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EXHIBIT 4.1
EXECUTION COPY
RESTRUCTURING AGREEMENT
This RESTRUCTURING AGREEMENT (this "Agreement") is entered into as of
February 22, 2001 between Quokka Sports, Inc., a Delaware corporation (the
"Company"), and the holders of the Notes (as defined below) set forth on
Schedule A hereto (the "Participating Noteholders").
RECITALS
WHEREAS, on September 15, 2000, the Company issued $77,400,000 aggregate
principal amount of its 7% Convertible Subordinated Promissory Notes (the
"Notes") and warrants to purchase 2,805,750 shares of the Company's Common
Stock;
WHEREAS, by letter dated January 12, 2001, the Company notified the
Noteholders that it was in breach the covenant contained in Section 2.6 of the
Noteholders Agreement and acknowledged that such breach constituted an Event of
Default (as defined in the Note) as a result of which Event of Default (as well
as the additional Events of Default referenced in the immediately succeeding
WHEREAS Clause), the maturity of the Notes is subject to acceleration pursuant
to the terms thereof;
WHEREAS, as of the date hereof, as a result of the accrual of interest
on the Notes since the date of the original issuance through the date hereof,
the Notes are currently outstanding in the principal amount of approximately
$76,000,000;
WHEREAS, the Company desires (i) to acquire from the Noteholders waivers
of the breach constituting an Event of Default referenced above as well as the
breaches described in Section 7.1(d) hereof and (ii) to redeem for cash certain
outstanding Notes at a discounted price;
WHEREAS, the Company has offered to the Noteholders to restructure the
terms of the Participating Noteholders' investment in the Company in accordance
with the terms set forth in this Agreement in exchange for the receipt of the
Waiver, and the Participating Noteholders have agreed to accept such offer
subject to the terms set forth in this Agreement.
WHEREAS, the Participating Noteholders' aggregate holdings represent the
consent of the "Required Holders" for purposes of amending, and waiving
defaults, under the Noteholders Agreement, the consent of the "Required
Purchasers" for purposes of amending, and waiving defaults, under the Note
Purchase Agreement and the requisite consent for amending, and waiving defaults
under, any other Transaction Documents to effectuate the purposes of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
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ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms.
Capitalized terms not otherwise defined herein shall have the meanings
set forth in Note Purchase Agreement, dated as of September 15, 2000 between the
Company, GE Capital Equity Investments, Inc. and the other purchasers named on
Schedule 1.1 thereto or, if not defined therein, the definitions set forth in
the other Restructuring Documents or, if not defined therein, the Transaction
Documents. In addition, the following terms shall have the following meanings:
"Amended Note" means the Amended Promissory Note (amending the
Promissory Note originally issued on September 15, 2000) in the form of Exhibit
A delivered to Participating Noteholders in connection with the transactions
contemplated by this Agreement.
"Change of Control Transaction" means the merger or consolidation of the
Company with or into another Person or the merger of another Person with or into
the Company, the sale, lease, transfer or conveyance, in a transaction or series
of transactions, of all or substantially all the assets of the Company to
another Person, the acquisition of beneficial ownership (as defined in Rule
13d-3 under the Exchange Act without regard to the 60-day exercise period) by
any person (as defined in Section 13(d) of the Exchange Act) together with its
affiliates and associates (as each of such terms are defined in Rule 405 under
the Securities Act) of securities constituting in excess of 50% of the Company's
voting power (excluding in all cases beneficial ownership of Notes, Amended
Notes or Warrants to the extent such securities are not convertible as a result
of applicable conversions on limitation contained therein) (such beneficial
ownership, the "Controlling Equity Interest Event").
"Closing Date" has the meaning set forth in Section 8.1 hereof.
"Note Repurchase Price" means $.50 per $1.00 principal amount of Notes
surrendered by a Participating Noteholder pursuant to Section 4.1.
"PIK Preferred Certificate of Designations" shall mean the certificate
of Designations establishing the terms of the PIK Preferred Shares.
"PIK Preferred Shares" means the shares of pay-in-kind preferred stock
of the Company issued pursuant to Section 5.1 of this Agreement.
"Required Holders" has the meaning set forth in the Noteholders
Agreement.
"Restructuring Documents" means this Agreement, the Amended Notes and
the PIK Preferred Shares (including the Certificate of Designations establishing
the terms thereof).
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Participating
Noteholder as of the date hereof as follows:
Section 2.1 Organization, Good Standing and Qualification.
(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation, as
the case may be, and has all requisite power and authority to own, lease and
operate its properties and assets and to carry on its business as currently
conducted. The Company has all requisite corporate power and authority to
execute and deliver the Restructuring Documents, to consummate the transactions
contemplated thereby and to perform its obligations thereunder. The Company has
delivered to the Participating Noteholders at the Closing or has made publicly
available a complete and correct copy of the Restated Certificate (as defined in
Section 2.12) and the Bylaws (as defined in Section 2.12).
(b) Each of the Company and its Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation or
other entity in all jurisdictions in which the character or location of its
activities or of the properties owned or operated by it makes such qualification
necessary, except for such failures which, individually or in the aggregate,
would not have a material adverse effect on the business, assets, operations,
liabilities, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole, or on the ability of the Company
to perform its obligations under the Transaction Documents and the Restructuring
Documents or to consummate the transactions contemplated thereby (a "Material
Adverse Effect").
Section 2.2 Subsidiaries.
(a) As used herein, "Subsidiary" means, with respect to any Person (a) a
corporation a majority of whose capital stock with the general voting power
under ordinary circumstances to vote in the election of directors of such
corporation (irrespective of whether or not, the time, any other class or
classes of securities shall have, or might have, voting power by reason of the
happening of any contingency) is at the time beneficially owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof, or (b) any other Person (other than a corporation),
including, without limitation, a joint venture, in which such Person, one or
more Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, (x) have at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Persons performing such functions) or (y)
is a general partner or managing member. Schedule 2.2(a) hereto accurately sets
forth each Subsidiary of the Company, including its name, place of incorporation
or formation, and if not wholly owned directly or indirectly by the Company, the
record ownership as of the date of this Agreement of all capital stock or other
equity interests issued thereby. Except as set forth on Schedule 2.2(a) hereto,
all shares of capital stock or other equity interests of any Subsidiary have
been duly authorized and validly issued, are fully paid and nonassessable and
are directly or indirectly owned by the Company or
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such other person as is set forth herein, free and clear of any Encumbrance and
have not been issued in violation of, nor subject to, any preemptive,
subscription or other similar rights. "Encumbrance" means any security interest,
pledge, mortgage, lien (statutory or other), charge, option to purchase, lease
or otherwise acquire any interest or any claim, restriction, covenant, title
defect, hypothecation, assignment, deposit arrangement or other encumbrance of
any kind or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement).
(b) Except for the Subsidiaries and as set forth on Schedule 2.2(b)
hereto, neither the Company nor any of its Subsidiaries owns any capital stock,
membership interests, security or other interest in any other Person.
Section 2.3 Capitalization; Voting Rights.
(a) As of January 31, 2001, the capitalization of the Company consisted
of the following:
(i) 250,000,000 shares of Common Stock, of which (A) 63,000,738
shares are issued and outstanding, and (B) 18,222,306 shares have been reserved
for issuance under the Company's Stock Option Plans (as defined below) of which
(1) options to purchase 11,376,450 shares are outstanding, and (2) options to
purchase 1,206,938 shares have been exercised; and
(ii) 10,000,000 shares of Preferred Stock, par value $ .0001 (the
"Preferred Shares"), none of which are issued and outstanding.
Since January 31, 2000 no shares of Common Stock or Preferred Shares
have been issued except for issuances of Common Stock under any Stock Option
Plan or upon conversion of the Notes.
(b) All issued and outstanding shares of the Company's capital stock (i)
have been duly authorized and validly issued, (ii) are fully paid and
nonassessable, (iii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities and (iv) were not issued in
violation of, or subject to, any preemptive, subscription or other similar
rights of any other Person. All shares of the Company's Common Stock issuable
upon conversion of the Notes, the Amended Notes and the PIK Preferred Shares and
upon exercise of the Warrants (i) will be duly authorized and validly issued,
(ii) will be fully paid and nonassessable, (iii) will be issued in compliance
with all applicable state and federal laws concerning the issuance of securities
and (iv) will not be issued in violation of, or subject to, any preemptive
subscription or other similar rights of any other Person.
(c) The Company has made available to the Participating Noteholders a
copy of the Company's (i) 1999 Non-Employee Directors' Stock Option Plan, (ii)
1997 Stock Option Plan, (iii) XxxxXxxxxxx.xxx, Inc. 1996 Stock Option Plan, (iv)
option agreements pursuant to which stock options have been granted outside of
the plans described in clauses (i) through (iii) above and (v) 1999 Employee
Stock Purchase Plan (collectively the stock option plans described in clauses
(i) through (iv) are hereinafter referred to as the "Stock Option Plans"). Other
than the 11,376,450 shares of Common Stock which were reserved for future
issuance to employees
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pursuant to outstanding stock option grants under the Stock Options Plans (as
defined above) and 779,908 shares of Common Stock which were reserved for future
issuance to employees pursuant to the Employee Stock Purchase Plan, the stock
options issued pursuant to the Stock Option Plans, and except as may be granted
pursuant to this Agreement or as set forth on Schedule 2.3(c) hereto, there are
no outstanding subscriptions, options, calls, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company or any of its Subsidiaries of any of their
securities, nor has the Company nor any of its Subsidiaries taken or agreed to
take any action to issue or grant the same. Except as described in this
Agreement or set forth on Schedule 2.3(c) hereto, (x) there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any securities of the Company or any voting or equity
securities or interests of any of its Subsidiaries, (y) there is no voting
trust, proxy, stockholder or other agreements or understandings to which the
Company or any of its Subsidiaries or, to the knowledge of the Company, any of
its stockholders is a party or is bound with respect to the voting or transfer
of the capital stock or other voting securities of the Company or any of its
Subsidiaries and (z) there are no other subscriptions, options, calls, warrants
or other rights (including registration rights, whether demand or piggyback
registration rights), agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any of its
Subsidiaries to which the Company or any of its Subsidiaries is a party. Except
as set forth on Schedule 2.3(c) hereto, the consummation of the transactions
contemplated by the Restructuring Documents will not trigger the anti-dilution
provisions or other adjustment mechanisms of any outstanding subscriptions,
options, calls, warrants, commitments, contracts, preemptive rights, rights of
first refusal, demands, conversion rights or other agreements or arrangements of
any character or nature whatsoever under which the Company is or may be
obligated to issue or acquire shares of any of its capital stock. The delivery
of the Amended Notes and the issuance of the PIK Preferred Shares is not and
will not be subject to any preemptive rights, rights of first refusal,
subscription or similar rights that have not been properly waived.
(d) The Amended Notes and the PIK Preferred Shares have been duly and
validly authorized, will be delivered to the Participating Noteholders (or their
permitted transferees) free and clear of all Encumbrances (other than those
placed thereon by or on behalf of the Participating Noteholders (or their
permitted transferees)) and the Notes and the PIK Preferred Shares will have the
rights, preferences, privileges and restrictions set forth in the Notes and
Restated Certificate, respectively.
Section 2.4 Authorization; Binding Obligations.
The execution and delivery of the Restructuring Documents, the
consummation of the transactions contemplated thereby and the performance of all
obligations of the Company thereunder have been duly authorized by all necessary
corporate action of the Company and its stockholders. The Restructuring
Documents have been duly executed and delivered by the Company. The
Restructuring Documents (assuming due execution and delivery by the
Participating Noteholders) are legal, valid and binding obligations of the
Company enforceable against it in accordance with their terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
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creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
Section 2.5 SEC Reports; Financial Statements.
(a) The Company has filed with the U.S. Securities and Exchange
Commission (the "SEC") all forms, reports and schedules, proxy statements
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein and including all registration
statements and prospectuses filed with the SEC, the "SEC Reports") required to
be filed by the Company with the SEC since July 27, 1999. As of its date of
filing, except as set forth on Schedule 2.5(a) hereto, each SEC Report complied
in all material respects with the requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the Securities Act of 1933, as amended
(the "Securities Act"), as applicable, and the rules and regulations promulgated
thereunder and none of such SEC Reports (including any and all financial
statements included therein) contained when filed or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including the notes
thereto) included in the SEC Reports (the "Financial Statements") complied as to
form, as of its date of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, has been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly presents the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended, subject (in the
case of unaudited financial statements only) to normal year-end adjustments and
any other adjustments described therein or in the notes or schedules thereto or
the absence of footnotes.
(c) The Company's unaudited consolidated financial statements for the
three months and nine months ended September 30, 2000 (the "Unaudited Financial
Statements") included in its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000 (the "10-Q") have been prepared in accordance with GAAP
applied in a consistent basis with the financial statements and fairly presents
the consolidated results of operations of the Company and is consolidated
subsidiaries for the three month and nine month periods then ended, subject to
normal year-end adjustments, the absence of footnotes and other presentation
matters.
(d) The year end financial results announced February 8, 2001 and
attached hereto on Schedule 2.5(d) were prepared in accordance with U.S.
generally accepted accounting principles and present fairly, in all material
respects, the financial position of the Company as of the date thereof except as
stated in such announcement.
(e) As of January 31, 2001, the amount set forth on Schedule 2.5(e)
hereto represented all the funds available as unrestricted cash of the Company.
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Section 2.6 Undisclosed Liabilities.
(a) Except as set forth on Schedule 2.6 hereto and except for (a)
liabilities included or reserved for in (i) the unaudited consolidated balance
sheet of the Company as of September 30, 2000 included the 10-Q or (ii) the
audited consolidated balance sheet of the Company as of December 31, 1999
included in its Annual Report on Form 10-K (the "10-K") for the fiscal year
ended December 31, 1999 (the "Balance Sheet") and (b) current liabilities
incurred in the ordinary course of business consistent with past practice
subsequent to September, 2000, not in excess of $100,000 in the aggregate,
neither the Company nor any of its Subsidiaries had, and since such date none of
them has incurred, liabilities, including contingent liabilities, or any other
obligations whatsoever that could reasonably be expected to have a Material
Adverse Effect.
Section 2.7 Agreements; Action.
(a) Attached hereto as Schedule 2.7(a) hereto is a list of (i) all
"material contracts" within the meaning of Item 601 of Regulation S-K of the
SEC, (ii) all of the Company's and its Subsidiaries' contracts, agreements,
leases or other instruments to which the Company or any of its Subsidiaries is a
party or by which the Company, its Subsidiaries or its properties are bound,
which involve payments by or to a Company or its Subsidiaries during any fiscal
year of more than $250,000, (iii) all of Company's and its Subsidiaries' loan
agreements, bank lines of credit agreements, indentures, mortgages, deeds of
trust, pledge and security agreements, factoring agreements, conditional sales
contracts, letters of credit or other debt instruments evidencing indebtedness
for money borrowed and all such instruments or agreements other than for
borrowed money representing payment obligations of $250,000 or more, (iv) all
material operating or capital leases for equipment to which the Company or any
of its Subsidiaries is a party, (v) all contracts for the employment of any
officer or employee, (vi) all material consulting agreements, (vii) any
guarantees by the Company or any of its Subsidiaries, (viii) all material
distributor and sales agency agreements, (ix) all IP Contracts (as defined in
Section 2.11), (x) all contracts restricting the Company or any of its
Subsidiaries from engaging in any line of business or competing with any Person
or in any geographical area, and (xi) all contracts restricting the payment of
interest upon, or the redemption or conversion of, the PIK Preferred Shares and
the Amended Notes (collectively, the "Contracts").
(b) Except as set forth on Schedule 2.7(b) hereto, neither the Company
nor any of its Subsidiaries is, nor to the Company's knowledge is any other
party to any Contract, in default under, or in breach or violation of, any
Contract and no event has occurred which, with the giving of notice or passage
of time or both would constitute a default by the Company or, to the Company's
knowledge, any other party under any Contract. Other than Contracts which have
terminated or expired in accordance with their terms, each of the Contracts is
in full force and effect and (assuming due execution and delivery by the
counterparties thereto) is a legal, valid and binding obligation of the Company
or its Subsidiary (as applicable) enforceable against the Company or such
Subsidiary in accordance with its terms (subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing) and
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neither the Company nor any of its Subsidiaries has any knowledge that any
Contract is not a legal, valid and binding obligation of the other parties
thereto.
Section 2.8 Obligations to Related Parties.
Except as disclosed in Schedule 2.8 hereto or in the 10-K, there are no
obligations of the Company or any of its Subsidiaries to their respective
officers or directors or family members (not more remote than first cousin) or
Affiliates thereof other than (a) for payment of salary for services rendered,
(b) reimbursement for reasonable expenses incurred on behalf of the Company or
one of its Subsidiaries' and (c) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under the Stock Option Plans). Except as disclosed in Schedule 2.8
hereto, there are no currently effective agreements, arrangements or other
transactions between the Company or any of its Subsidiaries and any Affiliate of
the Company (other than it Subsidiaries).
Section 2.9 Changes.
(a) Except as set forth in Schedule 2.9(a) hereto, in the SEC Reports
filed and publicly available prior to the date hereof or in press releases
disseminated over PR Newswire, since December 31, 1999, no events, changes or
circumstances have occurred which have had, or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
(b) Except as set forth in Schedule 2.9(b) hereto, in the SEC Reports
filed and publicly available prior to the date hereof or in press releases
disseminated over PR Newswire, since December 31, 1999, the Company and its
Subsidiaries have carried on their respective businesses only in the ordinary
course consistent with their past practices.
(c) Except as disclosed on Schedule 2.9(c) hereto or in the SEC Reports
filed and publicly available prior to the date hereof, since December 31, 1999
the Company has not engaged in any sale, assignment, disposition, conveyance,
abandonment, transfer or license, and no event has occurred causing the
invalidation or cancellation, in whole or in part, of the Intellectual Property
(as defined in Section 2.11) other than in the ordinary course of business
consistent with past practice.
Section 2.10 Title to Properties and Assets; Liens, Condition, Etc.
The Company and each of its Subsidiaries have good and merchantable
title to their respective personal property and assets, and good title to their
respective leasehold estates, in each case subject to no Encumbrance other than
(i) liens permitted by the Subordinated Loan and Security Agreement dated as of
February 12, 1999, as amended between the Company and Comdisco, Inc. (as
amended, the "Credit Agreement"), (ii) liens for current taxes not yet
delinquent and payable without penalty, (iii) minor Encumbrances which do not in
any case detract in any material respect from the value of the property subject
thereto or impair in any material respect the operations of the Company and its
Subsidiaries, taken as a whole and which have not arisen other than in the
ordinary course of business, (iv) Encumbrances relating to vendor or
installation purchases, so long as such Encumbrances extend only to the
properties or other assets whose purchase was so financed, and (v) as set forth
on Schedule 2.10 hereto
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(collectively "Permitted Encumbrances"). The Company and each of its
Subsidiaries are in compliance in all material respects with all material terms
of each lease to which they are a party or are otherwise bound. All material
properties, equipment and systems of the Company and its Subsidiaries are in
good repair, working order and condition (ordinary wear and tear excepted) and
are in compliance in all material respects with all applicable standards and
rules imposed (a) by any governmental agency or authority in which such
properties, equipment and systems are located, and (b) under any agreements to
which the Company or its Subsidiaries are party.
Section 2.11 Intellectual Property.
(a) The Company and its Subsidiaries own or have a valid license to use
all intellectual property, including without limitation patents, trademarks,
service marks, trade names, corporate names, domain names, copyrights, trade
secrets, licenses, information and proprietary rights and processes
("Intellectual Property") necessary to conduct their businesses as now conducted
(the "Company IP") without any conflict, to the Company's knowledge, with, or
infringement of, the rights of others. Schedule 2.11(a) hereto sets forth a list
of (i) all patents, trademark registrations, service xxxx registrations,
corporate name registrations, domain name registrations, trade name
registrations and copyright registrations, and all applications for any of the
foregoing, owned by the Company or any of its Subsidiaries or used by the
Company or any of its Subsidiaries in conducting its business as now conducted
(the "Registered Intellectual Property"); and (ii) all material licenses,
royalties, consents and other contracts or other agreements of the Company or
its Subsidiaries relating to Intellectual Property ("IP Contracts"). Except as
would not impair the Company's ability to timely perform its obligations under
the Transaction Documents, no IP Contracts are due to expire or terminate during
the next 18 months.
(b) The Intellectual Property owned by the Company or any of its
Subsidiaries is referred to herein as the "Owned Intellectual Property" and the
Intellectual Property licensed by the Company or its Subsidiaries from other
persons or entities is referred to herein as the "Licensed Intellectual
Property." The Company and its Subsidiaries own and possess all right, title and
interest in and to the Owned Intellectual Property free and clear of any
Encumbrances other than Permitted Encumbrances. The rights of the Company and
its Subsidiaries under all IP Contracts with respect to the Licensed
Intellectual Property are valid and enforceable by the Company or its Subsidiary
(as applicable) except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar Laws affecting creditors' rights generally and by such principles
of equity as may affect the availability of equitable remedies. The execution
and delivery of the Transaction Documents will not cause the acceleration,
termination or the incurrence of liability or fees under any IP Contract.
Neither the Company nor any of its Subsidiaries is or is alleged to be in breach
or default under any IP Contract and, to the Company and its Subsidiaries
knowledge, neither is any other party thereto.
(c) The Company has no Action (as defined in Section 2.13) pending (or,
to the Company's knowledge, threatened) against any other Person relating to the
Company IP, and, except as set forth in Schedule 2.11(c) hereto, no other person
or entity has any Action pending (or to the Company's and its Subsidiaries'
knowledge, threatened) against the Company or any of its Subsidiaries relating
to the Company IP; and, to the Company's knowledge, the Owned
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Intellectual Property does not infringe, misappropriate, or otherwise impair
("Infringe"), and, except as set forth in Schedule 2.11(c) hereto, the
businesses of the Company and its Subsidiaries as now conducted does not
Infringe, any Intellectual Property owned or controlled by any other Person. To
the Company's knowledge, there is no infringement by a third party of any of the
Company IP. There are no pending or outstanding, or, to the knowledge of the
Company, no threatened Actions or Laws (as defined in Section 2.12) that seek to
limit or challenge the validity, enforceability, ownership or use of any Company
IP.
(d) To the Company's knowledge, none of the employees of the Company or
of any of its Subsidiaries is obligated under any contract (including licenses,
covenants, or commitments of any nature) or other agreement, or subject to any
Law that would interfere with the use of such employee's best efforts to promote
the interests of the Company and its Subsidiaries or that would conflict with
the Company's and its Subsidiaries' businesses as conducted. To the Company's
knowledge, neither the execution nor delivery of the Restructuring Documents,
nor the carrying on of the execution of the Company's or any of its
Subsidiaries' businesses by the employees of the Company and the Subsidiaries,
nor the conduct of the Company's and its Subsidiaries' businesses, will conflict
with or result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any contract, covenant, or instrument under which
any of such employees is now obligated. Except as listed on Schedule 2.11(c)
hereto, it will not be necessary to use in the conduct of the Company's and its
Subsidiaries businesses any inventions of any of the Company's or its
Subsidiaries' employees (or persons it currently intends to hire) made prior to
their employment by the Company or its Subsidiaries, other than those which have
been assigned to the Company or its Subsidiaries. The Company and its
Subsidiaries take all reasonable actions to maintain and protect the
confidentiality and ownership of all its material Owned Intellectual Property.
(e) The Company or its Subsidiaries (i) to their knowledge have the
exclusive right to use its name as a trademark, service xxxx and the name of a
corporation in any jurisdiction in which the Company or its Subsidiaries does
and proposes to do business, except as set forth in Schedule 2.11(e) hereto,
(ii) to their knowledge, have all ownership rights to or the right to use the
domain names listed on Schedule 2.11(a) hereto (the "Domains"), and no other
Person shall have any interest therein or any license or other right to use the
Domains, and (iii) except as set forth in Schedule 2.11(e) hereto, neither the
Company nor its Subsidiaries have received any notice of conflict during the
past two years with respect to the rights of others regarding the trademarks,
service marks and corporate name of the Company, its Subsidiaries or the
Domains. Except as set forth in Schedules 2.11(e) hereto, no other person or
entity is presently authorized by the Company or its Subsidiaries to use the
name of Company or its Subsidiaries.
Section 2.12 Compliance with Law; Other Instruments.
Neither the Company nor any of its Subsidiaries is in violation or
default of (i) the Company's Restated Certificate of Incorporation (the
"Restated Certificate") or its Bylaws, as amended (the "Bylaws"), or the
organizational documents of any of its Subsidiaries or (ii) of any judicial or
administrative judgment, decision, decree, order, settlement, injunction, writ,
stipulation, determination or award applicable to the Company, any of its
Subsidiaries, or their respective businesses, operations, assets, or properties
(each, an "Order") or any statute, law, ordinance, rule or regulation applicable
to the Company, any of its Subsidiaries, or their
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respective businesses, operations, assets, or properties (each, a "Law") and has
received no written notice of, and to the knowledge of the Company, no
investigation or review is in process or threatened by any governmental
authority with respect to, any violation or alleged violation of any Order or
Law except, in the case of any Orders or Laws, where such violations or defaults
would not, individually or in the aggregate, have a Material Adverse Effect. The
execution, delivery and performance of the Restructuring Documents, and the
consummation of the transactions contemplated thereby, will not result in (a)
(i) any violation, or be in conflict with or constitute a default (with or
without notice or lapse of time or both) under the Restated Certificate or
Bylaws or the organizational documents of any of the Company's Subsidiaries,
(ii) any violation, or be in conflict with or constitute a default (with or
without notice or lapse of time or both) under, any term or provision of, or any
right of termination, cancellation, modification or acceleration arising under
any Contract or cause any liabilities or additional fees to be due thereunder or
(iii) any violation under any Order or Law applicable to the Company or any of
its Subsidiaries or (b) the imposition of any Encumbrance on the business or
properties or assets of the Company or any of its Subsidiaries. None of the
execution and delivery of the Restructuring Documents, the consummation of the
transactions contemplated thereby or the performance of the obligations of the
Company thereunder will result in the suspension, revocation, impairment,
forfeiture or nonrenewal of any Permit applicable to the Company or any of its
Subsidiaries, their businesses or operations or any of their assets or
properties. "Permits" means all material licenses, permits, orders, consents,
approvals, registrations, authorizations, qualifications and filings with and
under all federal, state, local or foreign laws and governmental authorities and
all industry or other non-governmental self-regulatory organizations. Without
limiting the foregoing, upon and immediately following the Closing the Company
will be in full compliance with all covenants and obligations under its existing
borrowing arrangements, without taking into account any waivers from lenders.
Section 2.13 Litigation.
Except as set forth on Schedule 2.13 hereto, there is no Action (as
defined below) pending, or to the Company's knowledge, currently threatened
against the Company or any of its Subsidiaries (including with respect to any
Company Plan (as defined in Section 2.18)). The foregoing includes, without
limitation, any material Order, action, claim, suit, audit, assessment,
arbitration or similar inquiry, or any proceeding or investigation by or before
any government authority (an "Action") pending or threatened involving the prior
employment of any of the Company's or any of its Subsidiaries' employees, their
use in connection with the Company's or any of its Subsidiaries' business of any
Intellectual Property rights of their former employers, or their obligations
under any agreements with prior employers. Except as set forth on Schedule 2.13
hereto, neither the Company nor any of its Subsidiaries is a party or subject to
the provisions of any Order of any court or governmental authority. Except as
set forth on Schedule 2.13 hereto, there is no Action by the Company or any of
its Subsidiaries against any other Person currently pending or which the Company
or any of its Subsidiaries intends to initiate.
Section 2.14 Tax Matters.
(a) Except as set forth on Schedule 2.14(a) hereto, (i) all Tax Returns
(as defined below) that are required to be filed by or with respect to the
Company and its Subsidiaries as of the date hereof and of the Closing Date have
been duly filed, (ii) all Taxes (as defined below) of
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the Company and its Subsidiaries due and not yet delinquent and payable without
penalty, whether or not shown on the Tax Returns referred to in clause (i), have
been paid in full, (iii) the Tax Returns referred to in clause (i) have been
audited by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired, (iv) all
deficiencies asserted or assessments made as a result of such examinations have
been paid in full, (v) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns referred
to in clause (i) are currently pending, (vi) no waiver of statutes of limitation
have been given by or requested with respect to any Taxes of the Company or its
Subsidiaries, (vii) there are no liens for Taxes on any asset of the Company or
any of its Subsidiaries other than for current Taxes not yet due and payable, or
if due, are (A) not delinquent or (B) being contested in good faith by
appropriate proceedings, (viii) no consent has been filed relating to the
Company or any of its Subsidiaries pursuant to Section 341(f) of the Code, (ix)
neither the Company nor any Subsidiary has any current liability, or has
knowledge of any events or circumstances which could result in any liability,
for Taxes of any person (other than the Company and its Subsidiaries) (A) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), (B) as a transferee or successor, (C) by contract or (D)
otherwise, (x) the Company's methods of tax accounting are correct in all
material respects and (xi) the transfer pricing methodologies used by the
Company and its Subsidiaries are correct in all material respects.
(b) For purposes of this Agreement, the term (i) "Taxes" means all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to, income, excise, property, sales and use, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto, and (ii) "Tax Return" means any
return, report, information return or other document (including any related or
supporting information) filed or required to be filed with any taxing authority
with respect to Taxes.
Section 2.15 Employees.
Except as set forth on Schedule 2.15, neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other contract
with a labor union. There is, and during the past two years there has been, (i)
no labor strike, labor dispute, work stoppage or lockout pending, or to the
Company's or its Subsidiaries' knowledge, threatened against the Company or any
Subsidiary; (ii) no union or organizational campaign is in progress with respect
to the employees, and no other (formal or informal) union organization
activities are pending or, to the Company's knowledge, threatened between the
Company or any Subsidiary and their respective employees; (iii) neither the
Company nor any of its Subsidiaries is engaged in any unfair labor practice;
(iv) there is no unfair labor practice charge or complaint against the Company
or any Subsidiary pending or, to the Company's or its Subsidiaries' knowledge,
threatened before the National Labor Relations Board; (v) there are no pending
or, to the Company's and any Subsidiaries' knowledge, threatened charges against
the Company or any Subsidiary before the Equal Employment Opportunity Commission
or any state or local agency responsible for the prevention of unlawful
employment practices; and (vi) neither the Company nor any Subsidiary has
received written notice during the past two years of the intent of any
governmental authority responsible for the enforcement of labor or employment
Laws to conduct
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an investigation of the Company and, to the Company's and any Subsidiaries'
knowledge, no such investigation is in progress.
Section 2.16 Amendment and Issuance Valid.
Assuming the accuracy of the representations and warranties of the
Participating Noteholders contained in Section 3 hereof, the amendment of the
Amended Notes and the issuance of the PIK Preferred Shares will be exempt from
the registration requirements of the Securities Act and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
Section 2.17 Employee Benefit Plans.
(a) Schedule 2.17(a) hereto contains a true and complete list of each
"employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA, under which any employee or former employee of the Company or its
Subsidiaries has any present or future right to benefits and under which the
Company or its Subsidiaries has any present of future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively referred
to as the "Company Plan."
(b) Except as disclosed in Schedule 2.17(b) hereto, with respect to each
Company Plan, the Company has delivered to the Participating Noteholders to the
extent requested a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other material written communications (or in the absence of the
foregoing, a description of any oral communications) by the Company or any of
its Subsidiaries to their employees concerning the extent of the benefits
provided under a Company Plan and (iv) for the two most recent years (A) the
Form 5500 and attached schedules, (B) audited financial statements, (C)
actuarial valuation reports and (D) attorney's response to an auditor's request
for information.
(c) (i) Except as set forth on Schedule 2.17(c), each Company Plan has
been established and administered in accordance with its terms and in
substantial compliance with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations and neither the Company nor any of
its Subsidiaries has incurred in respect of any such Company Plan any material
tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other
applicable law, rule and regulations; (ii) each Company Plan which is intended
to be qualified within the meaning of Code section 401(a) is so qualified and
has received, to the extent applicable, a favorable determination letter and
nothing has occurred, whether by action or failure to act, that could reasonably
be expected to cause the loss of such qualification; (iii) no event has occurred
and no condition exists that would subject the Company or any of its
Subsidiaries, either directly or by reason of their affiliation with any member
of their "Controlled
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Group" (defined as any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o)), to
any material tax, fine, lien, penalty or other liability imposed by ERISA, the
Code or other applicable laws, rules and regulations; (iv) no Company Plan
provides retiree welfare benefits and neither the Company nor any of its
Subsidiaries have any obligation to provide any retiree welfare benefits other
than as required by Section 4980B of the Code; and (v) neither the Company nor
any member of its Controlled Group has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in
Sections 4069 or 4212(c) of ERISA.
(d) No Company Plan is (i) subject to Title IV of ERISA or (ii) a
"multiemployer plan" (as such term is defined in section 3(37) of ERISA) and
neither the Company nor any of its Subsidiaries has incurred any withdrawal
liability or termination liability with respect to any such plan that remains
unsatisfied. The Company has not engaged in, and is not a successor or parent
corporation to any Person that has engaged in, a transaction described in
Section 4069 or 4212(c) of ERISA.
(e) Except as set forth on Schedule 2.17(e) hereto, no Company Plan
exists that could result in the payment to any present or former employee of the
Company or its Subsidiaries of any money or other property or accelerate or
provide any other rights or benefits to any present or former employee of the
Company or its Subsidiaries as a direct result of the transactions contemplated
by this Agreement or as a result of transactions which have occurred prior the
date hereof or the Closing Date. Except as set forth on Schedule 2.17(e) hereto,
there is no contract, plan or arrangement (written or otherwise) covering any
employee or former employee of the Company or any of its Subsidiaries that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
(f) With respect to any Company Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the knowledge of the Company, threatened; and (ii) no facts or circumstances
exist that could reasonably be expected to give rise to any such actions, suits
or claims.
(g) The aggregate amount of all severance and change in control payments
(other than the Management Incentive Payments) to members of senior management
and certain members of the board of directors do not and will not exceed an
aggregate amount of $1.4 million. Schedule 2.17(g) hereto sets forth the name of
each individual entitled to a severance or change of control payment and the
amount such person is entitled to receive. The Board of Directors of the Company
shall have the right to reduce the amounts payable to any member of senior
management or the Board of Directors entitled to receive a severance or change
in control payment in order to make a severance or change in control payment to
another member of senior management or the Board of Directors, provided,
however, that (i) the Board of Directors shall not increase the amount payable
to any individual identified on Schedule 2.17(g) and (ii) the aggregate amount
of all severance and change in control payments (other than the Management
Incentive Payments) shall not exceed $1.4 million.
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Section 2.18 Permits.
The Company and its Subsidiaries hold all Permits necessary for the
lawful conduct of their respective businesses as they are presently being
conducted. All such Permits are in full force and effect. The Company and its
Subsidiaries have complied with the terms of the Permits and, to the Company's
knowledge, there are no pending modifications, amendments or revocations of any
Permits. All fees due and payable from the Company or any of its Subsidiaries to
governmental authorities or other third parties pursuant to the Permits have
been paid. There are no pending or, to the knowledge of the Company, threatened,
suits, Actions, proceedings or investigations with respect to the possible
revocation, cancellation, suspension, limitation or nonrenewal of any Permits,
and there has occurred no event which (whether with notice or lapse of time or
both) could reasonably be expected to result in or constitute the basis for such
a revocation, cancellation, suspension, limitation or nonrenewal thereof.
Section 2.19 No Broker.
Neither the Company nor any of its Subsidiaries has employed any broker
or finder, or incurred any liability for any brokerage or finders' fees or any
similar fees or commissions in connection with the transactions contemplated by
this Agreement.
Section 2.20 Disclosure.
Neither this Agreement (including all Exhibits and Schedules hereto) nor
any of the other agreements or instruments contemplated to be executed and
delivered by the Company in connection with this Agreement contain any untrue
statement of material fact; and none of such documents omits to state any
material fact necessary to make any of the representations, warranties or other
statements or information contained therein not misleading in light of the
circumstances under which such information was provided.
Section 2.21 Employment, Confidential Information and Invention
Assignment Agreement.
Except as set forth in Schedule 2.21 hereto, each employee, consultant
and officer of the Company and its Subsidiaries has executed an agreement with
the Company or its Subsidiary regarding confidentiality and proprietary
information substantially in the form or forms delivered to the counsel for the
Purchasers. The Company is not aware that any of the Company's or any of its
Subsidiaries' employees or consultants is in violation thereof, and the Company
and its Subsidiaries will use their best efforts to prevent any such violation.
To the Company's knowledge, no current employee, officer or consultant of the
Company or its Subsidiaries has excluded works or inventions from his or her
assignment of inventions pursuant to such employee, officer or consultant's
Confidential Information and Invention Assignment Agreement that were made prior
to his or her employment with the Company and are necessary in the conduct of
the Company's and its Subsidiaries' businesses.
Section 2.22 Insurance.
Schedule 2.22 hereto contains a complete and correct list of all
policies of insurance of any kind or nature covering Company and its
Subsidiaries, including, without limitation, policies
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of life, fire, theft, employee fidelity and other casualty and liability
insurance, indicating the type of coverage, name of insured, the insurer, the
premium, the expiration date of each policy and the amount of coverage, and such
policies are in full force and effect. Certificates for each such policy showing
the respective coverages and limits, including deductibles, have been furnished
or made available to Participating Noteholders. Such policies are in amounts
customary for the industry in which Company or such Subsidiary operates.
Section 2.23 Poison Pill Provisions.
Neither the Company nor its Subsidiaries have a stockholder rights plan.
None of the acquisition of the Notes, the Amended Notes, the Warrants, the
Conversion Shares, the Warrant Shares, the PIK Preferred Shares or the Common
Stock issuable upon conversion thereof nor the deemed beneficial ownership of
shares of Common Stock prior to, or the acquisition of such shares pursuant to,
the conversion of Notes, the Amended Notes or the PIK Preferred Shares or the
exercise of the Warrants will in any event under any circumstance trigger the
poison pill provisions of any other or subsequently adopted plan or agreement,
or a substantially similar occurrence under any successor or similar plan.
Section 2.24 Internal Accounting Controls.
The Company and each of its Subsidiaries maintain a system of internal
accounting controls sufficient, in the judgment of the Company's management, to
provide reasonable assurance that (a) transactions are executed in accordance
with management's general or specific authorizations, (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (c) access to assets is permitted only in accordance with
management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 2.25 Solvency
(a) Based on the financial condition of the Company as of the Closing
Date, the Company's assets do not constitute unreasonably small capital to carry
out its business for the year 2001 as now conducted and as proposed to be
conducted, including the Company's year 2001 capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof.
(b) The Company does not intend to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of its debt). Based on the financial condition of
the Company as of the Closing Date, the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid.
(c) Neither the Company nor any of its Subsidiaries is subject to any
bankruptcy, insolvency or similar proceeding.
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Section 2.26 Arms Length Negotiation.
The Company acknowledges and agrees that the terms of this Agreement and
the other Restructuring Documents and the transactions contemplated thereby were
negotiated in good faith and on an arms length basis with each of the
Participating Noteholders acting individually with respect to its respective
investment in the Notes and that the Company has been represented by counsel
throughout the negotiation process. The Company further acknowledges that no
Participating Noteholder is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Restructuring Documents
and the transactions contemplated thereby. The Company further represents that
the Company's decision to enter into the Restructuring Documents has been based
solely on the independent evaluation by the Company and its representatives.
Section 2.27 Foreign Corrupt Practices Act.
Neither the Company nor any Subsidiary, nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of acting for, or on behalf of, the Company: (i)
directly or indirectly used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
(ii) directly or indirectly made any direct or indirect unlawful payment to any
foreign or domestic government or party official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended, or any similar treaties of the United
States; or (iv) directly or indirectly made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
Section 2.28 Form S-3 Registration Statement.
The Form S-3 Registration Statement (Reg. No. 333-49556) filed by
Company on behalf of the original purchasers of the Notes covers the issuance of
the Conversion Shares upon conversion of the Amended Notes.
Section 2.29 Non-Public Information.
All information which constituted material nonpublic information and
which was provided by the Company to the Noteholders at the meeting held on
February 1, 2001 has been made public and no other information provided to the
Noteholders in connection with this Agreement or any other Restructuring
Document which is not being publicly filed in connection with the Closing
constitutes material non public information.
Section 2.30 Section 203.
In accordance with Section 203 of the Delaware General Corporation Law
("Section 203") the Board of Directors of the Company has approved the issuance
of the Notes, the Amended Notes, the PIK Preferred Shares, the Conversion
Shares, the Warrants and the Warrant Shares to the Participating Noteholders and
any transaction that results in any Participating Noteholder or any "affiliate"
(as defined in Section 203) of a Participating Noteholder, its affiliate or its
associate (as applicable) would not have been an interested stockholder if such
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Person (and its affiliates and associates) did not own the PIK Preferred Shares,
the Conversion Shares or the Warrant Shares for purposes of Section 203.
Accordingly, the ownership of the Conversion Shares and the Warrant Shares for
purposes of Section 203 by any Participating Noteholder or its affiliate or
associate will not result in the provisions of Section 203 being applicable to a
"business combination" (as defined in Section 203) between such Person (or its
affiliate or associate) and the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARTICIPATING NOTEHOLDERS
Each of the Participating Noteholders, severally and not jointly, hereby
represents and warrants to the Company as of the date hereof and as of the
Closing Date as follows:
Section 3.1 Requisite Power and Authority.
Such Participating Noteholder has all requisite power and authority to
execute and deliver the Restructuring Documents, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. All action on such Participating Noteholder's part necessary for the
execution and delivery of this Agreement, the consummation of the transactions
contemplated thereby and the performance of all obligations of such
Participating Noteholder thereunder as of the Closing has been or will be
effectively taken prior to the Closing. This Agreement has been or will be duly
executed and delivered by such Participating Noteholder. This Agreement
(assuming due execution and delivery by the Company) will be legal, valid and
binding obligations of such Participating Noteholder, enforceable against it in
accordance with their terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
Section 3.2 Investment Representations.
Such Participating Noteholder acknowledges that the Preferred Stock has
not been registered under the Securities Act or under any state securities laws.
Such Purchasing Noteholder (a) is acquiring the Preferred Stock for its own
account, not as a nominee or agent, and not with the present view to, or for
resale in connection with, any distribution thereof in violation of applicable
securities laws, (b) is an "accredited investor" within the meaning of
Regulation D, Rule 501(a), promulgated by the SEC, (c) acknowledges that the
Preferred Stock must be held indefinitely unless subsequently registered under
the Securities Act or unless an exemption from the registration requirements of
the Securities Act is available and (d) represents that by reason of its
business or financial experience, such Participating Noteholder has the capacity
to protect its own interests in connection with the transactions contemplated by
the Restructuring Documents. Such Participating Noteholder has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management. Such Participating Noteholder has had an
opportunity to ask questions of and receive answers from, officers of the
Company.
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Section 3.3 Arms Length Negotiation.
Each Participating Noteholder acknowledges and agrees that the terms of
this Agreement and the other Restructuring Documents and the transactions
contemplated thereby were negotiated in good faith and on an arms-length basis
with the Company. Each Participating Noteholder has individually, and not
together with any other Participating Noteholder, made a separate analysis of
terms of this Agreement and the other Restructuring Documents and the
transactions contemplated thereby and has negotiated with the Company on an
individual basis and not together with any other Participating Noteholder. Each
Participating Noteholder acknowledges and agrees that Xxxxx, Day, Xxxxxx & Xxxxx
has acted solely as counsel for Societe Generale in connection with the
Restructuring Documents and that Luskin, Xxxxx & Xxxxxx, LLP has acted solely as
counsel for Deutsche Bank AG and its affiliates and the preparation of
documentation by either of such firms in connection with the foregoing or the
distribution of such documentation to other Participating Noteholders or other
actions undertaken by such firms coordinating the Closing do not constitute the
establishment of an attorney-client relationship between either of such firms
and such other Participating Noteholders.
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ARTICLE 4
REPURCHASE OF NOTES
Section 4.1 Repurchase of Notes. On the Closing Date the Company will
purchase pro rata from the Participating Noteholders and the Participating
Noteholders will, severally and not jointly, sell to the Company, an aggregate
of $24.0 million of the approximately $76.0 million of Notes (including accrued
interest) outstanding at a price of $.50 per $1.00 par amount of each such Note
(the "NOTE PURCHASE CONSIDERATION") as more fully reflected on Schedule A to
this Agreement. Payment to the Participating Noteholders shall be made by wire
transfer of immediately available fund to the account(s) designated by each
Participating Noteholder.
Section 4.2 Delivery of Certificates Representing Notes. As soon as
practicable, but in no event later than 10 business days following the Closing
Date, each Participating Noteholder will tender and deliver to the Company each
Note being repurchased by the Company which is then held by such Participating
Noteholder and the Company shall deliver to each Participating Noteholder within
five business days thereafter an Amended Note representing the principal amount
of Notes held by a Participating Noteholder that has not been repurchased by the
Company on the Closing Date but which is evidenced in part by a Note delivered
to the Company in connection with the repurchase referred to in Section 4.1 of
this Agreement.
Section 4.3 Cancellation of Notes. As of the Closing, each Note of a
Participating Noteholder immediately prior to the Closing Date, shall be
converted into the right to receive the Note Repurchase Price and an Amended
Note upon delivery of the Note to the Company. Each such Note, when so
converted, shall no longer be outstanding and shall automatically be deemed
cancelled and retired and shall cease to exist, and each Participating
Noteholder shall cease to have any rights with respect thereto, except the right
to receive the Note Repurchase Price and the Amended Note therefor upon the
delivery of the Note.
Section 4.4 Election and Irrevocable Waiver Pursuant to Section 15 of
the Notes and Section C5(l) of PIK Preferred Certificate of Designations.
Each of Deutsche Bank AG and its affiliates (including Deutsche Banc
Xxxx Xxxxx Inc. (formerly known as Deutsche Bank Securities Inc.)), Societe
Generale and Canadian Imperial Holdings Inc., severally and not jointly, hereby
agrees that the number of shares of Common Stock that may be acquired by it upon
conversion of the Amended Notes or the PIK Preferred Shares to be held by it
following the Closing shall not exceed at any time 4.99% of the total issued and
outstanding shares of Common Stock and accordingly, the Restricted Ownership
Percentage for each of Deutsche Bank AG together with its affiliates, Societe
Generale and Canadian Imperial Holdings Inc. is 4.99%.
ARTICLE 5
ISSUANCE OF PREFERRED STOCK
Section 5.1 Issuance of Preferred Stock.
On the terms and subject to the conditions of this Agreement, as
promptly as practicable, but in no event later than seven business days
following the Closing Date, the Company will
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issue and deliver to each Participating Noteholder, severally and not jointly,
and each Participating Noteholder, severally and not jointly, will accept from
the Company, the number of PIK Preferred Shares set forth opposite such
Participating Noteholder's name on Schedule A to this Agreement which PIK
Preferred Shares shall initially have an aggregate initial Stated Value of $40.0
million. The Company's agreement with each Participating Noteholder is a
separate agreement, and the issuance of the PIK Preferred Shares to each
Participating Noteholder is a separate issuance. The PIK Preferred Shares
constitute a new series of Preferred Stock of the Company and have the rights,
restrictions, privileges and preferences set forth in the PIK Preferred
Certificate of Designations attached hereto as Exhibit B (the "PIK Preferred
Certificate of Designations").
Section 5.2 Restrictions on Transfer.
The PIK Preferred Shares shall be subject to the restrictions on
transfer set forth in Section 2.1 of the Amended and Restated Investors' Rights
Agreement, dated as of September 15, 2000, by and among Quokka Sports, Inc. and
the holders of the Company's Common Stock, Warrants and Convertible Subordinated
Notes.
ARTICLE 6
AMENDMENT OF TRANSACTION DOCUMENTS
Section 6.1 Amended Notes.
Upon the Closing, the Company will amend the Notes of each Participating
Noteholder not repurchased by the Company pursuant to Section 4.1 of this
Agreement.
Section 6.2 Noteholders Agreement.
Upon the Closing, the following provisions of the Noteholders Agreement
shall be amended and restated:
(a) The definition of Permitted Indebtedness in the Noteholders
Agreement is hereby amended and restated in its entirety as follows:
"Permitted Indebtedness" means, with respect to the Company, (i)
taxes or assessments or other governmental charges or levies, either not
yet due and payable or to the extent that nonpayment thereof is
permitted by the terms of this Agreement; (ii) obligations under
workmen's compensation, unemployment insurance, social security or
public liability laws or similar legislation; (iii) bids, tenders or
contracts (other than contracts for the payment of money) to which the
Company or any of its Subsidiaries is a party made in the ordinary
course of business; (iv) public or statutory obligations of the Company
or any of its Subsidiaries; (v) all deferred taxes and (vi) all unfunded
pension fund and other employee benefit plan obligations and liabilities
but only to the extent permitted to remain unfunded under applicable
law.
(b) The definition of Required Holders in the Noteholders Agreement is
hereby amended and restated in its entirety as follows:
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"Required Holders" means the Holders of a majority of the Face Amount of
the Notes then outstanding.
(c) Section 2.3 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"The Company will not, and will not permit any of its
Subsidiaries to, Incur or suffer to exist any Indebtedness except: (i)
Indebtedness evidenced by the Notes or the Amended Notes, (ii)
Indebtedness existing on February 22, 2001 which was incurred in
compliance with the Noteholders Agreement, (iii) Permitted Indebtedness
or (iv) outstanding Indebtedness owing by the Company to any of its
Wholly-Owned Subsidiaries or by any of the Company's Wholly-Owned
Subsidiaries to any other Wholly-Owned Subsidiaries or the Company."
(d) Section 2.4 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"The Company will not and will not permit any of its Subsidiaries
to make any Restricted Payments nor will the Company permit any
Subsidiary to make such payments with respect to the Company's Capital
Stock; provided, however, that (a) payment of the PIK Preferred Shares
redemption amount shall not be deemed a Restricted Payment, (b) only to
the extent contractually required to do so, Subsidiaries of the Company
may pay dividends to the Company or Subsidiaries of the Company (and
make pro rata dividend payments to other equity holders of NBC/Quokka
Ventures, LLC), and (c) the Company may make payments for the repurchase
of Capital Stock of the Company held by a deceased former employee
following the death of such employee, to the extent repurchased with the
proceeds of an insurance policy on the life of such employee."
(e) Section 2.5 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"(a) Other than in connection with a Change of Control
Transaction or as provided in subsection (b) below, the Company will
not, and will not permit any of its Subsidiaries to, (i) sell, transfer,
convey or otherwise dispose of any assets or properties or (ii)
liquidate, dissolve or wind up the Company, or any of its Subsidiaries,
except for transfers to the Company, whether voluntary or involuntary;
provided, however, that the foregoing shall not prohibit (i) the sale,
lease or license of inventory in the ordinary course of business, (ii)
the sale, lease, sublease, license or sublicense of surplus or obsolete
equipment and fixtures or other property that is not useful in the
business of the Company and its Subsidiaries, (iii) transfers resulting
from any casualty or condemnation of assets or properties, or (iv)
leases and subleases and licenses and sublicenses of property in the
ordinary course of the business of the Company and its Subsidiaries.
(b) Notwithstanding the foregoing, the Company and its
Subsidiaries may sell or otherwise dispose of (whether through sale of
assets, sale of Subsidiary stock, Subsidiary merger or otherwise) one or
more individual business units or lines of business in one or more
transactions (i) in which all or substantially all of the proceeds to
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the Company or its Subsidiaries consist of cash (whether payable
currently or in the future), equity securities to the extent
contemplated by Section 9.4 of the Restructuring Agreement or a
combination thereof or (ii) which are approved by the Required Holders;
provided, however, that the net proceeds to the Company and its
Subsidiaries of any such sales or other dispositions shall be applied in
accordance with the applicable provisions of the PIK Preferred
Certificate of Designations and the Amended Notes (a "Permitted Asset
Sale")."
(f) Section 2.6 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"The Company's total cash expenditures for each of the following
months (excluding severance payments within the parameters of Section
2.17(g) of the Restructuring Agreement, repurchases of Notes pursuant to
Section 4.1 of the Restructuring Agreement, the fees paid pursuant to
Section 7.2(h) of the Restructuring Agreement and legal fees paid to the
Company's counsel in connection with the negotiation of the
Restructuring Documents) will not exceed the amount set forth below
opposite such month (provided, however, that if as of the last day of
any month the Company's total cash expenditures for such month shall be
less than the amount set forth below (as adjusted hereunder), 80% of the
amount by which such total cash expenditures is less than the amount set
forth below (as adjusted hereunder) shall be carried forwarded and added
to the Company's total cash expenditures for the immediately succeeding
month):
February 2001 $10.0 Million
March 2001 $5.0 Million
April 2001 $5.0 Million
May 2001 $4.0 Million
June 2001 $4.0 Million
July 2001 $4.0 Million
August 2001 $4.0 Million
September 2001 $4.0 Million
October 2001 $4.0 Million
November 2001 $4.0 Million
December 2001 $4.0 Million
January 2002 and thereafter-- As agreed between a majority
in principal amount of the Noteholders and the
Company based on good faith negotiations completed
prior to the commencement of the period.
(g) Section 2.7 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows;
"The Company's total cash and cash equivalents on hand on the
last day of each of the following months (excluding severance payments
within the parameters of Section 2.17(g) of the Restructuring Agreement,
repurchases of Notes pursuant to Section 4.1 of the Restructuring
Agreement, the fees paid pursuant to Section 7.2(h) of the
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Restructuring Agreement and legal fees paid to the Company's counsel in
connection with the negotiation of the Restructuring Documents) shall
not decrease by more than the following amounts from the last day of the
immediately preceding month (provided, however, that if as of the last
day of any month, any such decrease shall be less than the amount set
forth below (as adjusted hereunder), 80% of the amount by which such
decrease shall be less than the amount set forth below (as adjusted
hereunder) shall be carried forward and added to the amount by which the
Company's total cash and cash equivalents on hand shall be allowed to
decrease for the immediately succeeding month):
February 2001 $8.0 Million
March 2001 $4.0 Million
April 2001 $4.0 Million
May 2001 $2.5 Million
June 2001 $2.5 Million
July 2001 $2.5 Million
August 2001 $2.5 Million
September 2001 $2.5 Million
October 2001 $2.5 Million
November 2001 $2.5 Million
December 2001 $2.5 Million
January 2002 and thereafter-- As agreed between a majority
in principal amount of the Noteholders and the
Company based on good faith negotiations completed
prior to the commencement of the period.
(h) Section 2.9 of the Noteholders Agreement is hereby deleted in its
entirety and is replaced with "[INTENTIONALLY LEFT BLANK]".
(i) Section 2.10 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"The Company will not, and will not permit any Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any
Voting Stock of any Subsidiary or to issue any of the Voting Stock of a
Subsidiary to any Person except to the Company or a Wholly-Owned
Subsidiary other than pursuant to a Change of Control Transaction or as
contemplated by Section 2.5 hereof. The Company will not permit any
Subsidiaries to merge or consolidate with or into any other Person
except to the Company or a Wholly-Owned Subsidiary other than pursuant
to a Change of Control Transaction or as contemplated by Section 2.5
hereof.
(j) Section 2.12 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, in any transaction or series of
transactions, acquire or invest in any assets or business of any Person
for cash. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, in any transaction or related
series of transactions,
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acquire or invest in, whether for debt, Capital Stock, or other property
or assets or by guaranty of any obligation, any assets or business of
any Person other than (i) acquisitions of assets in the ordinary course
of business of the Company, (ii) acquisitions by the Company or its
Wholly-Owned Subsidiaries from the Company or any such Wholly-Owned
Subsidiary or investments therein, (iii) investments in Cash Equivalents
that comply with the investment policy approved by the board of
directors of the Company, (iv) investments existing as of the date
hereof, (v) investments received in connection with a sale or other
disposition permitted by Section 2.5 or the bankruptcy or reorganization
in settlement of delinquent obligations of, or other disputes with,
Persons arising in the ordinary course of business and (vi) accounts
receivable in the ordinary course of business. Except as permitted in
this Agreement (including this Section 2.12), the Company shall not, and
shall not permit any of its Subsidiaries to invest in any Person if,
after giving effect thereto, such Person would be an Affiliate of
Company, other than investments in existing Wholly-Owned Subsidiaries of
the Company."
(k) Section 3.1 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"The Company shall not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any
Person, unless such transaction is a Change of Control Transaction as
defined in the Restructuring Agreement, dated February 22, 2001, by and
among the Company and the holders of Notes set forth on Schedule A
thereto (the "Restructuring Agreement") and provided that the Company
shall have delivered to the Holders an Officers' Certificate and an
Opinion of Counsel, each stating that consummation of such
consolidation, merger or transfer does not constitute a violation of the
terms and conditions of the Restructuring Documents and the Transaction
Documents, as amended.
For purposes of this Section 3.1, the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to constitute a Change of
Control Transaction under the Restructuring Agreement.
Notwithstanding the first sentence of this Section 3.1, (i) any
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company."
(l) Section 6.2 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:
"No modification, amendment or waiver of any provision of this
Agreement shall be effective against the Company or any Holder unless
such modification, amendment or waiver is approved in writing by the
Company and the Required Holders. The failure of any party to enforce
any of the provisions of this Agreement shall in no way be construed
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as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement
in accordance with its terms."
Section 6.3 Note Purchase Agreement.
(a) The second sentence of Section 5.5(a) of the Note Purchase Agreement
is hereby deleted in its entirety.
(b) Section 5.5(b) of the Note Purchase Agreement is hereby amended and
restated in its entirety to read as follows:
"(b) The Company shall at its expense (i) within twenty (20) days
of the Closing Date, prepare and submit an application to NASDAQ for
Listing the Conversion Shares and Warrant Shares and (ii) use its best
efforts to cause all shares of Common Stock issued upon the conversion
of this Note to be listed at the time of such issuance on NASDAQ and/or
such other national securities exchanges shares on which shares of
Common Stock are then listed and shall use its best efforts to maintain
such listing."
(c) Section 8.9 of the Note Purchase Agreement is hereby amended and
restated in its entirety to read as follows:
"This Agreement may be amended or modified, and the rights of the
Company or Purchaser hereunder may only be waived, upon the written consent of
the Company and, prior to the Closing, the Purchasers obligated to purchase a
majority of the face amount of the Notes then outstanding (collectively, the
"Required Holders")."
Section 6.4 Investors' Rights Agreement.
(a) Section 2.7(a)(i) of the Investor's Rights Agreement is hereby
amended and restated in its entirety to read as follows:
"But in any event within 35 days thereafter, prepare and file a shelf
registration statement with the Commission on Form S-3 under the Securities Act
(or in the event that the Company is ineligible to use such form, such other
form as the Company is eligible to use under the Securities Act) covering the
sale from time to time by the Purchasers of the Purchasers Registrable
Securities (such registration statement, including any amendments or supplements
thereto and prospectuses contained therein, is referred to herein as the
"PURCHASER REGISTRATION STATEMENT"), which Purchaser Registration Statement, to
the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that the initial Purchaser
Registration Statement also covers such number of additional shares of Voting
Common Stock as may become issuable to prevent dilution resulting from stock
splits, stock dividends or similar events. The number of shares of Voting Common
Stock initially included in the initial Purchaser Registration Statement shall
not exceed the number of shares allowed under Rule 415 and in no event will
exceed 150% of the number of shares of Voting Common Stock into which (i) the
Convertible Notes may be converted and (ii) the Purchaser Warrants may be
exercised which shares of Voting Common Stock shall be allocated pro rata among
the Purchasers whose securities are included in such Purchaser's Registration
Statement.
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Thereafter, the Company shall use its best efforts to cause such
Purchaser Registration Statement to be declared effective as soon as
practicable, and in any event prior to January 15, 2001 (the
"EFFECTIVENESS DEADLINE"). Following the closing of the restructuring
contemplated by the Restructuring Agreement, dated February 22, 2001,
the Company will cause the number of shares of Voting Common Stock
included in the Purchaser Registration Statement not to exceed the
number of shares allowed under Rule 415 and not to be less than 125% of
the number of shares of Voting Common Stock into which (i) the PIK
Preferred Shares may be converted, (ii) the Amended Convertible Notes
may be converted, and (iii) the Purchaser Warrants may be exercised
which shares of Voting Common Stock shall be allocated pro rata among
the Purchasers who securities are included in such Purchaser's
Registration Statement. The Company shall provide Purchasers and their
legal counsel reasonable opportunity, but not less than four (4) full
business days, to review the Purchaser Registration Statement or
amendment or supplement thereto prior to filing. Without limiting the
foregoing, the Company will promptly respond to all SEC comments,
inquiries and requests, and shall request acceleration of effectiveness
at the earliest practicable date."
(b) Section 2.7(b)(ii)(B) of the Investors' Rights Agreement is hereby
amended and restated in its entirety to read as follows:
"In the event that shares of Voting Common Stock of the Company
are delisted from the Approved Market and the Company shall not have
used its best efforts to avoid such delisting at any time following the
Convertible Note Closing Date and remain delisted for 5 consecutive
business days, then at the option of each Purchaser and to the extent
such Purchaser so elects, the Company shall on 2 business days notice
either (1) pay in cash (as provided in Section 2(b)(v)) to such
Purchaser a Monthly Delay Payment for each 30-day period (or portion
thereof) that the shares are delisted or (2) redeem the Purchaser
Registrable Securities held by such Purchaser, in whole or in part, at a
redemption price equal to the Premium Redemption Price; provided,
however, that such Purchaser may revoke such request at any time prior
to receipt of payment of such Monthly Delay Payments or Premium
Redemption Price, as the case may be; provided, further, that the
Company's obligation to pay the Monthly Delay Payment (other than
accrued but unpaid Monthly Delay Payments at the time of the Company's
cure) and/or redeem the Purchaser Registrable Securities after receipt
of a Purchaser notice shall cease if the delisting has been cured by the
Company prior to the payment and/or redemption."
(c) Section 2.7(b)(iii) of the Investors' Rights Agreement is hereby
amended and restated in its entirety to read as follows:
"BLACKOUT PERIODS. In the event any Purchaser is unable to sell
Purchaser Registrable Securities under the Purchaser Registration
Statement for more than an aggregate of forty-five (45) days in any 12
month period ("SUSPENSION GRACE PERIOD"), including without limitation
by reason of a suspension of trading of the Voting Common Stock on the
Approved Market, any suspension or stop order with respect to the
Purchaser Registration Statement or the fact that an event has occurred
as a result of which the prospectus (including any supplements thereto)
included in such Purchaser Registration Statement then in effect
includes an untrue statement of material fact or
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omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, or the number of shares of Voting Common
Stock covered by the Purchaser Registration Statement is insufficient at
such time to make such sales (a "BLACKOUT"), then the Company shall pay
in cash to each Purchaser a Monthly Delay Payment for each 30-day period
(or portion thereof) from and after the expiration of the Suspension
Grace Period. For purposes only of the initial Purchaser Registration
Statements reflected in Section 9.5 of the Restructuring Agreement dated
February 22, 2001, the Suspension Grace Period shall be an aggregate of
sixty (60) days rather than forty-five (45) days. In lieu of receiving
the Monthly Delay Payment as provided above, a Purchaser shall have the
right, in the event the Blackout Period exceeds the Suspension Grace
Period by more than 60 days, but not the obligation, to elect (until the
Company has no longer exceeded the Suspension Grace Period) to have the
Company redeem its Convertible Notes at the price equal to the Premium
Redemption Price."
Section 6.5 Transaction Documents.
(a) All references in each of the Transaction Documents to the Notes are
deemed to also refer to the Amended Notes unless the context clearly indicates
otherwise.
(b) Except as expressly amended hereby, the Transaction Documents shall
remain in full force and effect.
ARTICLE 7
CONDITIONS TO CLOSING
Section 7.1 Conditions to Obligations of the Company.
The Company's obligations to (i) repurchase the Notes, (ii) issue the
PIK Preferred Shares, (iii) amend the Notes not being repurchased and amend the
terms of the Noteholders Agreement, and (iv) repay existing bank debt on the
Closing Date are subject to the satisfaction (or waiver by the Company), on or
prior to the Closing Date, of the conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Participating Noteholders contained in this Agreement shall be
true and correct in all material respects as of the Closing Date. The
Participating Noteholders shall have performed in all material respects all
agreements, obligations, covenants and conditions herein required to be
performed by them on or prior to the Closing Date.
(b) Legal Investment. On the Closing Date, there shall not be in effect
any Law or Order directing that the purchase or amendment of the Notes, the
issuance of the PIK Preferred Shares and the other transactions contemplated by
this Agreement not be consummated or which has the effect of rendering it
unlawful to consummate such transactions.
(c) Proceedings and Litigation. No Action shall have been commenced by
any governmental authority or other person against any party hereto seeking to
restrain or delay the
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purchase and sale of the Notes, the issuance of the PIK Preferred Shares or the
other transactions contemplated by this Agreement.
(d) Delivery of Waivers. Each Participating Noteholder shall have waived
the defaults under Section 2.6 of the Noteholders Agreement and Section 5.5(a)
of the Note Purchase Agreement (which default under Section 5.5(a) shall
effectively be cured as a result of the effectiveness of this Agreement) and any
related cross default to the extent cured by such waiver; such waivers shall be
deemed delivered by a Participating Noteholders as a result of such
Participating Noteholder's execution and delivery of this Agreement provided
that such waivers shall only become effective upon completion of the Closing.
(e) Consent of 100% of the Noteholders. 100% of the holders of the
outstanding Notes shall have consented to the transactions contemplated by this
Agreement and the other Restructuring Documents, such consent to be evidenced by
their execution and delivery of this Agreement.
Section 7.2 Conditions to Obligations of the Participating Noteholders.
The obligations of the Participating Noteholders to (i) sell Notes
pursuant to Article 4 hereof, (ii) issue the PIK Preferred Shares, (iii) amend
the Notes not being repurchased and amend the terms of the Noteholders Agreement
and the other Transaction Documents, and (iv) deliver the waivers referenced in
Section 7.1(d) hereof at the Closing are subject to the satisfaction (or waiver
by a majority of the aggregate principal amount of Notes held by the
Participating Holders), on or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects as of the Closing Date. The Company shall have
performed in all material respects all agreements, obligations, covenants and
conditions herein required to be performed by it on or prior to the Closing
Date.
(b) Legal Investment. On the Closing Date, there shall not be in effect
any Law or Order directing that the purchase or amendment of the Notes, the
issuance of the PIK Preferred Shares and the other transactions contemplated by
this Agreement not be consummated or which has the effect of rendering it
unlawful to consummate such transactions.
(c) Proceedings and Litigation. No Action shall have been commenced by
any governmental authority or other person against any party hereto seeking to
restrain or delay the purchase and sale of the Notes, the issuance of the PIK
Preferred Shares or the other transactions contemplated by this Agreement.
(d) Opinion of Counsel. Each Participating Noteholder shall have
received an opinion addressed to such Participating Noteholder from Xxxxxx
Godward LLP, counsel to the Company, dated the Closing Date and in substantially
the form attached hereto as Exhibit C.
(e) Corporate Action. All Board and shareholder proceedings of the
Company required in connection with the transactions contemplated hereby shall
be evidenced by an
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officer's certificate and shall reasonably satisfactory in form and substance to
each Participating Noteholder.
(f) Filing of PIK Preferred Certification of Designations. The Company
shall have filed or caused to be filed, the PIK Preferred Certificate of
Designations with the Secretary of State of the State of Delaware and evidence
of the acceptance thereof shall have been delivered to the Participating
Noteholders.
(g) Payment of Note Repurchase Price. The Company shall have paid to
each Participating Noteholder, by wire transfer in immediately available funds,
the Note Repurchase Price set forth beside such Participating Noteholder's name
on Schedule A to this Agreement.
(h) Payment of Legal Fees. Immediately prior to the Closing, the Company
shall have paid up to an aggregate of $150,000 of documented legal fees and
expenses for Xxxxx, Day, Xxxxxx & Xxxxx, counsel to Societe Generale and Luskin,
Xxxxx & Xxxxxx LLP, counsel to Deutsche Bank AG and its affiliates.
(i) Consent of 100% of the Noteholders. 100% of the holders of the
outstanding Notes shall have consented to the transactions contemplated by this
Agreement and the other Restructuring Documents, such consent to be evidenced by
their execution and delivery of this Agreement.
ARTICLE 8
CLOSING; TERMINATION
Section 8.1 Closing.
The Closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxxx, Day, Xxxxxx & Xxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m. Eastern Standard Time on the
date hereof, or at such other place or time as the parties hereto may mutually
agree. The date on which the closing occurs is referred to herein as the
"Closing Date".
ARTICLE 9
POST-CLOSING COVENANTS
Section 9.1 Delivery of PIK Preferred Shares.
As promptly as practicable, but in no event later than seven business
days following the Closing, the Company shall deliver to each Participating
Noteholder a certificate, in such denominations and registered in such
Participating Noteholder's name as set forth on Schedule A attached hereto,
representing the number of PIK Preferred Shares which such Participating
Noteholder is receiving from the Company in connection with the transactions
contemplated with this Agreement.
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Section 9.2 Repayment of Bank Debt and Termination of Credit Facility.
Immediately following the Closing but in all events on the Closing Date,
the Company shall use the restricted cash on deposit with Silicon Valley Bank to
repay in full its indebtedness to Silicon Valley Bank. The Company shall deliver
a notice of termination to Silicon Valley Bank in the form attached hereto as
Exhibit D with respect to the credit facility in place with Silicon Valley Bank
and Silicon Valley Bank shall deliver evidence of such repayment and
termination. Confirmation of the repayment and termination described in the
immediately preceding sentence shall be delivered to each Participating
Noteholder within three business days of receipt by the Company of such evidence
of repayment and termination. Notwithstanding the foregoing, the Company may
maintain in effect (but not increase the maximum amount of) its existing $32,500
corporate credit card facility with Silicon Valley Bank, and doing so shall not,
in and of itself, constitute a breach of any covenant, representation or
condition set forth herein.
Section 9.3 Company Indebtedness.
For so long as any PIK Preferred Shares or the Amended Notes remain
issued and outstanding, the Company shall not incur any Indebtedness other than
as contemplated by the Noteholders Agreement.
Section 9.4 Change of Control Transaction; Permitted Asset Sale.
For so long as any PIK Preferred Shares or any Amended Notes remain
issued and outstanding, the Company shall not enter into or commence any Change
of Control Transaction or Permitted Asset Sale other than a Change of Control
Transaction or Permitted Asset Sale to be effected for cash; provided, however,
that the Company may effect a Change of Control Transaction or Permitted Asset
Sale in which part or all of the consideration therefore consists of common
stock (or American Depositary Receipts) of the acquiring company provided that
(i) the acquiring company's common stock (or American Depositary Shares) shall
be listed on the NASDAQ National Market, the American Stock Exchange or the New
York Stock Exchange, (ii) the company shall have a market capitalization of at
least $500 million as of the closing date of such Change of Control Transaction
or Permitted Asset Sale, (iii) the common stock (or American Depositary
Receipts) received shall be freely tradeable upon distribution to the holders of
the PIK Preferred Shares of the Amended Notes, as appropriate; for purposes of
determining the cash value of such distribution the common stock distributed
shall be valued based upon the average of the closing bid prices for such common
stock for the 10 trading days ending two trading days prior to the closing date
of such Change of Control Transaction or Permitted Asset Sale (such closing to
occur at least 10 trading days after the announcement of such transaction).
Section 9.5 Registration Statement.
As promptly as practicable, but in no event later than 10 calendar days
following the filing with the SEC of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000, the Company will file or cause to
be filed an additional Registration Statement on Form S-3 covering the resale of
additional shares of common stock issuable upon conversion of the Notes and the
Amended Notes as contemplated by the Investor Rights Agreement. As promptly as
practicable, but in no event later than 90 calendar days following the
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Closing Date. the Company will file or cause to be filed an additional
Registration Statement on Form S-3 covering the resale of additional shares of
Common Stock issuable upon conversion of the PIK Preferred Shares.
Section 9.6 Severance; Change in Control Payments.
From and after the Closing, the Company will not increase the aggregate
amount of severance and change in control payments payable to members of senior
management of the Company in excess of the amounts set forth on Schedule 2.17(g)
hereto.
Section 9.7 Notice to Non-Participating Holders.
Within three business days following the Closing Date, the Company shall
notify the holders of the Notes that the Amended Notes constitute "Senior
Indebtedness" for purposes of the Notes.
Section 9.8 Press Release; Filing of 8-K.
Promptly following the Closing, the Company shall issue a press release
describing the transactions contemplated by this Agreement and the other
Restructuring Documents and shall file with the SEC a Form 8-K containing such
description and appending as exhibits this Agreement and the other Restructuring
Documents.
ARTICLE 10
MANAGEMENT/EMPLOYEE INCENTIVE POOL
Section 10.1 The Participating Noteholders acknowledge that subsequent
to the Closing, the Company will establish a management/employee incentive pool
pursuant to which 10% of the (i) Change of Control Net Sale Proceeds and (ii)
Asset Sale Net Sale Proceeds) (such 10% amount being hereinafter referred to as
the "MANAGEMENT INCENTIVE PAYMENT") shall be distributed for the benefit of the
management and employees of the Company in the manner described on Schedule
10.1.
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification.
The Company (the "Participating Noteholder Indemnitor") shall defend,
indemnify and hold harmless the Participating Noteholders and their Affiliates
and each director, officer, member, partner, employee and agent of such Persons
(the "Participating Noteholder Indemnitees") against any obligations, loss,
damage, claim, liability, judgment, suits or settlement of any nature or kind,
including all costs and expenses relating thereto, including without limitation,
interest, penalties and reasonable attorneys' fees (including any attorneys'
fees incurred in enforcing this Section 11.1) (collectively "Damages"), arising
out of, resulting from or relating to:
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(i) the breach of any representation or warranty of failure to perform
any covenants or agreements by the Company contained in Articles 2 or 9, or any
certificate or document delivered pursuant to any Restructuring Document;
(ii) the breach by the Company of any covenant or agreement (whether to
be performed prior to or after the Closing) contained in any Restructuring
Document; or
(iii) the transactions contemplated hereby (other than Damages resulting
from a change in the price of the Company's common stock);
in each case other than Damages which are the result of such
Participating Noteholder's gross negligence or willful misconduct.
Section 11.2 Non-Exclusive Remedy.
The indemnification remedies provided in this Article 11 shall not be
deemed to be exclusive. Accordingly, the exercise by any Person of any of its
rights under this Article 11 shall not be deemed to be an election of remedies
and shall not be deemed to prejudice, or to constitute or operate as a waiver
of, any other right or remedy that such Person may be entitled to exercise
(whether under this Agreement, any other Transaction Document, under any
Restructuring Document, under any other contract, under any law or otherwise).
Section 11.3 Specific Performance.
The Company and the Participating Noteholders acknowledge and agree that
irreparable damage to the Participating Noteholders would occur in the event
that any of the provisions of the Restructuring Documents were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that each Participating Noteholder shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of the
Restructuring Documents and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any Participating
Noteholder may be entitled by law or equity.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Governing Law; Jurisdiction; Waiver of Jury Trial.
THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN
THAT STATE. EACH OF THE PARTIES HEREBY SUBMITS TO THE EXCLUSIVE PERSONAL
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND IF SUCH COURT SHALL NOT HAVE JURISDICTION TO HEAR SUCH MATTER, TO
THE NEW YORK STATE SUPREME COURT LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK AND WAIVES ANY OBJECTION AS TO VENUE IN EITHER SUCH LOCATION. SERVICE OF
PROCESS ON
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THE PARTIES IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
EFFECTIVE IF MAILED TO THE PARTIES IN ACCORDANCE WITH SECTION 11.8 HEREOF. THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT.
Section 12.2 Successors and Assigns; Assignment.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, permitted
assigns, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each Person who shall be a holder
of the Amended Notes and the PIK Preferred Shares from time to time. This
Agreement may not be assigned by the Company without the prior written consent
of the Required Holders (as defined in the Noteholder Agreement). This Agreement
may not be assigned by the Participating Noteholders prior to the Closing
without the consent of the Company, except that each Participating Noteholder
may assign its rights and obligations hereunder to any Affiliate or Affiliates.
After the Closing, this Agreement may be assigned by the Participating
Noteholders to any transferee of the Amended Notes or the PIK Preferred Shares
so long as each assignee (i) agrees to be bound hereunder, (ii) agrees that the
representations and warranties made by the Participating Noteholders herein
shall be deemed to have been made by such assignee and (iii) shall execute a
counterpart to this Agreement the execution of which shall constitute such
assignee's agreement to the terms of this Section 12.2. Any purported assignment
of this Agreement in violation of the provisions of this paragraph is null and
void.
Section 12.3 Entire Agreement.
This Agreement and the Schedules and Exhibits hereto, the other
Restructuring Documents, the Transaction Documents and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein. This Agreement and the Schedules and Exhibits hereto and the other
Restructuring Documents and the Transaction Documents to the extent not
expressly amended by this Agreement supersede any other agreement or
understanding, whether written or oral, that may have been made or entered into
by any party or their respective affiliates or representatives prior to the date
hereof relating to the matters contemplated hereby and thereby. All references
in this Agreement to Schedules refer to sections of the Company Disclosure
Letter delivered in connection with this Agreement.
Section 12.4 Severability.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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Section 12.5 Survival of Warranties.
The warranties, representations and covenants of the Company and
Participating Noteholders contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing, and shall
continue as long as any Amended Notes or PIK Preferred Shares are outstanding or
issuable.
Section 12.6 Amendment and Waiver.
This Agreement may be amended or modified, and the rights of the Company
or Participating Noteholders hereunder may only be waived, upon the written
consent of the Company and the Participating Noteholders representing a majority
of the principal amount of the outstanding Amended Notes.
Section 12.7 Delays or Omissions.
It is agreed that no delay or omission to exercise any right, power or
remedy accruing to any party, upon any breach, default or noncompliance by
another party under this Agreement or any other Restructuring Document, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or of
or in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character on a Participating Noteholder's part of any breach, default or
noncompliance under this Agreement, the other Restructuring Documents or any
waiver on such party's part of any provisions or conditions of this Agreement or
the Restructuring Documents must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or the other Restructuring Documents, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
Section 12.8 Notices.
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified; (b) upon receipt of successful complete transmission when sent by
facsimile if sent during normal business hours of the recipient, if not, then on
the business day next succeeding receipt of successful, complete transmission;
(c) three (3) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the addresses set forth in the Note Purchase Agreement.
Section 12.9 Titles and Subtitles.
The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
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Section 12.10 Counterparts; Execution by Facsimile Signature.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument. This Agreement may be executed by facsimile signature(s).
Section 12.11 Participating Noteholders' Obligations Several and Not
Joint.
All obligations of the Participating Noteholders hereunder shall be
several and not joint and no Participating Noteholder shall have any liability
or obligation hereunder as a result of any other Participating Noteholder's
breach of any provisions of this Agreement.
Section 12.12 Obligations Absolute.
The Company's obligations under the Restructuring Documents are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction.
Section 12.13 No Strict Construction.
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
Section 12.14 Releases and Waivers.
The Company hereby irrevocably and unconditionally waives, forever
releases and discharges the Participating Noteholders (and any of its respective
affiliates, officers, directors, employees and partners) in any and all
capacities from and against any and all claims, covenants, promises, agreements,
obligations, controversies, losses, damages, costs, expenses, demands, causes of
action, judgments or liabilities of any kind or character whatsoever, whether
matured or contingent, or known or unknown, including for indemnity or
contribution, that the Company has or may have to the extent it or they arise
out of, or in connection with, the Transaction Documents, the Restructuring
Documents or the transactions contemplated thereby.
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IN WITNESS WHEREOF, the parties hereto have executed the
Restructuring Agreement as of the date set forth in the first paragraph hereof.
QUOKKA SPORTS, INC.
-------------------
Name:
Title:
PARTICIPATING NOTEHOLDER
-------------------
Name of Participating Noteholder
Name of Signatory:
Title:
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SCHEDULE A
Original
Principal Principal Redemption Stated
Amount of Amount Principal Price Remaining Valued PIK
Participating Notes of Notes as of Amount for Notes Principal Preferred
Holder Held February 22 of Notes Redeemed Redeemed Amount of Notes Shares Issued
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