EXCHANGE AGREEMENT
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
DECEMBER 21, 2001
TABLE OF CONTENTS
PAGE
Article I Exchange Of Shares.........................................1
Article II Sporting Magic Representations And Warranties..............2
Article III Next Representations And Warranties........................7
Article IV Next Stockholders Representations And Warranties..........10
Article V Next Covenants............................................11
Article VI Sporting Magic Covenants..................................12
Article VII Additional Covenants......................................13
Article VIII Conditions Of Sporting Magic..............................14
Article IX Conditions Of Next........................................15
Article X Indemnification...........................................17
Article XI Post-Closing Matters......................................18
Article XII Miscellaneous.............................................19
SCHEDULES:
Schedule 1.2.................................List of post-Closing stock holdings
Schedule 1.5.................................... Young Non-Competition Agreement
Schedule 2.4(a)............................Sporting Magic Foreign Qualifications
Schedule 2.11..........................Sporting Magic Employees and Compensation
Schedule 2.14...........................................Sporting Magic Contracts
Schedule 3.5(b).....................................Next Options, Warrants, etc.
Schedule 3.6(c)...............................Exceptions to Financial Statements
Schedule 3.7(a)...................................................Next Conflicts
Schedule 3.8.....................................................Next Litigation
Schedule 3.10........................................Next Employee Benefit Plans
Schedule 3.11............................................Next Material Contracts
Schedule 5.4..............................................Permitted Indebtedness
Schedule 7.6........................Registration for Resale of Consultant Shares
Schedule 8.7................Opinion of Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx &Wolosky
Schedule 9.10.....................................Opinion of L. Xxxxxxx Xxxxxxxx
Schedule 9.11............................................Young Lock-Up Agreement
Schedule 12.3....................................... Brokerage and Finder's Fees
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "AGREEMENT") is entered into as of
December 21, 2001, 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").
W I T N E S S E T H :
WHEREAS, the parties intend that, subject to the terms and
conditions hereinafter set forth, Sporting Magic will acquire all of the issued
and outstanding equity capital of Next from the Next Stockholders in exchange
(the "EXCHANGE") for shares of Sporting Magic common stock, $0.001 par value
(the "SPORTING MAGIC COMMON STOCK"); and
WHEREAS, the parties desire that the transactions contemplated by
this Agreement constitute a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "CODE").
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
1.1 CLOSING DATE. Subject to termination of this Agreement as
provided in Section 12.1, the closing of the transactions and the consummation
of the Exchange (the "CLOSING") will take place at the offices of Xxxxxx
Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP ("XXXXXX"), 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, or at such other location as the parties hereto may mutually
agree upon in writing, at 10:00 a.m. on such date, on or before the Termination
Date (as defined in Section 12.1), as the parties hereto mutually agree upon in
writing.
1.2 THE EXCHANGE.
Subject to the terms and conditions set forth herein, at the
Closing:
(a) the Next Stockholders shall irrevocably assign and transfer
to Sporting Magic all of the outstanding equity capital of Next, consisting of
13,000,000 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, 13,000,000 shares of Sporting Magic Common Stock as outlined in Schedule
1.2 (the "EXCHANGE CONSIDERATION"); and
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(c) Sporting Magic shall issue instructions to its transfer
agent to issue certificates for the Exchange Consideration to the Next
Stockholders.
1.3 FURTHER ASSURANCES. If, at any time after the Closing, the
parties hereto consider or are advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Exchange or to carry out the purposes of this Agreement, then the parties
shall execute and deliver all such proper deeds, assignments, instruments and
assurances and do all other things necessary or desirable to consummate the
Exchange and to carry out the purposes and intent of this Agreement.
1.4 RESIGNATIONS OF PRESENT DIRECTORS AND EXECUTIVE OFFICERS AND
DESIGNATION OF NEW DIRECTORS AND EXECUTIVE OFFICERS. At the Closing, the present
directors and executive officers of Sporting Magic shall designate the directors
and executive officers nominated by the Next Stockholders to serve in their
place and stead, until the next respective annual meetings of the stockholders
and the Board of Directors of the reorganized Sporting Magic, and until their
respective successors shall be elected and qualified or until their respective
prior resignations or terminations, and then, the current directors and
executive officers shall resign, in seriatim. Prior to the Closing, the Board of
Directors of Sporting Magic shall adopt resolutions specified by the Next
Stockholders directing the issuance of the Exchange Consideration to the Next
Stockholders so that the issuance of such shares is exempt from liability under
Section 16 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT").
1.5 YOUNG NON-COMPETE. 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) issue to Young 300,000 shares of Sporting Magic Common
Stock 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.
1.6 TAX-FREE REORGANIZATION. The parties intend for the Exchange to
be a tax-free "reorganization" within the meaning of Section 368 of the Code.
Article II
Sporting Magic Representations And Warranties
Sporting Magic represents and warrants to Next and the Next
Stockholders, as follows:
2.1 POWER AND AUTHORITY. Sporting Magic has the corporate power and
authority, to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Sporting Magic and no other corporate proceedings on the part of
Sporting Magic are necessary to authorize this Agreement and the transactions
contemplated hereby.
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2.2 SPORTING MAGIC FINANCIAL STATEMENTS. Sporting Magic has
heretofore delivered to Next its audited financial statements for the fiscal
year ended August 31, 2001 and its unaudited financial statements for the two
month period ended October 31, 2001 (collectively, the "SPORTING FINANCIAL
STATEMENTS"). The Sporting Financial Statements have been prepared in accordance
with generally accepted accounting principles, and fairly present in all
material respects, the financial condition of Sporting Magic as at the
respective dates thereof, and the results of operation of Sporting Magic for the
periods then ended. At October 31, 2001, there were no liabilities, unknown,
accrued, absolute, contingent or otherwise of Sporting Magic that were not shown
or reserved against on the balance sheets included in the Sporting Financial
Statements.
2.3 NO MATERIAL ADVERSE EFFECT. Since October 31, 2001, there has
not been any material adverse change in the business, operations, properties,
assets, condition, financial or otherwise, or prospects of Sporting Magic.
2.4 DUE ORGANIZATION; POWER; QUALIFICATION; SUBSIDIARIES AND
AFFILIATES, ETC.
(a) Sporting Magic is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware and has
the corporate power to own its property and to carry on its business as now
conducted. Sporting Magic is qualified to do business as a foreign corporation
in each jurisdiction where the failure to qualify would have a material adverse
effect on Sporting Magic. Schedule 2.4(a) sets forth the jurisdictions in which
Sporting Magic is qualified.
(b) Sporting Magic has no subsidiaries or affiliates (as that
term is defined in the regulations promulgated under the Securities Act of 1933,
as amended (the "SECURITIES ACT")).
2.5 CAPITALIZATION.
(a) The authorized capital stock of Sporting Magic consists
entirely of 25,000,000 shares of Sporting Magic Common Stock, of which 1,529,814
shares are issued and outstanding. All of the outstanding shares of Sporting
Magic Common Stock have been, and all of the outstanding Sporting Magic Common
Stock as of the Closing Date will be, duly authorized and validly issued and are
fully paid and non-assessable. None of the outstanding Sporting Magic Common
Stock is subject to pre-emptive rights or was issued in violation of any
pre-emptive rights.
(b) There are not presently, and, on the Closing Date, there
will not be any outstanding subscriptions, options, warrants, contracts, calls,
puts, agreements, demands or other commitments or rights of any type to purchase
or acquire any securities of Sporting Magic, nor are there outstanding
securities of Sporting Magic which are convertible into, or exchangeable for,
any shares of capital stock of Sporting Magic, and Sporting Magic has no
obligation of any kind to issue any additional securities.
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2.6 TAX MATTERS.
(a) Sporting Magic has filed or caused to be filed with the
appropriate federal, state, county, local and foreign governmental agencies or
instrumentalities, all tax returns and tax reports required to be filed, and all
taxes, assessments, fees and other government charges have been fully paid when
due (subject to any extensions filed on a timely basis).
(b) There is not pending nor, to the best knowledge of Sporting
Magic, is there any threatened federal, state or local tax audit of Sporting
Magic. There is no agreement with any federal, state or local taxing authority
by Sporting Magic that may affect the subsequent tax liabilities of Sporting
Magic.
(c) Without limiting the generality of the foregoing: (a) the
Sporting Financial Statements include adequate provisions for all taxes,
assessments, fees, penalties and governmental charges which have been or in the
future may be assessed against Sporting Magic with respect to the period then
ended and all periods prior thereto; and (b) on the date hereof, Sporting Magic
is not liable for any taxes, assessments, fees or governmental charges.
2.7 NO CONFLICT OR DEFAULT; ENFORCEABILITY; CORPORATE RECORDS;
COMPLIANCE WITH LAW.
(a) Neither the execution and delivery of this Agreement, nor
compliance with the terms and provisions hereof, including without limitation
the consummation of the transactions contemplated hereby, will violate any
statute, regulation or ordinance of any governmental authority, or conflict with
or result in the material breach of any term, condition or provision of the
Certificate of Incorporation, By-laws or other charter documents of Sporting
Magic, nor of any agreement, deed, contract, mortgage, indenture, writ, order,
decree, legal obligation or instrument to which Sporting Magic is a party or by
which its assets or properties are or may be bound; or constitute a material
default (or an event which, with the lapse of time or the giving of notice, or
both, would constitute a material default) thereunder, nor result in the
creation or imposition or any lien, charge or encumbrance, or restriction of any
nature whatsoever with respect to any properties or assets of Sporting Magic,
nor give to others any interest or rights, including rights of termination,
acceleration or cancellation in or with respect to any of the properties,
assets, contracts or business of Sporting Magic.
