UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): November 26,
2008
LEGEND
MEDIA, INC.
(Exact
name of Registrant as specified in its charter)
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Nevada
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333-138479
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87-0602435
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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9663
Santa Monica Blvd. #952
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Beverly
Hills, CA
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90210
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(310)
933-6050
(Registrant's
telephone number, including area code)
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(Former
Name or Former Address, if Changed Since Last
Report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
2.01
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Completion
of Acquisition or Disposition of
Assets.
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On
November 28, 2008, Legend Media, Inc. (the "Company") entered into and closed
an
Acquisition Agreement (the "Acquisition Agreement") with Well Chance Investments
Limited, its wholly-owned subsidiary and a British Virgin Islands company (the
"Purchaser"), Music Radio Limited, a British Virgin Islands company (the
"Seller"), and the Seller's two stockholders, Ju Baochun and Xue Wei (the
"Seller Stockholders"). Pursuant to the Acquisition Agreement, the Company
acquired control over an airline advertising business (the "Acquisition").
In
exchange for the acquisition of control, the Company issued 5,033,680 shares
of
its newly-created Series B Convertible Preferred Stock, par value $0.001 per
share (the "Preferred Stock"), to the Seller and two warrants (the "Warrants")
to purchase an aggregate of 10,000,000 shares of the Company's common stock,
par
value $0.001 per share (the "Common Stock"), to Ju Baochun.
In
determining the amount of consideration to be paid in the Acquisition, the
Company reviewed and compared publicly available selected financial data and
stock trading prices for public companies chosen based on their common
participation in the Chinese advertising and media industry, and conducted
a
discounted cash flow analysis. Applying the conclusions drawn therefrom, the
number of shares of Preferred Stock issued in the Acquisition was calculated
based on an aggregate purchase price of RMB275,000,000, a currency exchange
rate
of RMB6.829 to U.S. $1, and a per share issue price of 20 times the greater
of
(a) 75% of the weighted average trading price of one share of Common Stock
for
the 15 trading days ended on the third day before closing, and (b) $0.40.
Because 75% of the weighted average trading price for the Common Stock during
the period was $0.3440, the per share issue price used was $0.40. As more fully
described below, each share of Preferred Stock is initially convertible into
20
shares of Common Stock, or an aggregate of 100,673,600 shares of Common Stock,
representing approximately 90.6% of the issued and outstanding Common Stock
on
an as-converted basis (not including the Company's outstanding Series A
Preferred Stock, warrants or options).
One
of
the warrants issued to Ju Baochun upon closing of the Acquisition is immediately
exercisable for 5,000,000 shares of Common Stock at an exercise price of $0.40
per share until November 28, 2011 (the "First Expiration Date") and is
exercisable on a cashless basis at any time after November 28, 2009 and until
the First Expiration Date if the shares of Common Stock underlying the warrant
have not been registered with the U.S. Securities and Exchange Commission (the
"SEC") by such date. The other warrant issued to Ju Baochun upon closing of
the
Acquisition is immediately exercisable for 5,000,000 shares of Common Stock
at
an exercise price of $0.80 per share until November 28, 2013 (the "Second
Expiration Date") and is exercisable on a cashless basis at any time after
November 28, 2009 and until the Second Expiration Date if the shares of Common
Stock underlying the warrant have not been registered with the SEC by such
date.
Pursuant
to the terms of the Acquisition Agreement, Jeffrey
Dash has agreed to resign as the Company's Chief Executive Officer and the
Company has agreed to appoint Ju Baochun as his replacement. After resigning,
Jeffrey Dash will continue to serve on the Company's board of directors and
as
the Company's Chief Financial Officer and Secretary. In addition, pursuant
to
the terms of the Acquisition Agreement, the parties agreed to increase the
size
of the Company's board of directors from five to seven members and to appoint
Ju
Baochun and an independent director nominated by Ju Baochun, subject to approval
by the Company's board of directors, to fill the two newly-created vacancies.
The parties agreed to effect the change in the Company's management and appoint
the two new directors within 45 days of closing of the Acquisition.
Upon
the
closing of the Acquisition, the Company became the beneficiary of several
agreements. As a condition to closing, Legend Media (Beijing) Information and
Technology Co., Ltd., an indirect, wholly-owned subsidiary of the Company
incorporated in the People's Republic of China (the "Consulting Entity"),
entered into an Exclusive Technical, Operational, Business Consulting and
Services Agreement (the "Services Agreement") with Beijing Yinselingdong
Advertising Co., Ltd., a company incorporated in the People's Republic of China
and owned by Xue Wei and Ju Bingzhen, the father of Ju Baochun, and the ultimate
target of the Acquisition (the "Target"). Ju Bingzhen and Xue Wei are also
parties to the Services Agreement. Pursuant to the Services Agreement, the
Consulting Entity became the exclusive provider of technical, operational,
business consulting and other services to the Target in exchange for a service
fee and bonus as described in more detail in the Services Agreement. The
financial results of the Target will be consolidated with the Company's
financial statements. The term of the Services Agreement is 10 years with an
automatic renewal for another 10-year term unless either party provides written
notice to the other party that it does not wish to renew the Services Agreement.
The Target agreed to several important covenants in the Services Agreement,
including (but not limited to), agreeing not to appoint any member of the
Target's senior management without the Consulting Entity's consent and to grant
the Consulting Entity certain informational rights. In addition, pursuant to
the
Services Agreement, each of Ju Bingzhen and Xue Wei: (a) pledged their equity
interests (representing 100% of the equity interest) in the Target to the
Consulting Entity as a guarantee of the Target's fulfillment of its obligations
under the Services Agreement; (b) granted to the Consulting Entity or its
designee an option to purchase any or all of their equity interest in the Target
at nominal value to the extent permitted under applicable laws and regulations;
and (c) agreed not to dispose of or encumber any of their equity interest in
the
Target without the Consulting Entity's prior written consent.
The
Consulting Entity also entered into an Operating Agreement (the "Operating
Agreement") with the Target, Ju Bingzhen and Xue Wei to secure the performance
of the parties' obligations under the Services Agreement. Pursuant to the terms
of the Operating Agreement: (a) the Target, Ju Bingzhen and Xue Wei agreed
not
to, or to cause the Target not to, conduct any transactions which may have
a
material adverse effect on the Target's assets, obligations, rights or
operations without the Consulting Entity's prior written consent; (b) the
Target, Ju Bingzhen and Xue Wei granted the Consulting Entity certain
informational rights; (c) the Target, Ju Bingzhen and Xue Wei agreed to submit
the Target's annual budget and monthly cash requirement plans to the Consulting
Entity for approval, obtain the Consulting Entity's approval for withdrawals
from the Target's bank accounts, and accept corporate policies and guidance
from
the Consulting Entity with respect to the appointment and dismissal of senior
management, daily operations and management and financial administrative
systems; (d) the Target, Ju Bingzhen and Xue Wei agreed to appoint or cause
to
be appointed the individuals nominated by the Consulting Entity to become
directors, general manager, chief financial officer or other senior management
of the Target; and (e) each of Ju Bingzhen and Xue Wei entered into an
Authorization Agreement (the "Authorization Agreement") pursuant to which each
authorized Jeffrey Dash, the Company's Chief Financial Officer, to exercise
his
voting rights with respect to shares of the Target at the Target's stockholders'
meetings. The term of the Operating Agreement is 10 years with an automatic
renewal for another 10-year term unless any party provides written notice to
the
other parties that it does not wish to renew the Operating Agreement. The term
of each of the Authorization Agreements is 10 years but it terminates
automatically upon the earlier termination of the Services
Agreement.
In
connection with the closing of the Acquisition, the Company also entered into
a
Third Amendment to Share Purchase Agreement (the "Third Amendment") with the
Purchaser, the Seller and the Seller Stockholders (originally entered into
on
May 8, 2008, as further amended and described below). Pursuant to the terms
of
the Third Amendment, the parties agreed to defer a cash payment of $1.5 million
by the Company or the Purchaser to Ju Baochun under the Tianjin Agreement (as
defined below) to be paid in the following manner: (a) $700,000 within five
days
of November 28, 2008, and (b) $800,000 within six months of November 28, 2008.
The obligation to make the payments is conditioned upon (a) the Company or
the
Purchaser, as applicable, having sufficient cash flow surplus to make the
payments, or completing a new round of financing generating sufficient funds
to
make the payments, and (b) the Seller and the Seller Stockholders causing
Tianjin Yinse Lingdong Advertising Co., Ltd. ("Yinse"), a company incorporated
in the People's Republic of China and owned by the Seller Stockholders, to
enter
into an agreement with Atis Advertising (the "Atis Contract"), in form and
content acceptable to the Purchaser, pursuant to which (i) Yinse is granted
the
exclusive right to market and sell all broadcast advertising for China National
Radio Station Music Radio in Tianjin, the People's Republic of China, local
frequency FM92.5, (ii) the term of such exclusivity is at least one year, and
(iii) any fees payable for any subsequent 12-month period by Yinse under the
Atis Contract shall not be increased by more than 20% of the fees payable in
the
first 12-month period (if applicable). Ju Baochun is entitled to receive
interest on the unpaid balance of the $800,000 payment, accrued at an annual
rate of 5%, calculated from the date of execution of the Atis Contract until
paid in full. Further, the parties agreed to cause the release of 1,935,328
shares of Common Stock held in escrow pursuant to the Tianjin Agreement to
the
Seller (the "Tianjin Share Consideration"); provided, however, that (A) all
of
the Tianjin Share Consideration shall be returned to the Purchaser if Yinse
does
not execute the Atis Contract on or before December 31, 2008, and (B) 1,351,351
shares of Common Stock of the Tianjin Share Consideration shall be returned
to
the Purchaser if Yinse's audited gross revenues for the period from June 1,
2008
through December 31, 2008 (the "2008 Revenues") are less than or equal to 60%
of
RMB8.75 million and, in exchange therefor, the Seller shall be entitled to
receive the number of shares of Common Stock equal to: $5 million multiplied
by
(1 minus (the percentage shortfall from the 2008 Revenue minus 10%)) and divided
by a per share price of $3.70.
Before
the closing of the Acquisition, the Seller held approximately 15.9% of the
issued and outstanding Common Stock of the Company. The Seller is owned and
controlled by the Seller Stockholders. The Seller Stockholders are husband
and
wife. The Seller and the Seller Stockholders have several material relationships
with the Company or its affiliates. On May 30, 2008, the Purchaser acquired
80%
of the common stock of Legend Media Tianjin Investment Company Limited, a
British Virgin Islands company, from the Seller pursuant to the terms of a
Share
Purchase Agreement entered into on May 8, 2008, and further amended on June
19,
2008 and August 20, 2008, among the Company, the Purchaser, the Seller and
the
Seller Stockholders, as disclosed in the Company's Current Reports on Form
8-K
filed on May 12, 2008, June 5, 2008 and June 26, 2008 (the "Tianjin Agreement").
Further, on July 21, 2008, the Purchaser acquired 100% of the common stock
of
News Radio Limited, a British Virgin Islands company, pursuant to the terms
of a
Share Purchase Agreement entered into on June 4, 2008 among the Company, the
Purchaser and the Seller Stockholders, as disclosed in the Company's Current
Reports on Form 8-K filed on June 6, 2008 and July 25, 2008. The Company has
also entered into a Sales and Marketing Agreement with Beijing Hongteng
Lianguang Advertising Co., Ltd. ("HTLG"), a related party company owned and
controlled by the Seller Stockholders, pursuant to which HTLG handled all sales
and marketing for the Company through September 30, 2008 and continues to
provide services to the Company. Finally, the Company's business before closing
of the Acquisition was operated through contractual arrangements with
consolidated affiliated entities, Tianjin Yinse Lingdong Advertising Co., Ltd.
and Beijing Maihesi International Advertising Co., Ltd., each of which is owned
and controlled by the Seller Stockholders.
The
foregoing descriptions of the Acquisition Agreement, the
Warrants, the
Services Agreement, the Operating Agreement and the Authorization Agreements,
copies of which are filed as Exhibits 10.1, 4.1, 4.2, 10.2, 10.3, 10.4 and
10.5
hereto, respectively, are qualified in their entirety by reference to the
complete documents and are incorporated herein by reference.
| Item
3.02 |
Unregistered
Sales of Equity
Securities.
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The
disclosure set forth under Item 2.01 of this Current Report on Form 8-K with
regard to the issuance of the Preferred Stock and the Warrants is incorporated
herein by reference.
The
Company issued the Preferred Stock and the Warrants in reliance on the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), and Regulation D promulgated thereunder, based upon
its
compliance with such rules and regulations. In that respect, the Company notes
that: (a) it issued securities to two investors it believes are accredited
within the meaning of Regulation D previously known to the Company; (b) the
Company did not conduct any general solicitation or general advertising in
connection with the issuance; and (c) the certificates for the issued securities
contain, and the certificates for the underlying shares of Common Stock will
contain, a restrictive legend in accordance with the rules and regulations
of
the Securities Act.
| Item
3.03 |
Material
Modification to Rights of Security
Holders.
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Pursuant
to the terms of the Certificate
of Designation of the Preferences, Rights, Limitations, Qualifications and
Restrictions of the Series B Convertible Preferred Stock of the Company (the
"Certificate of Designation") filed with the Nevada Secretary of State on
November 26, 2008, each share of Preferred Stock is automatically convertible
into 20 fully paid and nonassessable shares of Common Stock on such date that
the Company's Amended and Restated Articles of Incorporation,
as
further amended, have
been
amended so that there is a sufficient number of shares of Common Stock
authorized by the Company to allow full conversion of all outstanding shares
of
Preferred Stock into Common Stock. The Preferred Stock votes as a single class
with the Common Stock on each matter submitted to the Company's stockholders
based upon the whole number of shares of Common Stock into which the Preferred
Stock is convertible at such time. The
Preferred Stock has no liquidation preference over the Common Stock.
Accordingly, upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, after payment or provision for payment of
senior equity securities, debts, and other liabilities of the Company, including
but not limited to payments due to the holders of the Company's Series A
Convertible Preferred Stock, $0.001 par value per share, the holders of the
Preferred Stock shall share ratably with the holders of the Common Stock, on
an
as-converted basis based upon the number of shares of Common Stock issuable
upon
conversion of the shares of Preferred Stock held by each such holder, in any
distribution of the remaining assets and funds of the Company.
The
foregoing description of the Certificate
of Designation,
a copy
of which is filed as Exhibit 3.1 hereto, is qualified in its entirety by
reference to the complete document and is incorporated herein by
reference.
| Item
5.03 |
Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
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The
disclosure set forth under Item 3.03 of this Current Report on Form 8-K with
regard to the Certificate of Designation is incorporated herein by reference.
On
December 3, 2008, the Company issued a press release announcing the closing
of
the Acquisition. A copy of the press release is furnished as Exhibit 99.1 to
this Current Report on Form 8-K.
| Item
9.01 |
Financial
Statements and Exhibits.
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(d)
Exhibits.
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Exhibit
#
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Description
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3.1
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Certificate
of Designation of the Preferences, Rights, Limitations, Qualifications
and
Restrictions of the Series B Convertible Preferred Stock of Legend
Media,
Inc.
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4.1
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Form
of $.40 Common Stock Purchase Warrant of Legend Media,
Inc.
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4.2
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Form
of $.80 Common Stock Purchase Warrant of Legend Media,
Inc.
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10.1
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Acquisition
Agreement, dated as of November 28, 2008, among Legend Media, Inc.,
Wells
Chance Investment Limited, Music Radio Limited, Ju Baochun and Xue
Wei
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10.2
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Exclusive
Technical, Operational, Business Consulting and Services Agreement,
dated
as of November 28, 2008, by and among Legend Media (Beijing) Information
and Technology Co., Ltd., Beijing
Yinselingdong Advertising Co., Ltd.,
Ju Bingzhen and Xue Wei
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10.3
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Operating
Agreement, dated as of November 28, 2008, by and among Legend Media
(Beijing) Information and Technology Co., Ltd., Beijing
Yinselingdong Advertising Co., Ltd.,
Ju Bingzhen and Xue Wei
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10.4
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Authorization
Agreement, dated as of November 28, 2008, between Xue Wei and Jeffrey
Dash
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10.5
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Authorization
Agreement, dated as of November 28, 2008, between Ju Bingzhen and
Jeffrey
Dash
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99.1
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Press
release dated December 3, 2008
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Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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LEGEND
MEDIA, INC.
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Date:
December 3, 2008
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By:
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/s/
Jeffrey Dash
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Jeffrey
Dash
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Chief
Executive Officer
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