Exhibit 10.2
XDOGS, Inc.
126 North 3rd Street, Suite 407
Minneapolis, Minnesota 55401
June 1, 2004
Mr. Joshua M. Kaye Legion Media Partners, Inc.
8730 Sunset Strip, 6th Floor West Wing
Los Angeles, CA 90069
Re: Stock for Asset Exchange with XDOGS, Inc.
Dear Joshua:
We are writing to you as the President of Legion Media Partners, a Delaware
Corporation ("LMP"), to express XDOGS, Inc.'s ("XDOGS") intention to acquire the
business and operations of LMP, a Los Angeles, CA based financier and
distributor of theatrical motion pictures and television programming in both
traditional and new media formats on a world-wide basis, through either a
stock-for-stock or stock-for-assets exchange (the "Transaction") to be
determined by XDOGS. Except as provided in Sections 6, 7, 8 and 9 below (the
provisions of which are binding), this letter is not intended to bind either LMP
or XDOGS to the Transaction, but is intended solely to indicate XDOGS's
intention to proceed with a due diligence investigation of LMP's business
operations, financial affairs and prospects and to negotiate with LMP in good
faith a definitive agreement containing the terms and conditions set forth below
(the "Definitive Agreement").
We propose the following basic terms and conditions for the Transaction:
1. Form of Transaction. XDOGS (or a newly formed subsidiary of XDOGS formed for
the purpose of the Transaction also referred to herein as XDOGS) will issue and
deliver to LMP shares of its duly authorized common stock free and clear of all
liens, claims and encumbrances in exchange for either (a) all of the issued and
outstanding capital stock of LMP (the "LMP Stock"), or (b) all of the assets
(whether tangible or intangible) necessary for, used in or useful to LMP's
operations (the "LMP Assets"). Upon closing of the Transaction, XDOGS would
acquire the LMP Stock or the LMP Assets free and clear of all claims, liens or
encumbrances of any kind except for those liabilities of LMP which, after
completion of due diligence, XDOGS expressly agrees to assume (the "Assumed
Liabilities"). LMP, or its stockholders as the case may be, would remain
responsible for all other liabilities. XDOGS and LMP contemplate a one for one
share exchange, with LMP shareholders receiving seventy-three percent (73%) of
the new entity.
The Transaction will be structured as a tax-free reorganization under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended. The common stock
issued by XDOGS hereunder will be "restricted securities" within the meaning of
the Securities Act of 1933, as amended, and will be acquired by LMP for
investment purposes only and not with a view to the distribution thereof.
LMP, Inc.
June 1, 2004
Page 2
2. Representations and Warranties by LMP and its Major Stockholders. The
Definitive Agreement would contain customary representations and warranties by
LMP and the Major Stockholders, relating to the business and financial
condition, assets, operations, affairs and prospects of LMP. All of LMP and the
Major Stockholder's representations and warranties would last for a period of 24
months. The Definitive Agreement would require LMP to indemnify and hold XDOGS
harmless against claims, liabilities and other expenses and damages, including
attorneys' fees and expenses, related to a breach of any representation or
warranty made by LMP or the Major Stockholders in the Definitive Agreement. To
secure payment of any claims, one million (1,000,000) of the XDOGS common stock
deliverable upon the Closing Date would be escrowed during the 24 months after
Closing, pursuant to an escrow agreement satisfactory to both parties.
3. Conditions to Closing on Stock Exchange. The Definitive Agreement would
contain a variety of terms and conditions to be satisfied by the parties prior
to Closing on the Transaction. Such conditions would include XDOGS's completion
to XDOGS's satisfaction of the investigation of the business and financial
affairs and prospects of LMP, its operations and assets, the discovery by XDOGS
in the course of such investigation of no adverse matters affecting the business
and financial affairs and prospects of LMP, its operations and assets and the
determination by XDOGS's independent accountants that the financial statements
of LMP can be audited for the requisite period to comply with SEC requirements
(to the extent that XDOGS's accountants determine that the audit is required).
4. Due Diligence Investigation. Upon execution of this letter, LMP and the Major
Stockholders agree to permit XDOGS and its employees, attorneys, accountants,
investment bankers and other agents to have full and free access, during normal
business hours, to the books and records of LMP and to LMP's premises,
employees, customers and suppliers as the foregoing relates to LMP's operations,
assets or the Transaction in general (XDOGS will work closely with LMP's senior
management to avoid disruption of LMP's relationships with such parties) for the
purpose of investigating the business and financial affairs and prospects of
LMP, its operations and assets.
5. Confidentiality. Each party, for itself and its respective employees,
stockholders and agents, agrees to keep confidential (i) the existence and terms
of this letter and (ii) all confidential information provided by or through a
party to the other. Confidential information includes all business and financial
information of a party, whether disclosed prior to or after execution of this
letter, including financial statements, tax returns, business and marketing
plans and customer and supplier data. Despite the foregoing, "confidential
information" does not include publicly available information, information
obtained from a third party source not under an agreement or obligation to
maintain the confidentiality of such information and information independently
developed by a party without the use of any otherwise confidential information.
In addition, LMP acknowledges that XDOGS, as a public company, may be required
publicly to disclose the existence of this letter and potentially its contents.
XDOGS will provide LMP with reasonable notice prior to any such press release
and will reasonably attempt to agree with LMP upon the written text of any such
press release prior to its public distribution.
LMP, Inc.
June 1, 2004
Page 3
6. No-Shop Agreement. In consideration of this letter and the time and expense
to be incurred by XDOGS in conducting its due diligence investigation of LMP,
its operations and assets, LMP, the Major Stockholders, employees and agents
agree not to solicit, negotiate with or provide any information to any other
person, firm or entity regarding any acquisition of the assets or capital stock
of LMP or any merger or other business combination involving LMP or its assets
or capital stock. This agreement shall extend through the earlier of (i) the
date of execution of the Definitive Agreement, (ii) the date that XDOGS notifies
LMP in writing of XDOGS's intention to abandon the proposed Transaction, or
(iii) 90 days from the date of execution of this letter. The parties agree that
any breach or threatened breach of the provisions of this Section 8 may be
enjoined by a court of competent jurisdiction. The parties agree that the state
and federal courts located in Minneapolis, Minnesota shall have personal and
subject matter jurisdiction as to any such injunctive action.
7. Definitive Agreement, Closing Date and Operations. The parties agree promptly
to commence negotiations of the terms and conditions of the Definitive Agreement
in good faith in accordance with the provisions of this letter with the
non-binding intention of executing the Definitive Agreement on or prior to a
Closing Date of July 15, 2004. LMP agrees promptly to provide XDOGS with copies
of any written, and a written summary of any oral, offer or solicitation of an
offer made to LMP or any of LMP's employees or agents after execution of this
letter relating to any acquisition of its assets or capital stock whether by
merger or otherwise or any request for information related to the foregoing.
After the execution of this letter and through the later of the date of
execution of the Definitive Agreement or expiration of the no-shop agreement in
Section 8, and except as otherwise contemplated by this letter, LMP agrees to
operate LMP's business in the ordinary course and in a manner consistent with
the operations thereof prior to execution of this letter.
If the provisions of this letter correctly summarize our agreement, please
indicate so by your signatures below. This agreement may be executed in counter
parts
Very truly yours,
XDOGS, Inc.
By: /s/ Kent Rodriguez
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Kent Rodriguez, Chief Executive Officer
LMP, Inc.
June 1, 2004
Page 4
Agreed to and accepted:
LMP, Inc.
By: /s/ Joshua Kaye
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Joshua M. Kaye President
/s/ Adam Levin
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Adam Levin - Chief Executive Officer