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AMENDMENT NO. 1 TO EXCHANGE AGREEMENT
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BY AND AMONG
SPORTING MAGIC, INC., XXXXX XXXXX,
NEXT, INC., XXXXX X. XXXXX, XXXXXXX X. XXXXXXX AND
THE XXXXXXX X. III AND XXXXX X. XXXXXXX LIVING TRUST
JANUARY 18, 2002
AMENDMENT NO. 1 TO EXCHANGE AGREEMENT
THIS AMENDMENT NO. 1 TO THE EXCHANGE AGREEMENT (this "AMENDMENT") is
entered into as of January 18, 2002, by and among Sporting Magic, Inc., a
Delaware corporation ("SPORTING MAGIC"); Xxxxx Xxxxx, the principal stockholder
of Sporting Magic ("YOUNG"); Next, Inc., a Delaware corporation ("NEXT"); and
Xxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, and The Xxxxxxx X. III and Xxxxx X. Xxxxxxx
Living trust, the sole stockholders of Next (together, the "NEXT STOCKHOLDERS").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Exchange Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, Sporting Magic, Young, Next and the Next Stockholders are
parties to that certain Exchange Agreement dated as of December 21, 2001, a copy
of which is attached hereto as Exhibit A (the "EXCHANGE AGREEMENT"); and
WHEREAS, the parties hereto wish to amend the Exchange Agreement as
set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties do hereby agree, subject
to the terms and conditions hereinafter set forth, as follows:
ARTICLE I
EXCHANGE OF SHARES
1.2 THE EXCHANGE.
Sections 1.2(a) and (b) of the Exchange Agreement are hereby deleted
in their entirety and replaced with the following:
(a) the Next Stockholders shall irrevocably assign and
transfer to Sporting Magic all of the outstanding common equity of Next,
consisting of 6,000,000 shares of common stock, $0.0001 par value per share (the
"NEXT COMMON STOCK");
(b) Sporting Magic shall issue to the Next Stockholders,
pro rata, 6,000,000 shares of Sporting Magic Common Stock as outlined in
Schedule 1.2 (the "EXCHANGE CONSIDERATION")
1.5 YOUNG NON-COMPETE.
Section 1.5 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following:
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As of the Closing Date, Sporting Magic shall enter into a
non-compete agreement with Young, in the form attached hereto as Schedule 1.5
(the "YOUNG NON-COMPETITION AGREEMENT"), in exchange for which Sporting Magic
shall (i) cause Next to issue to Young 300,000 shares of Next Preferred Stock
(as defined in Section 3.5 hereof) at the Closing and (ii) assume the obligation
to pay to Young $350,000. As of the date hereof, Young has already received
$25,000 of this consideration and Young shall receive an additional $100,000 no
later than 72 hours prior to the scheduled Closing Date. Young shall receive the
remaining $225,000 on or before the date that is 90 days following the Closing
Date.
ARTICLE III
NEXT REPRESENTATIONS AND WARRANTIES
3.5 CAPITALIZATION.
Section 3.5(a) of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following:
(a) The authorized capital stock of Next consists entirely of
50,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000
shares of preferred stock, of which 6,000,000 shares of common stock and
7,000,000 shares of Series A preferred stock, $0.0001 par value per share (the
"NEXT PREFERRED STOCK"), are issued and outstanding. All the outstanding shares
of Next Common Stock and Next Preferred Stock have been duly authorized and
validly issued, and are fully paid and non-assessable. Next does not own the
capital stock of any other entity other than Next Marketing Inc., a Delaware
corporation, and Blue Sky Graphics, Inc., a Delaware corporation, as to each of
which Next owns all of the capital stock.
ARTICLE V
NEXT COVENANTS
Section 5.1 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following:
5.1 No dividend shall be declared or paid by other distribution
(whether in cash, stock, property or any combination thereof) or payment
declared or made in respect to Next Common Stock or Next Preferred Stock, nor
shall Next purchase, acquire or redeem or split, combine or reclassify any
shares of its capital stock unless prior to the record date for such dividend or
the effective date of such split, combination or reclassification, it tenders to
Sporting Magic its agreement to amend this Agreement so as to effect an
appropriate adjustment in the number of shares deliverable upon the Closing
Date.