(b) This Agreement and all other agreements
and documents delivered by Sporting Magic in connection herewith are, or when
executed by Sporting Magic will be, valid and binding obligations of Sporting
Magic, enforceable in accordance with their respective terms. Sporting Magic has
permitted Next to examine Sporting Magic's corporate minute and stock records
books. The corporate minute books contain the Certificate of Incorporation,
By-laws and other charter documents of Sporting Magic as in effect on the date
hereof, contain a true and complete record of all actions by and meetings of the
directors (and committees thereof) and stockholders of Sporting Magic since the
date of its incorporation and accurately reflect all transactions referred to
therein. Sporting Magic is not in violation of any outstanding arbitration
award, judgment, order or decree; or in violation of any statute, regulation or
ordinance ("LAW"), including, but not limited to, any anti-discrimination,
hazardous and toxic substances, wage,
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hour, working condition, payroll withholding, pension, building, zoning and tax
Law. There have been no allegations of or inquiries concerning any violations of
Law by Sporting Magic within the past ten years.
2.8 LITIGATION. There are no actions, suits, investigations, or
proceedings pending, nor, to the knowledge of Sporting Magic, threatened against
Sporting Magic, the performance of the terms and conditions hereof, or the
consummation of the transactions contemplated hereby, in any court or by or
before any governmental body or agency, including without limitation any claim,
proceeding or litigation for the purpose of challenging, enjoining or preventing
the execution, delivery or consummation of this Agreement. Sporting Magic is not
subject to any order, judgment, decree, stipulation or consent or any agreement
issued by any governmental body or agency.
2.9 SECURITIES FILINGS. The Sporting Magic Common Stock is quoted on
the NASD OTC Electronic Bulletin Board. Sporting Magic has heretofore provided
to Next true and correct copies of its annual report on Form 10-KSB for the year
ended August 31, 2001, and its quarterly reports on Form 10-QSB dated November
30, 2000, February 28, 2001, and May 31, 2001. In all material respects, all
such reports are true, correct and accurate as of the dates of filing and do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. No material
adverse change in the business, financial condition or operations of Sporting
Magic has occurred since the date of such reports. Sporting Magic will have on
the Closing Date, made all filings required to be made with the Securities and
Exchange Commission (the "COMMISSION") and any state securities authorities.
Sporting Magic does not know of any reason why a registration statement filed on
its behalf after the Closing would not be declared effective by the Commission
and why any Sporting Magic Common Stock issued to or issuable to the Next
Stockholders would not be eligible for public resale under Rule 144 after the
Closing.
2.10 GOVERNMENTAL AND OTHER APPROVAL. To the best of Sporting
Magic's knowledge, Sporting Magic has all permits, licenses, orders and
approvals of all federal, state, local or foreign governmental or regulatory
bodies required for Sporting Magic to conduct its business as presently
conducted. All such permits, licenses, orders and approvals are in full force
and effect and no suspension or cancellation of any of them is threatened, and
none of such permits, licenses, orders or approvals will be affected by the
consummation of the transactions contemplated by this Agreement. No approval or
authorization of or filing with any governmental authority, including the
Commission, or any other person or entity on the part of Sporting Magic is
required as a condition to the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby other than the filing of
any documents contemplated by this Agreement. Sporting Magic does not know of
any reason why the NASD will not accept Sporting Magic Common Stock for trading
on any other market or exchange operated by the NASD, subject to meeting the
qualifications of such listing.
2.11 SALARIES. There is set forth on Schedule 2.11 a true and
complete list, as of the date of this Agreement, of all persons who are employed
by Sporting Magic, together with their
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compensation (including bonuses) for the calendar year ended December 31, 2000,
and the rate of compensation (including bonus arrangements) currently being paid
to each such employee.
2.12 ACCRUED COMPENSATION; BENEFITS. Sporting Magic does not have
any outstanding liability for payment of wages, vacation pay (whether accrued or
otherwise), salaries, bonuses, pensions or contributions and does not have any
responsibility for providing medical insurance or medical benefits under any
labor or employment contract, whether oral or written, or pursuant to any law,
rule or regulation or by reason of any past practices with respect to its
current or former officers, directors or employees based upon or accruing with
respect to services of its present or former officers, directors or employees.
2.13 EMPLOYEE BENEFIT PLANS. Sporting Magic does not have, maintain
or contribute to and never has had, maintained or contributed to, any pension
plan, profit sharing plan or employee's savings plan, and is not otherwise
subject to any applicable provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
2.14 MATERIAL CONTRACTS, ETC. Schedule 2.14 contains an accurate
list of all contracts, commitments, leases, instruments, agreements, licenses or
permits, written or oral, to which Sporting Magic is a party or by which it or
its properties are bound (including without limitation contracts with customers,
joint venture or partnership agreements, contracts with any labor organizations,
employment agreements, consulting agreements, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, options to purchase land, liens, pledges
or other security agreements). Each such agreement is legally valid and binding
and in full force and effect.
2.15 TITLE AND AUTHORITY. Sporting Magic has delivered to Next a
stockholder list dated November 7, 2001 (the "NOVEMBER STOCKHOLDER List"). The
stockholders listed on the November Stockholder List are together the holders of
record and, to the knowledge of Sporting Magic, the sole beneficial owners of
all of the outstanding Sporting Magic Common Stock.
2.16 INSIDER TRANSACTIONS. All transactions between Sporting Magic
and its employees, officers, directors and stockholders, and between Sporting
Magic and Young, including any issuance of Sporting Magic Common Stock, have
been or will be, as the case may be, made on an arm's length basis on terms and
conditions comparable to what Sporting Magic would have given to unrelated third
parties. No director, officer or employee of Sporting Magic has any claim of any
nature against Sporting Magic.
2.17 ENVIRONMENTAL. There are no environmental liens, actions or
proceedings, nor is there any cause for any such lien, action or proceeding
related to the business operations of Sporting Magic. There are no substances or
conditions which may support a claim or cause of action against Sporting Magic
or any of Sporting Magic's current or former officers, directors, agents or
employees, whether by a governmental agency or body, private party or
individual, under any Law or Hazardous Materials Regulations. "HAZARDOUS
MATERIALS" means any oil or petrochemical products, PCB's, asbestos, urea
formaldehyde, flammable explosives, radioactive materials, solid or hazardous
wastes, chemicals, toxic substances or related materials, including, without
limitation, any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials" or "toxic
substances" under any
6
applicable federal or state laws or regulations. "HAZARDOUS MATERIALS
REGULATIONS" means any regulations governing the use, generation, handling,
storage, treatment, disposal or release of hazardous materials, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conversation and Recovery Act and the Federal Water
Pollution Control Act.
2.18 NO LIQUIDATION OF NEXT. Sporting Magic has no plan or intention
to (i) liquidate Next, (ii) merge Next into any other corporation, (iii) cause
Next to sell or otherwise dispose any of its assets, except for dispositions
made in the ordinary course of business, or (iv) sell or otherwise dispose of
any of the Next Common Stock acquired pursuant to this Agreement.
2.19 NO REACQUISITION OF SPORTING MAGIC COMMON STOCK. Sporting Magic
has no plan or intention to reacquire any of the Exchange Consideration.
2.20 NO INVESTMENT COMPANY PARTIES. Sporting Magic is not an
"investment company" as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
Code.
2.21 MATERIAL MISSTATEMENTS. The representation and warranties
contained herein do not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein in
light of the circumstances under which they were made, not misleading.
Article III
Next Representations And Warranties
Next represents and warrants to Sporting Magic and Young as follows:
3.1 POWER AND AUTHORITY. Next has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Next, and, no other corporate proceedings on the part of Next are
necessary to authorize this Agreement and the transactions contemplated hereby,
other than a vote of the Next Stockholders.
3.2 NEXT FINANCIAL STATEMENTS. Next has heretofore delivered to
Sporting Magic its unaudited combined financial statements for the year ended
December 31, 2000 and its unaudited combined financial statements for the nine
month period ended September 30, 2001 (collectively, the "NEXT FINANCIAL
STATEMENTS"). The Next Financial Statements have been prepared in accordance
with generally accepted accounting principles, and fairly present, in all
material respects, the financial condition of Next as at the respective dates
thereof, and the results of operations of Next for the periods then ended. At
September 30, 2001, there were no material liabilities, absolute or contingent
of Next that were not shown or reserved against on the balance sheets included
in the Next Financial Statements, except obligations under the contracts set
forth therein. Since September 30, 2001, Next has not sold or otherwise disposed
of or
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encumbered any of the properties or assets reflected on the Next Financial
Statements, or other assets owned or leased by it, except in the ordinary course
of business.
3.3 NO MATERIAL ADVERSE EFFECT. Since September 30, 2001
there has not been any material adverse change in the business, operations,
properties, assets, condition, financial or otherwise of Next.
3.4 DUE ORGANIZATION; POWER; QUALIFICATION. Next is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has the corporate power to own its property
and to carry on its business as now conducted. Next is qualified to do business
as a foreign corporation in each jurisdiction where the failure to qualify would
have a material adverse effect on Next.
3.5 CAPITALIZATION.
(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 13,000,000 shares of common stock and no
shares of preferred stock are issued and outstanding. All the outstanding shares
of Next Common 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.
(b) There are not presently, and on the Closing Date there will not
be any outstanding options, warrants, convertible securities or rights that may
require Next to issue additional shares of its capital stock other than as
listed on Schedule 3.5(b).
3.6 TAX MATTERS.
(a) Next has filed or caused to be filed with the appropriate
federal, state, county, local and foreign governmental agencies or
instrumentalities all tax returns and tax reports required to be filed, and all
taxes, assessments, fees and other governmental charges have been fully paid
when due (subject to any extensions filed on a timely basis).
