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AMENDMENT NO. 2 TO EXCHANGE AGREEMENT
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By and Among
Sporting Magic, Inc., ▇▇▇▇▇ ▇▇▇▇▇,
Next, Inc., ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
The ▇▇▇▇▇▇▇ ▇. III and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Living Trust
February 1, 2002
THIS AMENDMENT NO. 2 TO THE EXCHANGE AGREEMENT (this "Amendment") is
entered into as of February 1, 2002, by and among Sporting Magic, Inc., a
Delaware corporation ("Sporting Magic"); ▇▇▇▇▇ ▇▇▇▇▇, the principal stockholder
of Sporting Magic ("Young"); Next, Inc., a Delaware corporation ("Next"); and
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and the ▇▇▇▇▇▇▇ ▇. III and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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 and as
amended on January 18, 2002 (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 contained herein, the parties do hereby agree, subject
to the terms and conditions hereinafter set forth, as follows:
ARTICLE I
EXCHANGE OF SHARES
Schedule 1.2 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following as if contained in the Exchange
Agreement upon its execution:
"The 6,000,000 shares of Sporting Magic Common Stock to be issued to
the Next Stockholders shall be distributed as follows:
Name No. of shares
---- -------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ 3,000,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,500,000
▇▇▇▇▇▇▇ ▇. III and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Living Trust 1,500,000"
ARTICLE III
NEXT REPRESENTATIONS AND WARRANTIES
Section 3.3 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following:
"3.3 No Material Adverse Effect. Except as set forth on Schedule
3.3, since September 30, 2001 there has not been any material
adverse change in the business, operations, properties, assets,
condition, financial or otherwise of Next."
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Schedule 3.5(b) of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following as if contained in the Exchange
Agreement upon its execution:
"Gematria Trust 321,750 shares of Next Preferred Stock
to be issued on the Closing Date (See
Item 3, Schedule 3.11)
▇▇▇▇▇ ▇▇▇▇▇▇▇ 321,750 shares of Next Preferred Stock
to be issued on the Closing Date (See
Item 3, Schedule 3.11)
Olympic Capital Group 100,000 shares of Next Preferred Stock
to be issued on the Closing Date (See
Item 3, Schedule 3.11)
Employees, Directors
and Consultants 513,000 shares of Next Common Stock
under options with two year cliff
vesting at a strike price of $0.025 per
share
M&J Holdings, Inc. 100,000 shares of Next Common Stock to
be issued following completion of the $1
million convertible note offering and
the Closing (See Item 4, Schedule 3.11)
Convertible Note Holders 1 million shares of Next Common Stock to
be issued upon conversion of up to $1
million principal amount Convertible
Notes at closing at $1.00 per share"
ARTICLE VII
ADDITIONAL COVENANTS
Schedule 7.6 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following as if contained in the Exchange
Agreement upon its execution:
"Gematria Trust 379,706 shares of Sporting Magic Common
Stock;
▇▇▇▇▇ ▇▇▇▇▇▇▇ 379,705 shares of Sporting Magic Common
Stock;
Olympic Capital Group 450,000 shares of Sporting Magic Common
Stock;
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RAE & Company 750,000 shares of Sporting Magic Common
Stock"
ARTICLE IX
CONDITIONS OF NEXT
Section 9.11 of the Exchange Agreement is amended such that Section
9.11 is hereby deleted in its entirety.
Section 9.15 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following:
"9.15 Sporting Magic shall have delivered to Next a
stockholder list dated December 31, 2001 (the "December Stockholder
List"). Except to reflect Sporting Magic's dividend distribution
scheduled for December 21, 2001, the list of stockholders set forth
on the December Stockholder List shall not differ in any material
respect from the November Stockholder List, and with regards to L.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ or any affiliates of ▇▇. ▇▇▇▇▇▇▇▇ or Young,
it shall not differ at all."
ARTICLE XI
POST-CLOSING MATTERS
Section 11.3 of the Exchange Agreement is hereby deleted in its
entirety and replaced with the following:
"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 100 outstanding shares of Next
Preferred Stock shall automatically convert into one share of
Sporting Magic Series A Preferred Stock."
The following additional Section 11.4 is hereby inserted at the end
of Article XI of the Exchange Agreement:
11.4. Within five (5) business days following the
Closing, Sporting Magic shall deliver to Next a stockholder list
dated the Closing Date. The list of stockholders set forth on such
stockholder list shall not differ in any material respect from the
December Stockholder List, and with regards to L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Young or any affiliates of ▇▇. ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇, it shall not
differ at all."
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ARTICLE XII
MISCELLANEOUS
Section 12.1 of the Exchange Agreement is hereby deleted
in its entirety and replaced with the following:
"12.1 Termination. With respect to each company, this
Agreement may be terminated and the transactions contemplated hereby
may be abandoned (i) by the mutual consent of Sporting Magic and
Next at any time, or (ii) by either Next or Sporting Magic if the
transactions contemplated hereby have not been consummated prior to
February 4, 2002 (the "Termination Date") for any reason, or (iii)
by either Next or Sporting Magic if either discovers a material
breach of a representation, warranty, covenant or agreement by the
other and such breach is not cured within ten (10) days of the
breaching party's receipt of a notice from the non-breaching party.
In the event of such termination and abandonment, none of Sporting
Magic, Next, Young nor the Next Stockholders (or any of their
respective directors or officers) shall have any liability or
further obligation to any other party to this Agreement, except that
nothing herein will relieve any party from liability for any willful
breach of this Agreement."
[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/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
▇▇▇▇▇ ▇▇▇▇▇, President & CEO
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
▇▇▇▇▇ ▇▇▇▇▇
NEXT, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
THE ▇▇▇▇▇▇▇ ▇. III AND ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ LIVING TRUST
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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SCHEDULE 3.3
SCHEDULE 3.3
TO EXCHANGE AGREEMENT
On January 22, 2002, Kmart Corp. ("Kmart"), a customer of Next,
filed for protection under Chapter 11 of the U.S. Bankruptcy Code. This action
by Kmart could result in a material adverse affect on the business of Next.
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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 February
___, 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 100,000. 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 $10.00 per share per annum payable solely in shares of Common
Stock (in an amount equal to $10.00 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
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any past dividend periods may be declared and 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
Corporation's Certificate of Incorporation, 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.
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(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 $100.00 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 to 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 clause (a) above) prior to
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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 February, 2002.
SPORTING MAGIC, INC.
By:
--------------------------------
Name:
Title: