Three Irons, Inc. 12000 Westheimer, Suite 340 Houston, TX 77077 ● Tel: (281) 600-6000 ● Fax: (713) 462-1980
Three
Irons, Inc.
00000
Xxxxxxxxxx, Xxxxx 000
Houston,
TX 77077 ● Tel: (000) 000-0000 ● Fax: (000) 000-0000
April
25
2008
| Legacy Communications Corporation |
Via
Fax: (000)
000-0000
|
Attn:
X.
Xxxxxx Xxxxxxx, Xx.
000
Xxxxx
0000 Xxxx
St.
Xxxxxx, UT 84770
Re:
Purchase of securities from Legacy Communications
Corporation
Dear
Xx.
Xxxxxxx:
This
letter is intended to summarize the principal terms of an agreement under which
we, as custodian for several unaffiliated beneficial owners (“Purchaser”),
will
acquire record title and ownership to certain existing indebtedness and
newly-issued shares of preferred stock, $.001 par value per share (the
“Preferred
Stock”),
of
Legacy Communications Corporation, a Nevada corporation (“Legacy”),
and
will enter into the other transactions described in this letter. In this letter,
(i) the Purchaser and Legacy are sometimes called the “Parties,” and (ii) the
Purchaser’s acquisition of the indebtedness and Preferred Stock and other
transactions described in this letter, is sometimes called the
“Transaction.”
1. On
the
date of this Letter, Legacy will create a series of preferred stock designated
the “Series A Redeemable Convertible Preferred Stock,” substantially in the form
of Exhibit A to this letter, with the following characteristics:
a. Designation
and amount:
The
number of shares designated as Series A Redeemable Convertible Preferred Stock
will be 185,000 shares of newly designated preferred stock, $.001 par value
per
share, with a stated value of $1.00 per share (the “Stated
Value”).
b. Dividends:
The
Series A Preferred Stock shall not have any dividend rights.
c. Liquidation:
The
Series A Preferred Stock will participate in the distribution of the assets
of
the company upon liquidation in preference to the common stock, $.001 par value
(the “Common
Stock”),
of
Legacy as though it had been converted into shares of Common Stock at the
conversion rate then in effect, until the holders of the Series A Preferred
Stock have received distributions in the amount of the Stated Value plus a
premium of 12.5% of the Stated Value (the “Liquidation
Premium”).
d. Voting:
Each
share of Series A Preferred Stock shall be entitled to vote on an “as converted”
basis and shall vote as a class with the Common Stock; provided, however, that
the aggregate votes that may be cast by any holder or any group (as defined
in
Rule 13d-5 under the Exchange Act) with respect to Series A Preferred Stock
held
by such holder or the members of such group shall not exceed 4.99% of the
aggregate voting interest of the Series A Preferred Stock and the Common Stock
then outstanding.
e. Conversion:
Each
share of Series A Preferred Stock shall be convertible by the holders thereof
after July 1, 2008 (i) into shares of Common Stock that have a market value
equal to the Stated Value and Liquidation Premium if there is a default by
Legacy in any of the provisions of paragraph 5 of this letter and such default
is continuing at the time of the conversion; provided, however, that no holder
may convert shares of Series A Preferred Stock to the extent that such holder
or
any group (as defined in Rule 13d-5 under the Exchange Act) of which such holder
is a member would become the beneficial holder (as defined in Rule 13d-3 under
the Exchange Act) of more than 4.99% of the issued and outstanding Common Stock;
or (ii) into 200 shares of Common Stock if the Transaction has been completed
at
the time of the conversion.
f. Redemption:
At any
time prior to July 1, 2008, each share of Series A Preferred shall be redeemable
by Legacy for Stated Value plus the Liquidation Premium. From and after July
1,
2008, each share of Series A Preferred shall be redeemable by Legacy for
1/1000th
share of
Common Stock unless the Board of Directors of Legacy determines that such right
of redemption shall be of no force and effect. The Series A Preferred shall
not
otherwise be redeemable by Legacy.
g. Antidilution:
All
redemption and conversion provisions shall be subject to adjustment for stock
splits, stock dividends and other increases in the number of outstanding shares
of Common Stock outstanding and shall not be adjusted for any reverse stock
splits, combinations or other decreases in the number of shares of Common Stock
outstanding.
2. The
Closing shall occur on the last to occur: (i) 45 days after (A) Legacy has
filed
a Form 10-KSB for the year ended December 31, 2007, (B) Legacy has filed a
Form
10-QSB for the quarter ended March 31, 2008, (C) original documents representing
the Transaction Debt, duly endorsed for transfer, shall have been delivered
to
the Escrow Agent, (D) original certificates representing 145,000 shares of
Preferred Stock shall have been delivered to the Escrow Agent, (E) original
certificates representing 13,454,316 shares of Common Stock, duly endorsed
for
transfer with customary signature guarantee shall have been delivered to the
Escrow Agent, (F) the federal and state income tax returns of Legacy for the
year ended December 31, 2007 has been filed and a copy delivered to Purchaser,
(G) all of the representations and warranties of Legacy are true and correct,
(H) all conditions to Closing have occurred, or (ii) July 1, 2008
3. The
Purchaser hereby subscribes for 40,000 shares of Series A Preferred Stock for
an
aggregate purchase price of $40,000. Legacy acknowledges receipt of payment
simultaneously with the signature of this letter.
4. Promptly
after the date of this letter, Legacy will identify existing indebtedness held
by one or more non-affiliated creditors with aggregate principal and accrued
interest, penalties, late fees, and other obligations (such indebtedness and
all
accrued and unpaid interest, penalties, late fees and other obligations relating
thereto is referred to as the “Transaction
Debt”)
and
obtain the commitment of the creditor or creditors to transfer the Transaction
Debt to Purchaser in accordance with the Transaction.
5. On
or
before July 1, 2008, in a simultaneous transaction (the “Closing”):
a. Legacy
will transfer all of its existing assets and operations to a wholly owned
subsidiary (the “Subsidiary”)
and
the Subsidiary shall assume and become solely responsible for all of the
outstanding indebtedness and liabilities of Legacy other than the Transaction
Debt. Legacy shall obtain such releases, novations and other agreements from
its
creditors as necessary to be fully and completely released from all outstanding
indebtedness and liabilities other than the Transaction Debt.
b. Purchaser
shall subscribe for, and Legacy shall issue to Purchaser, the remaining 145,000
shares of Series A Preferred Stock for an aggregate purchase price of $145,000.
All of the purchase price shall be paid in immediately available funds at the
Closing to the escrow agent (the “Escrow Agent”) pursuant to a funds escrow
agreement substantially in the form of Exhibit C to this letter and applied
for
the benefit of Legacy in accordance with its terms.
c. Purchaser
will acquire the Transaction Debt directly from the owner or owners thereof
for
an aggregate purchase price of $110,000, payable in immediately available funds
to the Escrow Agent pursuant to a funds and securities escrow agreement
substantially in the form of Exhibit C to this letter and applied for the
benefit of the owners of the Transaction Debt.
d. Legacy
shall deliver all of the shares of the Subsidiary for holding and voting
pursuant to the terms of a trust receipt, irrevocable instructions and
irrevocable proxy substantially in the form of Exhibit B to this
letter.
e. Shareholders
of Legacy (“Shareholders”)
shall
have delivered to the Escrow Agent named in Exhibit C not less than 13,454,316
shares of common stock of Legacy to be held and delivered in accordance with
the
terms of the funds and securities escrow agreement substantially in the form
of
Exhibit C to this letter and distributed for the benefit of the Purchaser in
accordance with its terms.
f. If
the
Transaction is covered by Section 13(d) or 14(d) of the Exchange Act, Legacy
shall have mailed to its shareholders an information statement that complies
with Rule 14f-1 of Regulation 14E of the Exchange Act and otherwise complied
with the warrants and representations of paragraph 5 of this
letter.
g. The
directors of Legacy shall have elected and appointed the officers and directors
designated by Xxxxxxxxx and resigned all of their respective positions as
officers and directors of Legacy; provided, however, that nothing herein shall
require the directors or officers of the Subsidiary to resign any position
with
the Subsidiary or any company owned by the Subsidiary.
6. Legacy
warrants and represents that: (i) Legacy is authorized to issue 5,000,000 shares
of preferred stock, $.001 par value per share, and 50,000,000 shares of common
stock $.001 par value per share; (ii) no preferred shares are issued or
outstanding and 17,379,172 shares of common stock are issued and outstanding
as
of the date of this letter; (iii) it will file its Annual Report on Form 10-KSB
for the year ended December 31, 2007 on or before April 30, 2008; (iv) it shall
file when due all other reports require required to be filed prior to the
Closing with the Securities and Exchange Commission (the “SEC”)
by
issuers having a class of securities registered under Section 12(g) of the
Exchange Act with respect to the Transaction, including without limitation
a
Current Report on Form 8-K with respect to the Transaction; (v) the Subsidiary
and the Shareholders shall be solely responsible for a timely and adequate
response to comments received from the SEC with respect to any report or
registration statement filed prior to the Closing; (vi) it will seek and obtain
a complete release from any outstanding indebtedness other than the Transaction
Debt (as defined); (vii) it will cause Legacy to continue to be eligible for
quotation on the Over-the-Counter Bulletin Board prior to the Closing; (viii)
it
will provide to Purchaser any information requested in writing within 15 days
after receipt of such request; and (ix) it will take such other actions as
are
necessary to maintain the registration of the Common Stock with the SEC prior
to
the Closing.
7. Except
as
set forth in this letter and the Definitive Agreement, Legacy shall not issue
shares of Common Stock, preferred stock, or any warrant, option or other
security convertible into, exchangeable for or having a right to subscribe
for
Common Stock or preferred stock until the Transaction has been completed or
abandoned by the Parties. The foregoing notwithstanding, Legacy shall be
entitled to engage in its normal business of buying and selling radio station
properties (including construction permits, broadcast licenses and other rights
to construct or operate radio stations); provided that no such acquisition
or
sale shall involve the issuance of any securities by Legacy.
8. It
is the
intention of the Parties that the Transaction be exempt from registration with
the SEC. In the event that the Transaction cannot be accomplished without
registration of the Series A Preferred Stock under the Securities Act of 1933,
the Parties agree to use commercially reasonable efforts to restructure the
Transaction so that it may be completed without such registration.
9. The
Parties intend this letter to be a binding agreement to undertake the
Transaction. The foregoing notwithstanding, the Parties anticipate the
negotiation and signature of a definitive agreement (the “Definitive
Agreement”)
relating to the Transaction that will supersede and replace this letter and
will
contain the representations and agreements in this letter and such additional
representations, warranties, covenants and other terms as are customary in
similar transactions.
10. The
Parties acknowledge that this letter must be disclosed by Legacy on a Form
8-K
as a material definitive agreement. Purchaser consents to and authorizes such
disclosure.
11. This
letter shall be governed by and construed under the laws of the State of Nevada
without regard to conflicts of laws principles. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this letter
may be brought against any of the Parties in the courts of the State of Texas,
County of Xxxxxx, or, if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of Texas sitting in Houston,
Texas, and each of the Parties consents to the jurisdiction of such courts
(and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in
the
world.
12. This
letter may be signed in one or more counterparts, each of which will be deemed
to be an original copy of this letter and all of which, when taken together,
will be deemed to constitute one and the same agreement. Any signature
transmitted by facsimile or Portable Document Format (“PDF”)
shall
be deemed to be an original signature for all purposes unless the other Party
has actual knowledge that such facsimile or PDF signature is fraudulent. This
letter supersedes all prior agreements relating to the Transaction, whether
written or oral, and contains all of the agreements of the Parties with respect
to the Transaction. It may not be modified or supplemented except by a written
document signed by the Parties.
If
you
are in agreement with the foregoing, please sign and return one copy of this
letter agreement, which thereupon will constitute our agreement with respect
to
its subject matter.
|
Very
truly yours,
THREE
IRONS, INC.
|
||
| |
|
|
| By: /s/ Xxxxxx M. A. Xxxx | ||
|
Name: Xxxxxx M. A. Xxxx |
||
| Title: Director | ||
| Accepted and agreed on April 28, 2008. | ||
| Legacy Communications Corporation | ||
| By: /s/ X. Xxxxxx Xxxxxxx, Xx. | ||
|
Name: X. Xxxxxx Xxxxxxx, Xx. |
||
|
Title:
Chief
Executive Officer and
President
|
||