ARTICLE XI
POST-CLOSING MATTERS
The following additional Section 11.3 is hereby inserted at the end
of Article XI of the Exchange Agreement:
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11.3 As soon as practicable following the Closing, Sporting Magic
shall adopt and approve a certificate of designation creating a series of
preferred stock designated "Series A Preferred Stock," substantially in the form
attached hereto as Schedule 11.3. Immediately upon the creation and approval of
this Sporting Magic Series A Preferred Stock, each outstanding share of Next
Preferred Stock shall automatically convert into one share of Sporting Magic
Series A Preferred Stock.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first herein above written.
SPORTING MAGIC, INC.
By: /S/ XXXXX XXXXX
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Xxxxx Xxxxx, President & CEO
/S/ XXXXX XXXXX
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Xxxxx Xxxxx
NEXT, INC.
By: /S/ XXXXX X. XXXXX
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Xxxxx X. Xxxxx, Chairman
THE XXXXXXX X. III AND XXXXX X. XXXXXXX
LIVING TRUST
By: /S/ XXXXXXX X. XXXXXXX
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Name: Xxxxxxx X. Xxxxxxx
Title: Trustee
/S/ XXXXX X. XXXXX
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Xxxxx X. Xxxxx
/S/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx
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SCHEDULE 11.3
CERTIFICATE OF DESIGNATION
OF SERIES A PREFERRED STOCK
OF
SPORTING MAGIC, INC.
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Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
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I, the undersigned, being the President of Sporting Magic, Inc.
("CORPORATION"), hereby certify in accordance with the provisions of Section 151
of the General Corporation Law of the State of Delaware that the Board of
Directors of the Corporation duly adopted the following resolution on January
___, 2002:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Corporation's Certificate of Incorporation, this Board of Directors hereby
creates, from the 10,000,000 shares of preferred stock, $0.0001 par value per
share (the "PREFERRED STOCK"), of the Corporation authorized to be issued
pursuant to the Certificate of Incorporation, a series of the Preferred Stock
having the following terms and designations:
Section 1. DESIGNATION AND AMOUNT. The shares of such series having
a par value of $0.0001 per share shall be designated as "Series A Preferred
Stock" (the "SERIES A PREFERRED STOCK") and the number of shares constituting
such series shall be 9,500,000. The relative rights, preferences and limitations
of the Series A Preferred Stock shall be in all respects identical, share for
share, to the Common Stock of the Corporation, except as otherwise provided
herein.
Section 2. DIVIDENDS. Except in the case of distributions in a
liquidation, dissolution or winding up of the affairs of the Corporation as
provided for in Section 5 below, the holders of each share of Series A Preferred
Stock shall be entitled to receive dividends, out of assets legally available,
at the rate of $0.10 per share per annum payable solely in shares of Common
Stock (in an amount equal to $0.10 divided by the Fair Market Value (defined
below) of the Common Stock). Dividends of the Series A Preferred Stock shall be
fully cumulative and shall accrue, without interest, from the date of the
original issuance of the Series A Preferred Stock, and shall be payable
quarterly, when and as declared by the Board of Directors on March 31, June 30,
September 30 and December 31 of each year, commencing March 31, 2002, except if
such date is not a business day then such dividend shall be payable on the first
immediately succeeding business day (as used herein, the term "business day"
shall mean any day except a Saturday, Sunday or day on which banking
institutions are legally authorized to close in the City of New York). Each such
dividend shall be paid to the holders of record of shares of Series A Preferred
Stock as they appear on the stock register of the Corporation on such record
date, not exceeding 30 days preceding the payment thereof, as shall be fixed by
the Board of Directors of the Corporation. Dividends on account of arrears for
any past dividend periods may be declared and
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paid at any time, without reference to any regular dividend payment date, to
holders of record on such date, not exceeding 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors of the Corporation. For
purposes of this Section 2, "FAIR MARKET VALUE" on any day shall mean (a) if the
Common Stock is listed or admitted for trading on a national securities
exchange, the reported last sales price or, if no such reported sale occurs on
such day, the average of the closing bid and asked prices on such day, in each
case on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, (b) if the Common Stock is not listed or admitted
to trading on any national securities exchange, the average of the closing bid
and asked prices in the over-the-counter market on such day as reported by
NASDAQ or any comparable system or, if not so reported, as reported by any New
York Stock Exchange member firm selected by the Corporation for such purpose or
(c) if no such quotations are available on such day, the fair market value of a
share of Common Stock on such day as determined in good faith by the Board of
Directors of the Corporation.
