, including
making employees available on a mutually convenient basis to provide additional
information and explanations of any material provided, relating to the Company
as is reasonably necessary for the filing of any Tax Return, for the preparation
for any audit, and for the prosecution or defense of any claim, suit or
proceeding relating to any adjustment or proposed adjustment with respect to
Taxes. The Company shall retain in its possession, and shall provide the
Subsidiaries reasonable access to (including the right to make copies of), such
supporting books and records and any other materials that the Subsidiaries may
specify with respect to Tax matters relating to any taxable period ending on or
prior to the Closing Date until the relevant statute of limitations has expired.
After such time, the Company may dispose of such material, provided that prior
to such disposition the Company shall give the Subsidiaries a reasonable
opportunity to take possession of such materials.
(i) The
Company shall have the sole right to represent the interests of the Company in
any Tax audit or administrative or court proceeding relating to taxable periods
of the Company beginning after the Closing Date and to employ counsel of its
choice at its expense. The Subsidiaries agree that they will cooperate fully
with the Company and its counsel in the defense against or compromise of any
claim in any said proceeding.
(ii) If
any taxing authority asserts a claim, makes an assessment or otherwise disputes
or affects any Tax for which the Subsidiaries are responsible hereunder for the
Tax reporting position of the Company for taxable periods ending on or prior to
the Closing Date, the Company shall, promptly, upon receipt by the Company of
notice thereof, inform the Subsidiaries thereof. The failure of the Company
timely to forward such notification in accordance with the immediately preceding
sentence shall not relieve the Subsidiaries of their obligation to pay such
liability for Taxes except and to the extent that the failure timely to forward
such notification actually prejudices the ability of Subsidiaries to contest
such liability for Taxes or increases the amount of such
Taxes.
(iii) The
Subsidiaries and the Company jointly shall represent the interests of the
Company in any Tax audit or administrative or court proceeding relating to any
taxable period of the Company which includes (but does not begin or end on) the
Closing Date. All costs, fees and expenses paid to third persons in the course
of such proceeding shall be borne by the Subsidiaries and the Company in the
same ratio as the ratio in which, pursuant to the terms of this Agreement, the
Subsidiaries and the Company would share the responsibility for payment of the
Taxes asserted by the taxing authority in such claim or assessment if such claim
or assessment were sustained in its entirety.
(f) Except
as otherwise provided in Section 8.5(g), to the extent any determination of Tax
liability of the Company, whether as the result of an audit or examination, a
claim for refund, the filing of an amended return or otherwise, results in any
refund of Taxes paid attributable to (i) any period which ends on or before the
Closing Date or (ii) any period which includes the Closing Date but does not
begin or end on that day, any such refund shall belong to the Subsidiaries, provided that in the
case of any Tax refund described in clause (ii) of this Section 8.5(f), the portion of such Tax
refund which shall belong to the Subsidiaries shall be that portion that is attributable to the
portion of that period which ends on the Closing Date (determined on the basis
of an interim closing of the books as of the Closing Date), and the Company
shall promptly pay any such refund, and the interest actually received thereon,
to the Subsidiaries upon
receipt thereof by the Company. Any and all other refunds shall belong to the
Company. Any payments made under this Section 8.5(f) shall be net of any Taxes
payable with respect to such refund, credit or interest thereon (taking into
account any actual reduction in Tax liability realized upon the payment pursuant
to this Section 8.5(f).
(g) The
indemnification provided for in Section 8.4 and the contribution and allocation
provision of this Section 8.5 shall be the sole remedy for any claim in respect
of Taxes and the provisions of Sections 8.1 through 8.3 hereof shall not apply
to such claims.
(h) Any
claim for indemnity under Section 8.4 or contribution and allocation under this
Section 8.5 may be made at any time prior to 60 days after the expiration of the
applicable Tax statute of limitations with respect to the relevant taxable
period (including all periods of extension, whether automatic of
permissive).
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8.6.
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Tax
Treatment of Indemnity Payments.
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The
Subsidiaries and the Company agree to treat any indemnity payment made pursuant
to this Article VIII as an adjustment to the Purchase Price for federal, state,
local and foreign income tax purposes.
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9.1.
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Certain
Definitions.
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(a) For
purposes of this Agreement, the following terms shall have the meanings
specified in this Section 9.1:
"Affiliate"
means, with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person, and the term "control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities, by
contract or otherwise.
"Balance
Sheet" shall have the meaning ascribed to such term in Section 4.7 hereof
"Balance Sheet Date" shall have the meaning ascribed to such term in Section 4.7
hereof.
"Business
Day" means any day of the year on which national banking institutions in Texas
are open to the public for conducting business and are not required or
authorized to close.
"Closing
Date" shall have the meaning ascribed to such term in Section 3.1
hereof.
"Contract"
means any Contract, agreement, indenture, note, bond, loan, instrument, lease,
and commitment or other arrangement or agreement.
"Effective
Time" shall have the meaning ascribed to such term in Article I
hereof.
"Environmental
Costs and Liabilities" means, with respect to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand by
any other Person or in response to any violation of Environmental Law, whether
known or unknown, accrued or contingent, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute, to the
extent based upon, related to, or arising under or pursuant to any Environmental
Law, Environmental Permit, order or agreement with any Governmental Authority or
other Person, which relates to any environmental, health or safety condition,
violation of Environmental Law or a Release or threatened Release of Hazardous
Materials.
"Environmental
Law" means any foreign, federal, state or local statute, regulation, ordinance,
rule of common law or other legal requirement, as now or hereafter in effect, in
any way relating to the protection of human health and safety, the environment
or natural resources including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.§ 9601 et seq),
the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean
Water Act (33 U.S.C. § 1251 et seq), the Clean Air Act (42 U.S.C. § 7401 et
seq.) the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 ct seq.), and the
Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as each has been
or may be amended and the regulations promulgated pursuant
thereto.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
"Financial
Statements" shall have the meaning ascribed to such term in Section
4.7.
"GAAP"
means generally accepted United States accounting principles as of the date
hereof.
"Governmental
Body" means any government or governmental or regulatory body thereof or
political subdivision thereof, whether federal, state, local or foreign, or any
agency, instrumentality or authority thereof, or any court or arbitrator (public
or private).
"Hazardous
Material" means any substance, material or waste that is regulated, classified,
or otherwise characterized under or pursuant to any Environmental Law as
"hazardous," "toxic," "pollutant," "contaminant," "radioactive," or words of
similar meaning or effect, including without limitation, petroleum and its
by-products, asbestos, polychlorinated biphenyls, radon, mold, urea formaldehyde
insulation.
"HSR Act"
shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
The term
"knowledge" means the knowledge, after due inquiry, of the officers and
directors of the respective Party.
"Law" means any federal, state, local
or foreign law (including common law), statute, code, ordinance, rule, regulation or
other requirement but does not include municipal ordinances or other regulations or provisions that
are effective only within the corporate limits of a municipality.
"Legal
Proceeding" means any judicial, administrative or arbitral actions, suits,
proceedings (public or private), claims or governmental
proceedings.
"Lien"
means any lien, pledge, mortgage, deed of trust, security interest, claim,
lease, charge, option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement, encumbrance or any other
restriction or limitation whatsoever.
"Material
Adverse Change" means any fact, event, change, circumstance or occurrence which
has resulted in or could reasonably be expected to result in a Material Adverse
Effect.
"Material
Adverse Effect" means (i) a material adverse effect on the ability of the
Company to consummate the transactions contemplated by this Agreement or perform
its obligations under this Agreement or the Transaction Documents, (ii) a
material adverse effect on the registration of the Common Stock under the
Securities Exchange Act, and (iii) a material adverse effect on the
authorization of the Common Stock to be traded on the Over the Counter Bulletin
Board Market.
"Order"
means any order, injunction, judgment, decree, ruling, writ, assessment or
arbitration award.
"Ordinary
Course of Business" means the ordinary and usual course of day to day operations
of the business as conducted prior to the Closing.
"Permits"
means any approvals, authorizations, consents, licenses, permits or
certificates.
"Person"
means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"Purchaser
Indemnified Parties" shall have the meaning ascribed to such term in Section
8.1(a).
"Release"
means any release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property;
"Subsidiary
Indemnified Parties" shall have the meaning ascribed to such term in Section 8.
l(b) hereof.
"Taxes"
means (i) all federal, state, local or foreign taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever (ii) all interest, penalties, fines, additions to tax or
additional amounts imposed by any taxing authority in connection with any item
described in clause (i), and (iii) any transferee liability in respect of any
items described in clauses (i) and/or (ii).
"Tax
Return" means all returns, declarations, reports, estimates, information returns
and statements required to be filed in respect of any
Taxes.
"Transaction
Documents" shall mean this Agreement, the Trust Receipt, Irrevocable
Instructions and Irrevocable Proxy substantially in the form of Exhibit B
attached to this Agreement, the Escrow Agreement substantially in the for of
Exhibit F attached to this Agreement, the Note Purchase Agreement substantially
in the form of Exhibit L attached to this Agreement, and the other documents and
certificates delivered by the Parties in connection with this Agreement or the
transactions contemplated hereby or thereby.
(b) Other
Definitional and Interpretive Matters. Unless otherwise expressly provided, for
purposes of this Agreement, the following rules of interpretation shall
apply:
Calculation
of Time Period. When calculating the period of time before which, within which
or following which any act is to be done or step taken pursuant to this
Agreement, the date that is the reference date in calculating such period shall
be excluded. If the last day of such period is a not a Business Day, the period
in question shall end on the next succeeding Business Day.
Dollars.
Any reference in this Agreement to $ or Dollars shall mean U.S.
dollars.
Exhibits.
The Exhibits to this Agreement are hereby incorporated and made a part hereof
and are an integral part of this Agreement. All Exhibits annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Schedule or
Exhibit but not otherwise defined therein shall be defined as set forth in this
Agreement.
Gender
and Number. Any reference in this Agreement to gender shall include all genders,
and words imparting the singular number only shall include the plural and vice
versa.
Headings.
The provision of a Table of Contents, the division of this Agreement into
Articles, Sections and other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in construing
or interpreting this Agreement. All references in this Agreement to any
"Section" are to the corresponding Section of this Agreement unless otherwise
specified.
Herein.
The words such as "herein," "hereinafter," "hereof," and "hereunder" refer to
this Agreement as a whole and not merely to a subdivision in which such words
appear unless the context otherwise requires.
Including.
The word "including" or any variation thereof means "including, without
limitation" and shall not be construed to limit any general statement that it
follows to the specific or similar items or matters immediately following
it.
(c) The
Parties hereto have participated jointly in the negotiation and drafting of this
Agreement and, in the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as jointly drafted by the Parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any Party by virtue of the authorship of any provision of this
Agreement.
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9.2.
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Survival
of Representations and Warranties.
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The
Parties hereto hereby agree that the representations and warranties contained in
this Agreement, the Transaction Documents, or in any certificate, document or
instrument delivered in connection herewith or therewith, shall survive the
execution and delivery of this Agreement, and the Closing hereunder, regardless
of any investigation made by the Parties hereto; provided, however, that any claims or
actions with respect thereto, including any claim for indemnification pursuant
to Article VIII hereof, must be commenced within twelve (12) months after the
Closing Date or shall be waived.
Except as
otherwise provided in this Agreement, the Company and the Purchaser shall each
bear its own expenses incurred in connection with the negotiation and execution
of this Agreement, the Transaction Documents, and each other agreement, document
and instrument contemplated by this Agreement or the Transaction Documents, and
the consummation of the transactions contemplated hereby and thereby, it being
understood that in any event the Subsidiaries shall assume and be solely
responsible for the costs and expenses of the Company.
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9.4.
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Specific
Performance.
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The
Company acknowledges and agrees that the breach of this Agreement would cause
irreparable damage to the Purchaser and that the Purchaser will not have an
adequate remedy at Law. Therefore, the obligations of the Company under this
Agreement, including, without limitation, the Company's obligation to sell the
Preferred Shares to the Purchaser, shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any Party may have under this Agreement or
otherwise.
The
Company and the Purchaser each agree to execute and deliver such other documents
or agreements and to take such other action as may be reasonably necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
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9.6.
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Submission
to Jurisdiction; Consent to Service of Process;
Arbitration.
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(a) The
Parties hereto hereby irrevocably submit to the exclusive jurisdiction of any
federal or state court located in Salt Lake City, Utah over any dispute arising
out of or relating to this Agreement or any of the transactions contemplated
hereby and each Party hereby irrevocably agrees that all claims in respect of
such dispute or any suit, action proceeding related thereto may be heard and
determined in such courts. The Parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum for the maintenance of such dispute. Each
of the Parties hereto agrees that a judgment in any such dispute may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by Law.
(b) Each
of the Parties hereto hereby consents to process being served by any Party to
this Agreement in any suit, action or proceeding by the mailing of a copy
thereof in accordance with the provisions of Section 9.9.
(c) Any
controversy, dispute or claim arising under or in connection with this Agreement
(including, without limitation, the existence, validity, interpretation or
breach hereof and any claim based on contract, tort of statute) shall be
resolved by a binding arbitration, to be held in Salt Lake City, Utah pursuant
to the Federal Arbitration Act and in accordance with then- prevailing
International Arbitration Rules of the American Arbitration Association (the
"AAA").
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9.7.
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Entire
Agreement; Amendments and Waivers.
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This
Agreement, the other Transaction Documents (including the schedules and exhibits
hereto and thereto) represents the entire understanding and agreement between
the Parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the Party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement, including without
limitation, any investigation by or on behalf of any Party, shall be deemed to
constitute a waiver by the Party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any Party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any Party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
Law.
This
Agreement shall be governed by and construed in accordance with the laws of the
State of Nevada.
All
notices and other communications under this Agreement shall be in writing and
shall be deemed given when delivered personally or mailed by certified mail,
return receipt requested, to the Parties (and shall also be transmitted by
facsimile to the Persons receiving copies thereof) at the following addresses
(or to such other address as a Party may have specified by notice given to the
other Party pursuant to this provision):
Fax
number: (435) 628-6636
With a
copy (that shall not constitute notice) to:
Franklin
Cardwell & Jones, PC
Attn:
Lawrence E. Wilson
1001
McKinney, 18th Floor
Fax
number: (713) 222-0938
Fax
number: (435) 628-6636
With a
copy (that shall not constitute notice) to:
Franklin
Cardwell & Jones, PC
1001
McKinney, 18th Floor
Fax
number: (713) 222-0938
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If
to the Purchaser, to:
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Three
Irons, Inc.
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12000
Westheimer Rd Ste 340
Attention:
Hunter M.A. Carr, President
Fax
Number: (713) 462-1980
With a
copy (that shall not constitute notice) to:
Attention:
Robert L. Sonfield, Jr., Esq.
Fax
number: (713) 877-1547
If any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
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9.11.
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Binding
Effect: Assignment.
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This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns. Nothing in this Agreement
shall create or be deemed to create any third person beneficiary rights in any
person or entity not a party to this Agreement except as provided below. No
assignment of this Agreement or of any rights or obligations hereunder may be
made by either the Purchaser (by operation of law or otherwise) without the
prior written consent of the other Parties hereto and any attempted assignment
without the required consents shall be void; provided, however, that the
Purchaser may assign this Agreement and any or all rights or obligations
hereunder (including, without limitation, the Purchaser's rights to purchase the
Preferred Shares and the Purchaser's rights to seek indemnification hereunder)
to any Affiliate of the Purchaser. Upon any such permitted assignment, the
references in this Agreement to the Purchaser shall also apply to any such
assignee unless the context otherwise requires.
No past,
present or future director, officer, employee, incorporator, member, partner or
stockholder of the Purchaser shall have any liability for any obligations or
liabilities of the Purchaser under this Agreement of or for any claim based on,
in respect of or by reason of, the transactions contemplated hereby and
thereby.
This Agreement may be executed in one
or more counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement. The Parties acknowledge that signatures
may be delivered by facsimile, portable document format or other electronic
means and any such signatures shall be binding upon the Party using such
delivery method as fully as a manually signed counterpart.
"'REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK**
LEGACY
COMMUNICATIONS CORPORATION
IN WITNESS WHEREOF, the
Parties hereto have caused this Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first written
above.
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By:
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Hunter M.A.
Carr |
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Hunter. M.A. Carr,
President |
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| THE COMPANY: |
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| Legacy
Communications Corporation |
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By:
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E. Morgan Skinner,
Jr. |
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E.
Morgan Skinner, Jr., President |
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By:
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E. Morgan Skinner,
Jr. |
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E.
Morgan Skinner, Jr., President
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