(b) There is not pending nor, to the best knowledge of Next, is
there any threatened federal, state or local tax audit of Next. There is no
agreement with any federal, state or local taxing authority that may affect the
subsequent tax liabilities of Next.
(c) Without limiting the generality of the foregoing, except as set
forth on Schedule 3.6(c), (i) the Next Financial Statements include adequate
provisions for all taxes, assessments, fees, penalties and governmental charges
which have been or in the future may be assessed against Next with respect to
the period then ended and all periods prior thereto; and (ii) Next is not, on
the date hereof, liable for any taxes, assessments, fees or governmental
charges.
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3.7 NO CONFLICT OR DEFAULT; ENFORCEABILITY; CORPORATE RECORDS;
COMPLIANCE WITH LAW.
(a) Except as set forth on Schedule 3.7(a), neither the execution
and delivery of this Agreement, nor compliance with the terms and provisions
hereof, including without limitation the consummation of the transactions
contemplated hereby, will violate any statute, regulation or ordinance of any
governmental authority, or conflict with or result in the material breach of any
term, condition or provision of the Certificate of Incorporation or By-laws of
Next, nor of any agreement, deed, contract, mortgage, indenture, writ, order,
decree, legal obligation or instrument to which Next is a party or by which it
or any of its respective assets or properties are or may be bound; or constitute
a material default (or an event which, with the lapse of time or the giving of
notice, or both, would constitute a material default) thereunder, nor result in
the creation of imposition of any lien, charge or encumbrance, or restriction of
any nature whatsoever with respect to any properties or assets of Next, nor give
to others any interest of rights, including rights of termination, acceleration
or cancellation in or with respect to any of the properties, assets, contracts
or business of Next.
(b) This Agreement and each other agreement and document delivered
by Next in connection herewith are, or when executed by Next will be, valid and
binding obligations of Next, enforceable in accordance with their respective
terms. Next has permitted Sporting Magic to examine Next's corporate minute and
stock records books. The corporate minute books contain the Certificate of
Incorporation, By-laws and other charter documents of Next as in effect on the
date hereof and a true and complete record of all actions by and meetings of the
directors (and committees thereof) and stockholders of Next and accurately
reflect all transactions referred to therein.
(c) Next is not in violation of any outstanding arbitration award,
judgment, order or decree; or in violation of any Law, including, but not
limited to, any anti-discrimination, hazardous and toxic substances, wage, hour,
working condition, payroll withholding, pension, building, zoning and tax Law.
There have been no allegations of or inquiries concerning any violations of Law
by Next within the past three years.
3.8 LITIGATION. Except as set forth on Schedule 3.8, there are no
actions, suits, investigations, or proceedings pending, nor, to the knowledge of
Next, threatened, against Next, the performance of the terms and conditions
hereof, or the consummation of the transactions contemplated hereby, in any
court or by or before any governmental body or agency, including without
limitation any claim, proceeding or litigation for the purpose of challenging,
enjoining or preventing the execution, delivery or consummation of this
Agreement. Next is not subject to any order, judgment, decree, stipulation or
consent or any agreement with any governmental body or agency which affects its
business or operations.
3.9 GOVERNMENTAL AND OTHER APPROVAL. To the best of its
knowledge, Next has all permits, licenses, orders and approvals of all federal,
state, local or foreign governmental or regulatory bodies required for Next to
conduct its business as presently conducted. Except as set forth on Schedule
3.9, all such permits, licenses, orders and approvals are in full force and
effect and no suspension or cancellation of any of them is threatened, and none
of such permits, licenses, orders of approvals will be affected by the
consummation of the transactions contemplated by this Agreement. No approval or
authorization of or filing with any
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governmental authority or any other person or entity on the part of Next is
required as a condition to the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby other than the filing of
documents contemplated by this Agreement.
3.10 EMPLOYEE BENEFIT PLANS. Next does not have, maintain or
contribute to, and never has had, maintained or contributed to, any pension
plan, profit sharing plan or employees' savings plan, and Next is not otherwise
subject to any applicable provisions of ERISA except as set forth on Schedule
3.10.
3.11 MATERIAL CONTRACTS, ETC. Schedule 3.11 contains an accurate
list of all contracts, commitments, leases, instruments, agreements, licenses or
permits, written or oral, to which Next is a party or by which it or its
properties are bound (including without limitation contracts with customers,
joint venture or partnership agreements, contracts with any labor organizations,
employment agreements, consulting agreements, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, options to purchase land, liens, pledges
or other security agreements) that (i) may give rise to obligations or
liabilities exceeding $50,000, or (ii) generate revenues or income exceeding
$50,000 (collectively, the "MATERIAL CONTRACTS"). Next is not in default of any
Material Contract.
3.12 TITLE AND AUTHORITY. The Next Stockholders are together the
holders of record and the sole beneficial owners of all of the outstanding
shares of Next capital stock being exchanged pursuant to this Agreement.
3.13 MATERIAL MISSTATEMENTS. The representation and warranties
contained herein do not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein in
light of the circumstances under which they were made, not misleading.
Article IV
Next Stockholders' Representation and Warranties
The Next Stockholders represent and warrant to Sporting Magic and
Young as follows:
4.1 INVESTMENT INTENT. Each Next Stockholder does not have any
present plan, intention, or arrangement to dispose of any of the Exchange
Consideration and each Next Stockholder is acquiring such stock for investment
purposes and not with a view towards distribution. Each Next Stockholder
acknowledges that the Exchange Consideration has not been registered under the
Securities Act, or under any state securities laws and, therefore, cannot be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of unless registered under the Securities Act and applicable state securities
laws or unless an exemption from registration is available and, as a result, the
Next Stockholders must bear the risk of an investment in the Exchange
Consideration for a period of time. Each Next Stockholder is an
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"accredited investor" as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. Each Next Stockholder has (i) such knowledge and
experience in financial and business matters that he is capable of independently
evaluating the risks and merits of acquiring the Exchange Consideration; (ii)
independently evaluated the risks and merits of acquiring the Exchange
Consideration and has independently determined that the Exchange Consideration
is a suitable investment for him; and (iii) sufficient financial resources to
bear the loss of his entire investment in the Exchange Consideration.
Article V
Next Covenants
Next agrees that prior to the Closing Date:
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, 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.
5.2 No change shall be made in the number of shares of authorized or
issued Next Common Stock; nor shall any option, warrant, call, right, commitment
or agreement of any character be granted or made by Next relating to its
authorized or issued Next Common Stock; nor shall Next issue, grant or sell any
securities or obligations convertible into or exchangeable for Next Common
Stock.
5.3 Next will not take, agree to take, or knowingly permit to be
taken any action or do or knowingly permit to be done anything in the conduct of
the business of Next or otherwise, which would be contrary to or in breach of
any of the terms or provisions of this Agreement, or which would cause any of
Next's representations contained herein to be or become untrue in any material
respect at the Closing Date.
5.4 Except in the ordinary course of business, as contemplated by
Article I hereof and as set forth in Schedule 5.4, Next will not (i) incur any
indebtedness for borrowed money; (ii) assume, guarantee, endorse, or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other individual, firm or corporation, or (iii) make any
loans, advances or capital contributions to or investments in, any other
individual, firm or corporation, in any such case in excess of $100,000, except
with the consent of Sporting Magic which consent shall not be unreasonably
withheld.
5.5 Except as contemplated in the Next Financial Statements, Next
will not make, alter or change any employment or other contract with any of its
personnel or make, adapt, alter, revise, or amend any pension, bonus,
profit-sharing or other employee benefit plan, or grant any salary increase or
bonus to any person without the prior written consent of Sporting Magic,
11
except for normal year-end or anniversary salary adjustments for employees,
excluding officers, except with the consent of Sporting Magic which consent
shall not be unreasonably withheld.
Article VI
Sporting Magic Covenants
Sporting Magic (and Young with respect to Section 6.6) agrees that
prior to the Closing Date:
6.1 Except as provided in this Agreement, no dividend shall be
declared or paid or other distribution (whether in cash, stock, property or any
combination thereof) or payment declared or made in respect of Sporting Magic
Common Stock, nor shall Sporting Magic purchase, acquire or redeem or split,
combine or reclassify any shares of its capital stock.
6.2 Except as provided in this Agreement, no change shall be made in
the number of authorized or issued shares of Sporting Magic Common Stock (other
than pursuant to this Agreement); nor shall any option, warrant, call, right,
commitment or agreement (other than this Agreement) of any character be granted
or made by Sporting Magic relating to its authorized or issued shares of
Sporting Magic Common Stock; nor shall Sporting Magic issue, grant or sell any
securities or obligations convertible into or exchangeable for Sporting Magic
Common Stock.
6.3 Sporting Magic will not take, agree to take, or knowingly permit
to be taken any action, nor do or knowingly permit to be done anything in the
conduct of the business of Sporting Magic or otherwise, which would be contrary
to or in breach of any of the terms or provisions of this Agreement, or which
would cause any of Sporting Magic's representations and warranties contained
herein to be or become untrue in any material respect at the Closing Date
including without limitation amending Sporting Magic's charter documents and
By-laws, except as otherwise provided hereby.
6.4 Sporting Magic will not make, alter or change any employment or
other contract with any of its management personnel or make, adopt, alter,
revise, or amend any pension, bonus, profit-sharing or other employee benefit
plan, or grant any salary increase or bonus to any person without the prior
written consent of Next.
6.5 Sporting Magic shall transfer all of its assets and liabilities
to an entity controlled by Young.
6.6 Young shall satisfy, without any recourse to or against Sporting
Magic, all liabilities of Sporting Magic, including, without limitation, all
costs incurred by Sporting Magic incident to this Agreement; PROVIDED, HOWEVER,
that Young shall not be responsible for any costs incurred by Next incident to
this Agreement.
12
Article VII
Additional Covenants
7.1 DIRECTORS' MEETING. Each of Next and Sporting Magic will take
all actions necessary in accordance with applicable law and its Certificate of
Incorporation and By-laws to convene a meeting or obtain the written consent of
its directors and, with respect to Next, its stockholders as promptly as
practicable to consider and vote upon the approval of the transactions
contemplated by this Agreement.
7.2 CONDUCT OF BUSINESS PENDING THE CLOSING. Prior to the Closing
Date, unless Sporting Magic and Next shall otherwise agree in writing, each
company shall not (i) operate its business otherwise than in the ordinary
course, or (ii) authorize, recommend or propose any merger, consolidation,
acquisition of assets, disposition of assets, material change in its
capitalization or any comparable event, not in the ordinary course of business
(in each case, other than the transactions contemplated hereby and transactions
as to which written notice has been given to the other companies prior to the
date hereof), provided, however, that Next shall be able to undertake any of the
foregoing with the consent of Sporting Magic which consent shall not be
unreasonably withheld.
7.3 DISCLOSURE. Each party acknowledges that it has, and will have,
possession of important confidential information ("CONFIDENTIAL INFORMATION")
regarding the other parties. Each party hereto shall not use any Confidential
Information except in furtherance of the transactions contemplated hereby and
shall not divulge, communicate, furnish or make accessible any Confidential
Information to any person, firm, partnership, corporation or other entity. No
party hereto shall make any public statement from the date of this Agreement
forward, including without limitation any press release, with respect to this
Agreement and the transactions contemplated hereby, without the prior written
consent of the other parties (which consent may not be unreasonably withheld),
except as may be required by law, in which case the parties shall consult with
each other as to the nature and scope of the required disclosure and any
protective measures which should be taken to preserve the confidentiality of the
disclosed information. If any party becomes legally compelled to disclose
information relating to this Agreement, such party shall provide the other
parties hereto with notice of such requirement to allow such party to seek a
protective order or other remedy. If such protective order or other remedy is
not obtained, or if compliance hereof is waived, each party shall disclose only
that portion of information that is legally required to be disclosed and to
permit the other parties at their expense to take all reasonable steps to
preserve the confidentiality of the transactions hereunder.
7.4 ACCESS. Prior to the Closing, Next shall afford to the officers,
attorneys, accountants, and other authorized representatives of Sporting Magic
free and full access to the premises, books and records of Next in order that
Sporting Magic may make such investigation as it may desire of the affairs of
Next, provided such access is not unreasonably disruptive to Next's business.
Prior to the Closing, Sporting Magic shall afford to the officers, attorneys,
13
accountants, and other authorized representatives of Next free and full access
to the premises, books and records of Sporting Magic so that it may make such
investigations as it may desire of the affairs of Sporting Magic, provided such
access is not unreasonably disruptive to Sporting Magic.
7.5 NO SOLICITATION. Except as provided in the Young Lock-Up
Agreement (as defined in Section 9.11), prior to the Closing, neither Next nor
Sporting Magic may (nor will either of them permit any agent or affiliate to)
solicit, initiate or encourage any Acquisition Proposal (as hereinafter defined)
or furnish any information to, or cooperate with, any person, corporation, firm
or other entity with respect to an Acquisition Proposal. As used herein
"ACQUISITION PROPOSAL" means a proposal for a merger or other business
combination involving such entity or for the acquisition of a substantial equity
interest in, or a substantial portion of the assets of such entity other than
the transaction contemplated hereby. Young shall not sell any of the Sporting
Magic Common Stock held by him and shall not agree to an Acquisition Proposal.
7.6 REGISTRATION OF SHARES. As soon as reasonably
practicable following the Closing Date, Sporting Magic shall file a registration
statement with the Commission to register for resale up to 2,400,000 shares of
Sporting Magic Common Stock issued to consultants for ongoing consulting
services related to acquisitions, to the parties and in the amounts provided on
Schedule 7.6.
Article VIII
Conditions Of Sporting Magic and Young
The obligations of Sporting Magic to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of each of the
following conditions:
8.1 No action shall have been taken, and no statute, rule,
regulation or order shall have been promulgated, enacted, entered, enforced or
deemed applicable to the transactions contemplated hereby by any federal, state
or foreign government or governmental authority or by any court, domestic or
foreign, including entry of a preliminary or permanent injunction, which would,
in the reasonable opinion of Sporting Magic, (a) make the transactions
contemplated hereby illegal, or (b) if the transactions contemplated hereby are
consummated, subject any officer, director, or employee of Sporting Magic to
criminal penalties or to civil liabilities not adequately covered by insurance
or enforceable indemnification maintained by Sporting Magic.
8.2 No action or proceeding before any court or governmental
authority, domestic or foreign, by any government or governmental authority or
by any other person, domestic or foreign, shall be threatened, instituted or
pending which would reasonably be expected to result in any of the consequences
referred to in clauses (a) or (b) of paragraph 8.1 above.
8.3 Next shall have complied in all material respects with its
agreements and covenants herein, and all representations and warranties of Next
herein shall be true and correct in all material respects at the time of Closing
as if made at that time, except to the extent they
14
expressly relate to an earlier date, and Sporting Magic shall have received a
certificate to that effect to the best of the knowledge of Next, signed by the
President of Next.
8.4 Each Next Stockholder shall have complied in all material
respects with its agreements and covenants herein, and all representations and
warranties of each Next Stockholder herein shall be true and correct in all
material respects at the time of the Closing as if made at that time, except to
the extent they expressly relate to an earlier date, and Sporting Magic shall
have received a certificate to that effect to the best knowledge of each Next
Stockholder, signed by each Next Stockholder.
8.5 Next shall have delivered to Sporting Magic good standing
certificates of Next, Next Marketing Inc. and Blue Sky Graphics Inc., dated no
more than 7 days prior to the Closing Date, from the Secretary of State of
Delaware or Indiana, as the case may be.
8.6 Each Next Stockholder shall have delivered to the Transfer
Agent, certificates representing such Next Stockholder's Next Common Stock which
is being transferred hereunder, which certificate shall have been duly endorsed
in blank by such Next Stockholder or with blank stock powers attached, in proper
form for transfer to Sporting Magic.
8.7 Xxxxxx shall have delivered an opinion in the form set forth on
Schedule 8.7.
8.8 The Young Non-Competition Agreement shall have been executed and
delivered.
8.9 $100,000 shall have been delivered by Next to Young.
8.10 Next shall have provided Sporting Magic with audited
consolidated financial statements for the year ended December 31, 2000 and the
eleven month period ended November 30, 2001.
Article IX
Conditions Of Next
The obligations of Next and the Next Stockholders to consummate the
transactions contemplated hereby are subject to the satisfaction of each of the
following conditions:
9.1 The directors of Sporting Magic shall have duly approved the
transactions contemplated hereby in accordance with applicable law.
9.2 No action shall have been taken, and no statute, rule,
regulation or order shall have been promulgated, enacted, entered, enforced or
deemed applicable to the transactions contemplated hereby by any federal, state
or foreign government or governmental authority or by any court, domestic or
foreign, including the entry of a preliminary or permanent injunction, which
would (a) make the transactions contemplated hereby illegal, (b) require the
divestiture by Next or any subsidiary of Next of the shares of any company or of
a material portion of the business of Next and its subsidiaries taken as a
whole, (c) impose material limits on the ability of
15
Next to effectively control the business of Next and its subsidiaries, (d)
otherwise materially adversely affect Next and its subsidiaries taken as a whole
or any Next Stockholder, or (e) if the transactions contemplated hereby are
consummated, subject any officer, director or employee of Next to criminal
penalties or to civil liabilities not adequately covered by insurance or
enforceable indemnification maintained by Next.
9.3 No action or proceeding before any court or governmental
authority, domestic or foreign, by any government or governmental authority or
by any other person, domestic or foreign, shall be threatened, instituted or
pending which would reasonably be expected to result in any of the consequences
referred to in clauses (a) through (e) of paragraph 9.2 above;
9.4 Sporting Magic shall have complied in all material respects with
its agreements and covenants herein, and all representations and warranties of
Sporting Magic herein shall be true and correct in all material respects at the
time of Closing as if made at that time, except to the extent they expressly
relate to an earlier date, and Next shall have received a certificate to that
effect, signed by the President of Sporting Magic;
9.5 Young shall have complied in all material respects with his
agreements and covenants herein;
9.6 Sporting Magic shall have delivered to Next a good standing
certificate of Sporting Magic, dated no more than 7 days prior to the Closing
Date, from the Secretary of State of Delaware;
9.7 All necessary third party and governmental consents and
approvals required for transactions contemplated hereby shall have been
obtained;
9.8 Sporting Magic shall have delivered to the Next Stockholders
certificates representing the Exchange Consideration; and
9.9 The conditions set forth in Article I shall have been complied
with by the appropriate parties.
9.10 L. Xxxxxxx Xxxxxxxx shall have delivered of an opinion in the
form set forth on Schedule 9.10.
9.11 Young shall have signed a lock-up agreement, in the form
attached hereto as Schedule 9.11 (the "YOUNG LOCK-UP"), limiting his right to
sell any of his equity interest in Sporting Magic for six months following the
Closing.
9.12 Sporting Magic shall have no material assets and no
liabilities, and all costs incurred by Sporting Magic incident to the Agreement
shall have been paid or satisfied.
9.13 Sporting Magic shall have filed the notice required pursuant to
Rule 14f-1 of the Exchange Act and shall have mailed such notice to its
stockholders.
16
9.14 The Young Non-Competition Agreement shall have been executed
and delivered.
9.15 Sporting Magic shall have delivered to Next a stockholder list
dated the Closing Date. Except to reflect Sporting Magic's dividend distribution
scheduled for December 21, 2001, the list of stockholders set forth on such
stockholder list shall not differ in any material respect from the November
Stockholder List, and with regards to L. Xxxxxxx Xxxxxxxx, Xxxxx or any
affiliates of Young it shall not differ at all.
Article X
Indemnification
10.1 INDEMNIFICATION BY SPORTING MAGIC. Sporting Magic shall
indemnify and hold harmless Next and its agents, representatives, employees,
officers, directors, stockholders, controlling persons and affiliates
(collectively, the "NEXT INDEMNIFIED PERSONS"), and shall reimburse the Next
Indemnified Persons for, any loss, liability, claim, damage, expense (including,
but not limited to, costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "DAMAGES") arising from or in connection with (a) any inaccuracy
in any of the representations and warranties of Sporting Magic in this Agreement
or in any certificate or document delivered by Sporting Magic pursuant to this
Agreement, or any actions, omissions or state of facts inconsistent with any
such representation or warranty, (b) any failure by Sporting Magic to perform or
comply with any covenant in this Agreement, or (c) any claim by any person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such person with
Sporting Magic (or any person acting on its behalf) in connection with this
Agreement.
10.2 INDEMNIFICATION BY NEXT. Next shall indemnify and hold harmless
Sporting Magic, and its agents, representatives, employees, officers, directors,
stockholders, controlling persons and affiliates (collectively, the "SPORTING
MAGIC INDEMNIFIED PERSONS") and shall reimburse the Sporting Magic Indemnified
Persons for, any Damages arising from or in connection with (a) any inaccuracy
in any of the representations and warranties of Next in this Agreement or in any
certificate delivered by Next pursuant to this Agreement, or any actions,
omissions or state of facts inconsistent with any such representation or
warranty, (b) any failure by Next to perform or comply with any covenant in this
Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Next (or any Person acting on its
behalf) in connection with any of the transactions contemplated by this
Agreement.
10.3 LIMITATIONS AS TO AMOUNT. Neither Sporting Magic nor Next shall
have any liability (for indemnification or otherwise) with respect to the
matters described in clause Sections 10.1 or 10.2, respectively, until the total
of all Damages with respect thereto exceeds $50,000.
10.4 In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 10.1 or 10.2 (the
"INDEMNIFIED PARTY"), the Indemnified Party shall promptly notify the person
against whom such indemnity may be sought
17
(the "INDEMNIFYING PARTY") in writing. A delay in giving notice shall only
relieve the Indemnifying Party of liability to the extent the Indemnifying Party
suffers actual prejudice because of the delay. The Indemnifying Party shall have
the right, at its option and expense, to participate in the defense of such a
proceeding or claim, but not to control the defense, negotiation or settlement
thereof, which control shall at all times rest with the Indemnified Party,
unless the proceeding or claim involves only money damages or relates to a
corporate restructuring, recapitalization or, not an injunction or other
equitable relief, and unless the Indemnifying Party:
(a) irrevocably acknowledges in writing complete responsibility for
and shall indemnify the Indemnified Party, and
(b) furnishes satisfactory evidence of the financial ability to
indemnify the Indemnified Party,
in which case the Indemnifying Party may assume such control through counsel of
its choice and at its expense, but the Indemnified Party shall continue to have
the right to be represented, at its own expense, by counsel of its choice in
connection with the defense of such a proceeding or claim. If the Indemnifying
Party does not assume control of the defense of such a proceeding or claim, (i)
the entire defense of the proceeding or claim by the Indemnified Party, (ii) any
settlement made by the Indemnified Party, and (iii) any judgment entered in the
proceeding or claim shall be deemed to have been consented to by, and shall be
binding on, the Indemnifying Party as fully as though it alone had assumed the
defense thereof and a judgment had been entered in the proceeding or claim in
the amount of such settlement or judgment, except that the right of the
Indemnifying Party to contest the right of the Indemnified Party to
indemnification under the Agreement with respect to the proceeding or claim
shall not be extinguished. If the Indemnifying Party does assume control of the
defense of such a proceeding or claim, it will not, without the prior written
consent of the Indemnified Party settle the proceeding or claim or consent to
entry of any judgment relating thereto which does not include as an
unconditional term thereof the giving by the claimant to the Indemnified Party a
release from all liability in respect of the proceeding or claim. The parties
hereto shall cooperate fully with each other in connection with the defense,
negotiation or settlement of any such proceeding or claim.
10.5 The parties agree that all of the representations and
warranties contained herein shall survive the Closing and continue to be binding
regardless of any investigation made at any time by any party.
Article XI
Post-Closing Matters
11.1 At the Closing, subject to the Next Stockholders being deemed
to be stockholders of record of the reorganized Sporting Magic, Sporting Magic
will cause all of its officers and directors to resign from office and to cause
to be elected to the Board of Directors of Sporting Magic those persons
designated by Next to wit: Xxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxx Xxxx, G.
Xxxxxxx Xxxxx and Xxxxxxxxx Xxxxxx.
18
11.2 Absent the prior written consent of Young, for the one year
period following the Closing Date, Sporting Magic shall not consummate a reverse
split of the Sporting Magic Common Stock unless required to do so by the
underwriter of a $3 million or greater public offering.
Article XII
Miscellaneous
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 January 31, 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.
12.2 EXPENSES. Whether or not the transactions contemplated are
consummated, all out-of-pocket costs and expenses incurred in connection with
the this Agreement and the transactions contemplated will be paid by the party
incurring such expenses.
12.3 BROKERS. Except as set forth on Schedule 12.3, no broker or
finder is entitled to any brokerage or finder's fee or other commission or fee
from any company or based upon arrangements made by or on behalf of any party
with respect to the transactions contemplated by this Agreement.
12.4 ARBITRATION. Any controversy arising out of, connected to, or
relating to any transactions herein contemplated, or this Agreement, including
the indemnification provisions contained herein, or the breach thereof,
including, but not limited to any claims of violations of Federal and/or state
securities acts, banking statutes, consumer protection statutes, federal and/or
state anti-racketeering (e.g. RICO) claims as well as any common law claims and
any state law claims of fraud, negligence, negligent misrepresentations, and/or
conversion and any disputes as to the arbitrability of any such claim shall be
settled by arbitration in the State of Delaware and in accordance with the
commercial rules of the American Arbitration Association by three (3)
arbitrators appointed in accordance with such rules. Any judgment on the
arbitrator's award may be entered in any court having jurisdiction thereof. The
arbitrators shall hear and determine the matter and shall execute and
acknowledge its award, in writing, and if requested by either party, shall make
findings of fact and conclusions of law. Any award determined by the arbitrators
shall be final and binding on the parties, however, in the event of any
misconduct, partiality, corruption or the like of any arbitrator, the parties
shall retain any rights of appeal to which they may be entitled pursuant to
applicable law. The cost and expense of arbitration, including the fees of the
arbitrator, and the reasonable legal and accounting fees and expenses of the
parties,
19
shall be divided between the parties in such proportion as the arbitrators may
determine, and may be assessed against one party if the arbitrators so
determine.
12.5 OTHER ACTIONS. Each of the parties hereto shall execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
12.6 ENTIRE AGREEMENT; WAIVER AND AMENDMENT. This Agreement, the
exhibits and schedules hereto contain the entire agreement by and among Sporting
Magic, Next, Young and the Next Stockholders with respect to the transactions
contemplated hereby. Any and all prior discussions, negotiations, commitments
and understandings relating to the subject matter of this Agreement are
superseded by this Agreement. This Agreement may not be modified, amended or
terminated except by a written agreement specifically referring to this
Agreement signed by all of the parties hereto. No waiver of any breach or
default hereunder shall be considered valid unless in writing signed by the
party giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
12.7 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of laws.
12.8 DESCRIPTIVE HEADINGS. The descriptive headings are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.9 NOTICES. All notices or other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally
or sent by registered or certified mail postage prepaid, addressed as follows:
If to Sporting Magic
Sporting Magic, Inc.
Attn: Xx. Xxxxx Xxxxx, President and CEO
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
with a copy to:
L. Xxxxxxx Xxxxxxxx, Esq.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
If to Next, Next Marketing or Blue Sky:
Next, Inc.
Attn: Xxx Xxxxx, Chairman
0000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
20
with a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
W. Xxxxx XxXxxxxxx, Xx., Esq.
Xxxxxx & Xxxxxx LLP
Suite 1000 Volunteer Building
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
12.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one agreement.
12.11 PUBLICITY. All public announcements relating to this Agreement
or the transactions contemplated hereby will be made only as may be agreed upon
by Sporting Magic and Next or as required by Law. If public disclosure or notice
is required by Law, the disclosing party will use its best efforts to give the
other prior written notice of the disclosure to be made.
12.12 GENDER; NUMBER. The use of a particular pronoun herein shall
not be restrictive as to gender, and the use of the singular or plural shall not
be restrictive as to number, but shall be interpreted in all cases as the
context may require.
12.13 SCHEDULES. The Schedules attached hereto and/or delivered
herewith are an integral part of this Agreement as if fully re-written herein.
12.14 BINDING EFFECT. This Agreement will be binding upon and will
inure to the benefit of the parties and their respective heirs, personal
representatives, successors and permitted assigns. Except as herein provided, no
party will have the right to assign this Agreement, or any of such party's
rights hereunder, without the prior written consent of the other parties.
SIGNATURES ON FOLLOWING PAGE
21
IN WITNESS WHEREOF, this Agreement 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
--------------------------------------
Xxxxx Xxxxx, President & CEO
/S/ XXXXX XXXXX
------------------------------------------
Xxxxx Xxxxx
NEXT, INC.
By: /S/ XXXXX X. XXXXX
--------------------------------------
Xxxxx X. Xxxxx, Chairman
THE XXXXXXX X. III AND XXXXX X. XXXXXXX
LIVING TRUST
By: /S/ XXXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Trustee
/S/ XXXXX X. XXXXX
------------------------------------------
Xxxxx X. Xxxxx
/S/ XXXXXXX X. XXXXXXX
------------------------------------------
Xxxxxxx X. Xxxxxxx
22
SCHEDULE 1.2
TO EXCHANGE AGREEMENT
LIST OF POST CLOSING STOCK HOLDINGS
The 13,000,000 shares of Sporting Magic Common Stock to be issued to the Next
Stockholders shall be distributed as follows
NAME NO. OF SHARES
---- -------------
Xxxxx X. Xxxxx 6,500,000
Xxxxxxx X. Xxxxxxx 3,250,000
Xxxxxxx X. III and Xxxxx X. Xxxxxxx Living Trust 3,250,000
SCHEDULE 1.5
TO EXCHANGE AGREEMENT
YOUNG NON-COMPETITION AGREEMENT
(SEE ATTACHED)
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("AGREEMENT") is entered into as of
this __ day of December, 2001, by and between Sporting Magic, Inc., a Delaware
corporation (the "SMI") and Xxxxx Xxxxx.
RECITALS
WHEREAS, Xxxxx Xxxxx is the principal stockholder of SMI and Xxxxx
X. Xxxxx, Xxxxxxx X. Xxxxxxx and the Xxxxxxx X. III and Xxxxx X. Xxxxxxx Living
Trust (the "TRUST") are the sole stockholders of Next, Inc. (together, the "NEXT
STOCKHOLDERS");
WHEREAS, SMI, Next, Inc. ("NEXT"), Xx. Xxxxx, Xx. Xxxxx Xx. Xxxxxxx
and the Trust are parties an Exchange Agreement (the "EXCHANGE AGREEMENT"),
under which the Next Stockholders shall become the principal stockholders of SMI
and Xx. Xxxxx shall become a minority stockholder (the "REORGANIZATION"); and
WHEREAS, in consideration for a payment of $350,000 and the issuance
of 300,000 shares of SMI common stock, par value $0.001 per share ("COMMON
STOCK"), following the Reorganization Xx. Xxxxx has agreed to forego certain of
his rights to compete with a reorganized SMI, subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises above recited and
the obligations and agreements contained in the Exchange Agreement and as
hereinafter set forth, the parties hereto agree as follows:
1. NON-COMPETE.
Xx. Xxxxx covenants and agrees that for a period of nine (9) months
after the date of this Agreement, he shall not :
(i) directly or indirectly, own, manage, operate, join,
control, finance or participate in the ownership, management, operation, control
or financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with, or use or permit
his name to be used in connection with, any business or enterprise which is
engaged in any business that is competitive with any business or enterprise in
which SMI or any affiliate of SMI is engaged on the date hereof, or had plans or
intentions to engage in as of the date hereof, including, without limitation,
the manufacture, distribution and marketing of apparel and promotional products
and all other actions contemplated by the Exchange Agreement. Xx. Xxxxx
acknowledges that SMI operates on a national basis (in the United States and
Canada) and that this covenant cannot be
limited to a service area in which SMI and its affiliates do business. The
foregoing restrictions shall not be construed to prohibit the ownership by Xx.
Xxxxx of less than ten percent (10%) of any class of securities or equity
interest of any corporation or other business entity which is engaged in a
competitive business having a class of securities registered pursuant to the
Securities Exchange Act of 1934, but neither Xx. Xxxxx nor any group of persons
including Xx. Xxxxx may in any way, either directly or indirectly, manage or
exercise control of any such corporation or entity, guarantee any of its
financial obligations, or otherwise take any part in its business other than
exercising rights as a stockholder; or
(ii) directly or indirectly, either for himself or any
other person (A) solicit or induce, or attempt to solicit or induce any employee
of, or sales agent, independent sales organization or other independent
contractor providing services to, SMI or any affiliate of SMI to leave the
employ of or to cease to provide services, in whole or in part to, SMI or any
affiliate of SMI, or to terminate or fail or refuse to renew or renegotiate, any
contract for services with SMI or any affiliate of SMI, whether such contract is
written or oral, (B) in any way interfere with the relationship between SMI or
any affiliate of SMI and an employee of or sales agent, independent sales
organization or independent contractor of SMI or any affiliate of SMI, (C)
employ, or otherwise engage as an employee, sales agent, independent sales
organization or independent contractor, consultant or otherwise, any employee,
sales agent, independent sales organization or independent contractor of SMI or
any affiliate of SMI (this subsection (ii) shall not apply to any person after
18 months have elapsed subsequent to the date on which such person's employment
by or association with SMI has terminated), or (D) induce or attempt to induce
any customer, supplier, licensee, or business relation of SMI or any affiliate
of SMI, to cease doing business with SMI or such affiliate, or in any way
interfere with the relationship between any customer, supplier, licensee, or
business relation of SMI or any affiliate of SMI.
In the event of a breach by Xx. Xxxxx of any of the covenants set
forth above, the term of such covenant shall be extended by the period of the
duration of such breach.
2. CONSIDERATION.
On the date hereof, SMI (i) shall issue 300,000 shares of Common
Stock, to Xx. Xxxxx and (ii) assume Next's obligation to pay to Xx. Xxxxx
$350,000 as set forth in Section 1.5 of the Exchange Agreement.
3. REMEDIES.
If Xx. Xxxxx breaches any of the covenants set forth above, SMI will
be entitled to the following remedies:
(a) Damages from Xx. Xxxxx, including the recovery of actual,
consequential, incidental, and other damages, as may be appropriate in the
circumstances, plus reasonable costs and attorney's fees incurred as a result of
the breach; and
(b) In addition to rights to damages and any other legal or
equitable remedies, to obtain injunctive or other equitable relief to restrain
any breach or threatened breach, and/or otherwise to specifically enforce the
provisions of Section 1 of this Agreement, it being agreed that money damages
alone would be inadequate to compensate SMI and would be an inadequate remedy
for such breach. Xx. Xxxxx acknowledges and agrees that a violation of any of
the provisions of Section 1 of this Agreement would cause irreparable injury to
SMI. Xx. Xxxxx and SMI acknowledge and agree that any legal requirement that SMI
show or establish the existence of irreparable harm or injury shall be satisfied
by the introduction and receipt of this Agreement into evidence.
(c) The rights and remedies of the parties to this Agreement are
cumulative and not alternative.
4. SUCCESSORS AND ASSIGNS.
This Agreement will be binding upon the parties and will inure to
the benefit of SMI and its respective successors and assigns, and Xx. Xxxxx and
his heirs, representatives and assigns. Neither party may assign any of its
rights under this Agreement without the prior written consent of the other
party. Notwithstanding the foregoing, SMI may assign this Agreement without Xx.
Xxxxx'x consent in the event SMI is merged or consolidated into or with another
corporation or in the event such corporation acquires all or substantially all
of SMI's assets.
5. WAIVER.
Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement, and no single or partial
exercise of any such right, power, or privilege, will operate as: (i) a waiver
of such right, power, or privilege, or (ii) the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law:
(a) No claim or right arising out of this Agreement can
be discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing and signed by the other party;
(b) No waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and
(c) No notice to or demand on one party will be deemed
to be a waiver of any obligation of such party, or of the right of the party
giving such notice or demand, to take further action without notice or demand as
provided in this Agreement.
6. GOVERNING LAW.
This Agreement will be governed by the laws of the State of
Tennessee without regard to conflicts of laws principles. Any legal action,
including an original complaint or third party claim, by or in the right of any
party to this Agreement or any action arising under or related to this
Agreement, including but not limited to a claim for payment under this
Agreement, and also including any non-contract claim, shall be brought and
maintained exclusively in a state or federal court of competent subject matter
jurisdiction in Harrison, Tennessee, and the parties hereby submit themselves to
the personal jurisdiction and venue of those courts for the purpose of any such
actions and hereby waive any defense related to personal jurisdiction, process,
or venue.
7. SEVERABILITY.
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by or invalid, then such provision or
term will be ineffective only to the extent of such prohibition or invalidity,
without invalidating or affecting in any manner whatsoever the remainder of such
provision or term or the remaining provisions or terms of this Agreement. If any
of the covenants set forth in Section 1 of this Agreement are held to be
unreasonable, arbitrary, or against public policy or otherwise unenforceable,
such covenant(s) will be considered divisible with respect to scope, time, and
geographic area, and in such lesser scope, time and geographic area, as will be
effective, binding and enforceable against Xx. Xxxxx.
8. SECTION HEADINGS, CONSTRUCTION.
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances require.
9. NOTICES.
All notices and other communications hereunder shall be in writing
and shall be deemed given when delivered personally, one day after being
delivered to an overnight courier or when telecopied (with a confirmatory copy
sent by overnight courier) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to SMI:
Sporting Magic, Inc.
c/o Next, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
(b) if to Xx. Xxxxx:
Xxxxx Xxxxx
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
10. AMENDMENTS.
This Agreement may not be modified or amended, except with the
mutual written consent of SMI and Xx. Xxxxx.
11. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement among the parties
with respect to the specific subject matter hereof and supersedes all prior
written and oral agreements and understandings between SMI and Xx. Xxxxx with
respect to the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Non-Competition Agreement to be executed and delivered as of the day and year
first above written.
Sporting Magic, Inc.
By:________________________________
Xxxxx X. Xxxxx
________________________________
Xxxxx Xxxxx
SCHEDULE 2.4(A)
TO EXCHANGE AGREEMENT
SPORTING MAGIC FOREIGN QUALIFICATIONS
California
SCHEDULE 2.11
TO EXCHANGE AGREEMENT
SPORTING MAGIC EMPLOYEES AND COMPENSATION
NAME TITLE COMPENSATION
---- ----- ------------
Xxxxx Xxxxx President and Chief Executive Officer None
SCHEDULE 2.14
TO EXCHANGE AGREEMENT
SPORTING MAGIC CONTRACTS
(1) Qualification to do business in the State of California as a foreign
corporation dated July 27, 1998 (California Secretary of State file number
C2120976).
SCHEDULE 3.5(B)
TO EXCHANGE AGREEMENT
NEXT OPTIONS, WARRANTS
Triad Associates, Inc. Such number of shares as shall equal eight
percent (8%) of the issued and outstanding
common stock immediately following the
closing (See Item 3, Schedule 3.11)
Olympic Capital Group 550,000 shares common stock to
be issued immediately following closing (See
Item 3, Schedule 3.11)
RAE & Company 750,000 shares common stock to be issued
immediately following closing (See Item 7,
Schedule 3.11)
Employees, Directors
and Consultants 513,000 shares 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 common stock to be issued
following completion of the $1 million
convertible note offering and upon closing of
the Exchange Agreement (See Item 4, Schedule
3.11)
Convertible Note Holders 1 million shares common stock to be issued
upon conversion of up to $1 million principal
amount Convertible Notes at closing at $1.00
per share
SCHEDULE 3.6(C)
TO EXCHANGE AGREEMENT
EXCEPTIONS TO FINANCIAL STATEMENTS
The Next Financial Statements do not include any provisions for corporate income
taxes, as each of Next Marketing Inc. and Blue Sky Graphics, Inc. have
historically elected to be treated as a "S" corporation.
SCHEDULE 3.7(A)
TO EXCHANGE AGREEMENT
NEXT CONFLICTS
None, except as described in Item 5 of Schedule 3.11.
SCHEDULE 3.8
TO EXCHANGE AGREEMENT
NEXT LITIGATION
Xxxx Xxxxxx, a photographer whose photographs appeared on the cover of Field &
Stream magazine, has alleged that Blue Sky Graphics, Inc. improperly
incorporated copies of his photographs on T-Shirts marketed under the American
Wildlife brandname. No litigation has been filed and Blue Sky Graphics is being
represented by Indianapolis counsel in negotiating a settlement of this matter.
SCHEDULE 3.10
TO EXCHANGE AGREEMENT
NEXT EMPLOYEE BENEFIT PLANS
Blue Sky Graphics, Inc. - Non Standardized 401(k)
Profit Sharing Plan and Trust - Norwest Bank Indiana, N.A.
Norwest Bank Indiana, N.A. Deferred Contribution
Plan and Trust
SCHEDULE 3.11
TO EXCHANGE AGREEMENT
NEXT MATERIAL CONTRACTS
1. Agreement dated July 24, 2001 with Triad Associates, Inc.
2. Employment Agreements dated as of December 19, 2001 with Xxxxx X. Xxxxx,
Xxxxxxx X. Xxxxxxx III, and Xxxxx Xxxxxxx.
3. Contract dated November 7, 2001 with Morgan, Spaulding, Inc. with attached
Term Sheet
4. Contract dated November 8, 2001 with M&J Holdings, Inc.
5. AmSouth Bank Loan and Security Agreement dated April 19, 1999, as amended,
together with related documentation (as to which Next has requested and
received a temporary consent that is valid through January 15, 2002 in
connection with the transactions contemplated hereby).
6. Engagement Agreement with Xxxxxx & Kleigman LLP
7. Consulting and Noncompetition Agreement with RAE & Company
8. Note (Next, Inc.) to First Federal Savings Bank of Wabash dated June 22,
2001 in the original principal amount of $495,974.56, with related loan
documentation
9. Note (Next, Inc.) to First Federal Savings Bank of Wabash dated January 4,
2001 in the original principal amount of $25,000, with related loan
documentation (Dunbrooke Worldwide)
10. Note (Next, Inc.) to First Federal Savings Bank of Wabash dated January 4,
2001 in the original principal amount of $25,000, with related loan
documentation (Alpha Shirts)
11. Note (Next, Inc.) to First Federal Savings Bank of Wabash dated January 4,
2001 in the original principal amount of $25,000, with related loan
documentation (Xxxxxxxx Sports)
12. Note (Next, Inc.) to First Federal Savings Bank of Wabash dated March 1,
2001 in the original principal amount of $500,100, with related loan
documentation
13. Note (Next, Inc.) to First Federal Savings Bank of Wabash dated January 17,
2001 in the original principal amount of $300,000, with related loan
documentation.
14. Note (Blue Sky Graphics, Inc.) to Xxxxxxx Xxxxxx Bank and Trust Company
dated December 1, 1996 in the original principal amount of $367,500, with
related loan documentation.
SCHEDULE 5.4
TO EXCHANGE AGREEMENT
PERMITTED INDEBTEDNESS
1. Indebtedness incurred in the ordinary course of business through draws on
the existing AmSouth Bank line of credit (See Item 5, Schedule 3.11)
2. Indebtedness to be incurred pursuant to the $1 million convertible note
offering pursuant to the M&J Holdings, Inc. Placement Agreement (See Item
4, Schedule 3.11)
SCHEDULE 7.6
TO EXCHANGE AGREEMENT
REGISTRATION FOR RESALE OF CONSULTANT SHARES
Triad Associates, Inc. 1.1 million shares of Sporting Magic
Common Stock
Olympic Capital Group 550,000 shares of Sporting Magic Common Stock
RAE & Company 750,000 shares of Sporting Magic Common Stock
SCHEDULE 8.7
TO EXCHANGE AGREEMENT
FORM OF LEGAL OPINION OF XXXXXX XXXXXXXX FROME XXXXXXXXXX & XXXXXXX LLP
(SEE ATTACHED)
December __, 2001
Sporting Magic, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Re: NEXT, INC.
Ladies and Gentlemen:
We have acted as counsel to Next, Inc., a Delaware corporation (the
"COMPANY"), in connection with the transactions contemplated by the Exchange
Agreement dated as of December __, 2001 (the "EXCHANGE AGREEMENT"), among the
Company, Xxx Xxxxx, Xxxx Xxxxxxx, Sporting Magic, Inc., a Delaware corporation
("SPORTING MAGIC"), and Xxxxx Xxxxx. This opinion is being delivered to you
pursuant to Section 8.8 of the Exchange Agreement. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to such terms in the
Exchange Agreement.
In connection with the opinions expressed herein, we have examined
originals or copies and, to the extent we have deemed appropriate, we have
relied upon the following:
(1) the Exchange Agreement;
(2) the Cash Escrow Agreement;
(3) the Stock Escrow Agreement;
(4) the Young Non-Competition Agreement;
(5) the Young lock-up agreement dated December __, 2001;
(6) the Written Action in Lieu of a Meeting of the Board
of Directors of the Company dated December __, 2001; and
(7) the Written Action in Lieu of a Meeting of the
stockholders of the Company dated December __, 2001.
As used herein, the term "BASIC DOCUMENTS" refers to the
documents listed in items 1-5 above.
We have also examined such other documents, agreements
and records and made such investigations and examinations of law as we have
deemed necessary or appropriate as a basis for the opinions set forth herein. As
to any facts material to this opinion, we have relied upon the corporate records
of the Company, certifications, statements and representations of officers and
other representatives of the Company, certificates of public officials and the
representations, warranties and covenants of the parties set forth in the
Exchange Agreement, and are assuming that such certifications, representations,
warranties and covenants were when made, and on the date hereof are, true and
complete. We have made no independent investigation of the accuracy or
completeness of such matters.
Any reference herein to "our knowledge" or any
derivation thereof shall mean the actual knowledge of attorneys in the firm
actually involved in the transactions contemplated by the Exchange Agreement
without any special or additional investigation undertaken for the purposes of
this opinion.
In our examination, we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the completeness and
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies, which facts we
have not independently verified. We have further assumed without any independent
investigation (i) the due organization and valid existence of each party other
than the Company, (ii) the full power and authority of each party other than the
Company to execute, deliver and perform each document heretofore, or hereafter
to be, executed and delivered or to be done by such party, (iii) the due
authorization, execution and delivery by each party other than the Company of
each document heretofore, or hereafter to be, executed and delivered by such
party and (iv) the legality, validity, binding effect and enforceability as to
each party other than the Company of each document heretofore, or hereafter to
be, executed and delivered and of each other act heretofore, or hereafter to be,
done by such party.
Based upon the foregoing and upon such investigation as
we have deemed necessary, we are of the following opinion:
1. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and is in good standing
under such laws. The Company has the requisite corporate power to own the
properties owned by it and to carry on its business as presently conducted.
2. The Company has all requisite corporate power and
authority to execute and deliver the Basic Documents and to carry out and
perform its obligations under the terms of the Basic Documents.
3. The Company's authorized capital consists entirely of
______________ shares of Next Common Stock.
4. The Next Common Stock to be exchanged on the Closing
Date, pursuant to the Exchange Agreement, has been duly and validly authorized
and issued, is fully paid and non-assessable and, to our knowledge, free of any
liens, encumbrances and preemptive or similar rights.
5. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of the Basic Documents and the performance of the Company's
obligations under the Basic Documents has been taken. Each of the Basic
Documents, when executed and delivered by the Company, as applicable, shall
constitute the valid and binding obligations of the Company, enforceable against
it in accordance with their respective terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, moratorium or other
similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies.
6. The execution, delivery and performance of and
compliance by the Company with the terms of the Basic Documents do not violate
any provision of the Company's Certificate of Incorporation or Bylaws, or any
provision of any applicable federal, state or local law, rule or regulation.
7. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of the Exchange Agreement and the other agreements contemplated thereby.
We are authorized to practice law in the State of New
York and we do not purport to be experts on, or to express any opinion hereunder
concerning, any law other than the law of the State of New York, the General
Corporation Law of the State of Delaware (the "DGCL") and the federal law of the
United States of America. In rendering our opinion in the second sentence of
paragraph (5) above, we have assumed that the laws of the State of Delaware are
the same as the laws of the State of New York.
The opinions expressed herein are rendered as of the
date hereof only in connection with the Exchange Agreement and are solely for
your benefit. These opinions may not be relied upon for any other purpose, and
may not be furnished to, quoted to or relied upon in any manner for any purpose
by any other person, firm or corporation. Our opinions are expressly limited to
matters set forth above and we render no opinion, whether by implication or
otherwise, as to any other matters relating to the Company. We assume no
obligation to advise you of facts, circumstances, events or developments that
hereafter may be brought to our attention and which may alter, affect or modify
the opinions expressed herein.
Very truly yours,
XXXXXX XXXXXXXX FROME XXXXXXXXXX & XXXXXXX LLP
SCHEDULE 9.10
TO EXCHANGE AGREEMENT
FORM OF LEGAL OPINION OF L. XXXXXXX XXXXXXXX
(SEE ATTACHED)
December __, 2001
Next, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxx 00000
Re: SPORTING MAGIC, INC.
Ladies and Gentlemen:
I have acted as counsel to Sporting Magic, Inc. a
Delaware corporation (the "COMPANY"), in connection with the transactions
contemplated by the Exchange Agreement dated as of December __, 2001 (the
"EXCHANGE AGREEMENT"), among the Company, Xxxxx Xxxxx, Next, Inc., a Delaware
corporation, Xxx Xxxxx and Xxxx Xxxxxxx. This opinion is furnished to you
pursuant to Section 9.11 of the Exchange Agreement. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to such terms
in the Purchase Agreement.
In connection with the opinions expressed herein, I have
examined originals or copies and, to the extent I have deemed appropriate, I
have relied upon the following:
(1) the Exchange Agreement;
(2) the Cash Escrow Agreement;
(3) the Stock Escrow Agreement;
(4) the Young Non-Competition Agreement;
(5) the Young lock-up agreement dated December __,
2001; and
(6) the Written Action in Lieu of a Meeting of the
Board of Directors of the Company dated December __, 2001.
As used herein, the term "BASIC DOCUMENTS" refers to the
documents listed in items 1-5 above.
I have also examined such other documents, agreements
and records and made such investigations and examinations of law as I have
deemed necessary or appropriate as a basis for the opinions set forth herein. As
to any facts material to this opinion, I have relied upon the corporate records
of the Company, certifications, statements and representations of officers and
other representatives of the Company, certificates of public officials and the
representations, warranties and covenants of the parties set forth in the
Exchange Agreement, and am assuming that such certifications, representations,
warranties and covenants were when made, and on the date hereof are, true and
complete. I have made no independent investigation of the accuracy or
completeness of such matters.
In my examination, I have assumed the genuineness of all
signatures, the legal capacity of natural persons, the completeness and
authenticity of all documents submitted to me as originals, the conformity to
original documents of all documents submitted to me as certified or photostatic
copies, and the authenticity of the originals of such copies, which facts I have
not independently verified. I have further assumed without any independent
investigation (i) the due organization and valid existence of each party other
than the Company, (ii) the full power and authority of each party other than the
Company to execute, deliver and perform each document heretofore, or hereafter
to be, executed and delivered or to be done by such party, (iii) the due
authorization, execution and delivery by each party other than the Company of
each document heretofore, or hereafter to be, executed and delivered by such
party and (iv) the legality, validity, binding effect and enforceability as to
each party other than the Company of each document heretofore, or hereafter to
be, executed and delivered and of each other act heretofore, or hereafter to be,
done by such party.
Based upon the foregoing and upon such investigation as
I have deemed necessary, I am of the following opinion:
1. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and is in good standing
under such laws. The Company has the requisite corporate power to own the
properties owned by it and to carry on its business as presently conducted.
2. The Company has all requisite corporate power and
authority to execute and deliver the Basic Documents, and to issue the Exchange
Consideration, and to carry out and perform its obligations under the terms of
the Basic Documents.
3. The authorized capital stock of the Company consists
entirely of 25,000,000 shares of Sporting Magic Common Stock.
4. Immediately after giving effect to the transactions
contemplated by the Exchange Agreement, the Exchange Consideration sold and
issued on the Closing Date will have been duly and validly authorized and issued
and, assuming payment therefor against delivery as provided in the Exchange
Agreement, will be fully paid and non-assessable and free of any liens,
encumbrances and preemptive or similar rights.
5. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of the Basic Documents, the authorization, exchange, issuance
and delivery of the Exchange Consideration and the performance of the Company's
obligations under the Basic Documents has been taken. Each of the Basic
Documents, when executed and delivered by the Company and Young, as applicable,
shall constitute the valid and binding obligations of the Company and Young, as
applicable, enforceable against them in accordance with their respective terms,
except to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or other similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable remedies.
6. The execution, delivery and performance of and
compliance by the Company with the terms of the Basic Documents and the issuance
of the Exchange Consideration: (i) do not violate any provision of the Company's
Certificate of Incorporation or Bylaws, or any provision of any applicable
federal, state or local law, rule or regulation.
7. Except as provided in the Exchange Agreement and
except for the filing of a Form D with the Securities and Exchange Commission
and filings under state "Blue Sky" laws, no consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company or Young is required in connection with the valid execution
and delivery of the Exchange Agreement and the other agreements contemplated
thereby or the offer, sale or issuance of the Exchange Consideration, or the
consummation of any other transaction contemplated on the part of the Company or
Young thereby.
8. The offer, sale and issuance of the Exchange
Consideration to be issued in conformity with the terms of the Exchange
Agreement constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended, and the "Blue Sky" laws of
the various states (other than state notice filings).
I am are authorized to practice law in the State of
California and I do not purport to be an expert on, or to express any opinion
hereunder concerning, any law other than the law of the State of California, the
General Corporation Law of the State of Delaware (the "DGCL") and the federal
law of the United States of America. In rendering my opinion in the second
sentence of paragraph (5) above, I have assumed that the laws of the State of
Delaware are the same as the laws of the State of California.
The opinions expressed herein are rendered as of the
date hereof only in connection with the Exchange Agreement and are solely for
your benefit. These opinions may not be relied upon for any other purpose, and
may not be furnished to, quoted to or relied upon in any manner for any purpose
by any other person, firm or corporation. My opinion is expressly limited to
matters set forth above and I render no opinion, whether by implication or
otherwise, as to any other matters relating to the Company. I assume no
obligation to advise you of facts, circumstances, events or developments that
hereafter may be brought to my attention and which may alter, affect or modify
the opinions expressed herein.
Very truly yours,
L. Xxxxxxx Xxxxxxxx, Esq.
SCHEDULE 9.11
TO EXCHANGE AGREEMENT
FORM OF YOUNG LOCK-UP AGREEMENT
(SEE ATTACHED)
LOCKUP AGREEMENT
December __, 2001
Next, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
Sports Magic, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
In consideration for Sporting Magic, Inc.'s (the "COMPANY")
commitment to (i) issue the undersigned 300,000 shares of common stock and (ii)
assume the obligation to pay the undersigned $350,000 (the "OBLIGATION")
pursuant to the terms and conditions set forth in the Exchange Agreement by and
among the undersigned, Company, Next, Inc. ("NEXT"), Xxxxx X. Xxxxx, Xxxxxxx X.
Xxxxxxx and the Xxxxxxx X. III and Xxxxx X. Xxxxxxx Living Trust (the "EXCHANGE
AGREEMENT"), and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby agrees that
he will not, directly or indirectly, sell, offer, contract or option to sell
(including without limitation any short sale), pledge, transfer, establish an
open "put equivalent position" within the meaning of Rule 16a-l(h) under the
Securities Exchange Act of 1934, as amended, or otherwise dispose of any of the
equity securities of the Company (the "SHARES") held by the undersigned, or
publicly announce the undersigned's intention to do any of the foregoing, for a
period commencing on the date hereof and continuing for six months thereafter;
PROVIDED, HOWEVER, that commencing on the three month anniversary of the date
hereof, the undersigned is permitted to sell up to 10,000 Shares per month. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of Shares,
or securities convertible into or exchangeable or exercisable for Shares, held
by the undersigned except in compliance with the foregoing restrictions.
This Agreement is irrevocable and will be binding on the undersigned
and his respective successors, heirs, personal representatives, and assigns.
This Agreement, however, shall terminate immediately should (a) Next
or the Company register any Shares with the Securities and Exchange Commission
(the "COMMISSION") while this Agreement is in effect other than (i) Shares
registered pursuant to Section 7.6 of the Exchange Agreement, (ii) Shares
registered pursuant to acquisitions made by the Company if the recipients of
such Shares execute Lockup Agreements with terms substantially similar to those
contained in this Agreement ("SIMILAR LOCKUP AGREEMENTS") or (iii) following the
payment of the Obligation, Shares registered for Xxx Xxxxx or Xxxx Xxxxxxx
following their execution of Similar Lockup Agreements, (b) Next or the Company
fail to timely file any mandatory disclosure documents with the Commission or
(c) the Company complete a reverse stock split following a $3 million public
secondary offering.
Very truly yours,
Xxxxx Xxxxx
SCHEDULE 12.3
TO EXCHANGE AGREEMENT
BROKERAGE AND FINDER'S FEES
See Schedule 3.5(a)