Section 3. VOTING RIGHTS. Except as otherwise provided by the
General Corporation Law of the State of Delaware, the Series A Preferred Stock
and the Common Stock of the Corporation shall vote as one class, with the holder
of each share of Series A Preferred Stock entitled to one vote per share of
Series A Preferred Stock.
Section 4. REACQUIRED SHARES. Any shares of the Series A Preferred
Stock redeemed or purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, unless otherwise provided for in the
Certificate of Incorporation of the Corporation, and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions or restrictions on issuance
set forth herein.
Section 5. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon the liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the holders of Series A
Preferred Stock shall have received a liquidation preference of $1.00 per share
(the "LIQUIDATION AMOUNT"), plus an amount equal to unpaid dividends thereon, if
any, to the date of such payment or (ii) to the holders of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all other such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. For purposes of this Certificate, each
of (1) the sale, conveyance, exchange or transfer of all or substantially all of
the property and assets of the Corporation, or (2) the consolidation or merger
of the Corporation with or into any other corporation, in which the stockholders
of the Corporation immediately prior to such event do not own a majority of the
outstanding shares of the surviving corporation or (3) the sale of securities
pursuant to a registration statement filed by the Corporation under the
Securities Act of 1933, as amended, in connection with the initial firm
commitment underwritten offering of its securities to the general public, shall
be deemed to be a liquidation, dissolution or winding up of the Corporation.
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(b) In the event of a liquidation, dissolution or winding up of the
Corporation within the meaning of subsection (a) above, then in connection with
each such event the Corporation shall send to the holders of the Series A
Preferred Stock at least twenty days' prior written notice of the date when such
event shall take place.
(c) For purposes of this Certificate the term "junior stock" shall
mean the Common Stock and any other class or series of shares of the Corporation
hereafter authorized over which Series A Preferred Stock has preference or
priority in the payment of dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation.
(d) Upon any liquidation, dissolution or winding up of the
Corporation, and after full payment as provided for in Section 5(a) above, the
holders of Series A Preferred Stock shall not be entitled to any further
participation in any distribution of assets by the Corporation.
Section 6. RESERVATION OF CASH. Prior to the consummation of any
liquidation, dissolution or winding up as described in Section 5(a) hereof, each
corporation, including this Corporation, which may be required to deliver any
cash to the holders of shares of the Series A Preferred Stock shall assume, by
written instrument delivered to each transfer agent of the Series A Preferred
Stock, the obligation to deliver to such holder such cash which, in accordance
with the provisions of Section 5, such holder may be entitled and each such
corporation shall have furnished to each such transfer agent or person acting in
a similar capacity, including the Corporation, an opinion of counsel for such
corporation, stating that such assumption agreement is legal, valid and binding
upon such corporation.
Section 7. WAIVER. Any right or privilege of the Series A Preferred
Stock may be waived (either generally or in a particular instance and either
retroactively or prospectively) by and only by the written consent of the
holders of a majority of the Series A Preferred Stock then outstanding and any
such waiver shall be binding upon each holder of Series A Preferred Stock.
Section 8. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Corporation of a record of the holders of its
Common Stock for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right or warrant to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right;
(b) any capital reorganization, reclassification or recapitalization
of the Corporation, any consolidation or merger involving the Corporation and
any other person (other than a consolidation or merger with a wholly-owned
subsidiary of the Corporation, provided that the Corporation is the surviving or
the continuing corporation and no change occurs in the Common Stock), or any
transfer of all or substantially all of the assets of the Corporation to any
other person; or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation;
then, and in each such case, the Corporation shall cause to be mailed to each
transfer agent for the shares of the Series A Preferred Stock and to the holders
of record of the outstanding shares of the Series A Preferred Stock, at least 20
days (or 10 days in case of any event specified in
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clause (a) above) prior to the applicable record or effective date hereinafter
specified, a notice stating (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right
or, (ii) the date or expected date to which any such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Series A
Preferred Stock shall be entitled to exchange their shares of Series A Preferred
Stock for the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding up, if any. The failure to give any notice
required by this Section 8, or any defect therein, shall not affect the legality
or validity of any such action requiring such notice.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed on its behalf, as of this ___ day of January, 2002.
SPORTING MAGIC, INC.
By:
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Name:
Title:
