Settlement of Earn Out
25 Juli 2003 - 9:01AM
UK Regulatory
RNS Number:9579N
Sportingbet PLC
25 July 2003
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES OF
AMERICA, CANADA, AUSTRALIA OR JAPAN
25 July 2003
Sportingbet Plc
("Sportingbet" or the "Company")
Settlement of SportsBook earn out
and
completion of bank facilities
On 14 July 2003, the Board of Sportingbet announced that it had agreed, in
principle, to renegotiate and settle the Company's earn-out obligations (the "
Settlement") with the vendors of SportsBook (the "Vendors") in respect of its
acquisition in 2001.
The Board is pleased to announce that the Company has reached and completed
formal agreements to implement the Settlement.
The Settlement is in line with the announcement of 14 July 2003 and comprises
the issue to the Vendors of 28,580,358 new ordinary shares, a convertible loan
note (convertible into a further 83,171,926 new ordinary shares) and a non
interest bearing Loan Note to the value of #39.9 million.
The Settlement satisfies all amounts and obligations due to the Vendors under
the 2001 Sportsbook Acquisition Agreement and related contracts (the "2001
Agreements"). Accordingly, the 2001 Agreements have now been effectively
terminated.
A detailed summary of the terms of the Settlement is set out in the Appendix to
this announcement.
The Company has simultaneously entered into new facilities with Barclays Bank
PLC under which it has an overdraft facility of up to #10.5 million and a
revolving loan facility of up to #10 million.
Enquiries:
Sportingbet Plc
Nigel Payne 020 7251 7260
Cubitt Consulting
Peter Ogden 020 7367 5100
Appendix
Summary of the Settlement
Principal terms of the Settlement
1. All obligations under the 2001 Agreements are effectively terminated
2. Sportingbet will issue to the Vendors:
- US$65 million of loan notes (the "US$ Loan Notes")
- 28,580,358 new ordinary shares in Sportingbet which, together with the
shares already held by the Vendors and their associates, will increase their
interest in the Company to 41,347,368 ordinary shares, representing 19.9 per
cent of the Company's enlarged issued share capital
- US$37.4 million of unsecured, non-interest bearing, non-transferable,
mandatorily convertible notes 2020 (the "US$ Convertible Notes") convertible at
any time, in whole or in part, at the holder's option into an aggregate of
83,171,926 new ordinary shares in the Company
3. The Casino Management and Marketing Agreement entered into as part of the
2001 Agreements has been terminated resulting in full ownership of the casino
websites and their revenues allied to the SportsBook websites reverting to
Sportingbet
4. The Barclays Facilities (as described below) have been entered into
concurrently
5. The consultancy agreements with associates of the Vendors entered into as
part of the 2001 Sportsbook Acquisition are replaced with a new agreement (the "
Consultancy Agreement")
The Settlement Agreement will be available for inspection at the Company's
registered office, 6th Floor, Transworld House, 82-100 City Road, London, for a
period of 28 days from the date of this announcement and further at the
Company's Annual General Meeting to be held in October 2003.
Principal terms of the US$ Loan Notes
1. Principal amount
US$65 million nominal issued under the Settlement.
2. Redemption
Up to US$30 million nominal of the US$ Loan Notes will be redeemed following the
draw down of the Barclays Facilities and the balance will be redeemed quarterly
from the Company's available cash (to the extent permitted by the Barclays
Facilities and not required to meet the Company's October 2003 Sporting Odds
repayment obligations) after the provision of a fixed #5 million sum in respect
of Sportingbet's anticipated future working capital and development
requirements. Any amounts thereafter outstanding are redeemable in full on 31
January 2007.
3. Transferability
The US$ Loan Notes are not transferable except with the Company's consent
4. Status and Security
The US$ Loan Notes are secured obligations of the Company and shall rank as
second fixed and floating charges (subordinated to the security granted under
the Barclays Facilities) over the assets and undertakings of the Company and
certain subsidiaries
5. Restrictions on the Company
Subject to the consent of the Vendors (not to be unreasonably withheld), the
Company has agreed to a number of restrictions, including that it will not:
- Enter into any agreement outside the ordinary course of business
- Incur or create any form of borrowing or indebtedness
- Issue any further shares or declare a dividend or buy back shares in
the Company
- Incur any expenditure materially in excess of that provided for in
the Company's budget, such budget to have been agreed with the Vendors
- Employ or amend (except in the usual course of business) the terms of
employment or terminate the employment of any employee or director with a salary
in excess of #100,000 per annum (or currency equivalent)
- Lend money to any person or enter into any commitment for capital
expenditure or investment above $100,000 (or currency equivalent)
- Acquire any assets in a single or related series of transactions for
a consideration of above $100,000 (or currency equivalent)
6. Events of default
The following events of default could, at the Vendors' option, accelerate the
outstanding principal amount of the US$ Loan Notes becoming immediately due and
payable:
- Non-payment of amounts due within 10 business days of the due date
- Material breach of any other obligations if unremedied within 10
business days of notification (including a breach of obligations under the
Barclays Facilities)
- Insolvency or similar proceedings being commenced against the Company
or any of its material subsidiaries
- The Company ceasing to carry on all or a material part of its current
business
- It being or becoming unlawful for the Company or any material
subsidiary to perform or comply with any of its or their obligations under the
US$ Loan Notes or any such obligation not being or ceasing to be legal, valid
and binding.
In addition, following an event of default, the Vendors have the right to
convert the outstanding principal amount of the unredeemed US$ Loan Notes into
new Sportingbet ordinary shares at 27 pence per share and at an exchange rate of
#1:US$1.668.
7. Interest
Save in the event of a default, the US$ Loan Notes will be interest free
The US$ Convertible Notes
1. Principal amount
US$37,457,309 nominal
2. Redemption
If not previously converted by 31 December 2020, the US$ Convertible Notes will
be, at the Company's option, converted into Sportingbet ordinary shares on the
same terms as a voluntary conversion or redeemed in cash
3. Transferability
The US$ Convertible Notes are not transferable except with the Company's
consent. However, they may be transferred immediately before the final
redemption date in 2020 if the Company elects for mandatory conversion
4. Status and Security
The US$ Convertible Notes shall rank pari passu with the claims of all the
Company's other unsecured creditors and shall be unsecured obligations of the
Company
5. Interest
Save in the event of a default, the US$ Convertible Notes will be interest free
6. Conversion rights
At the holder's request, the US$ Convertible Notes can be converted at any time
in whole or part into new Sportingbet ordinary shares at a price of 27 pence per
share and at an exchange rate of #1:US$1.668, into a maximum of 83,171,976 new
ordinary shares
7. Restrictions and events of default
There are no events of default or restrictions on conduct of business provided
for in the US$ Convertible Notes
Barclays Facilities
Barclays Bank PLC ("Barclays") has provided an overdraft facility of up to
#10.5m ("Overdraft Facility") and a revolving loan facility of up to #10m which
is repayable by 31 March 2005 ("Loan Facility").
The facilities are secured facilities with fixed and floating charges over the
Company's and certain subsidiaries' assets. The Loan Facility is subject
following draw down to there being, in Barclays' opinion, no material adverse
change in the financial or trading position or prospects of the Company or any
guarantor in its/their ability to perform or comply with its/their obligations
under the Loan Facility. The Vendors have arranged a guarantee in respect of the
loan and the cost of providing such guarantee will be met by the Company
Principal terms of the Consultancy Agreement
1. One of the Vendors will provide consultancy services to the US businesses
of the Group. To date, these services have comprised primarily the provision of
marketing expertise.
2. The Group will pay a fixed fee (inclusive of expense) per annum in line
with the previous consultancy agreement and an annual incentive bonus calculated
by reference a fixed minimum net profit achieved by the US businesses in excess
of $25 million.
3. The initial term of the Consultancy Agreement expires on 31 January 2007
(unless terminated earlier by the Vendors on giving 6 months' prior notice at
any time up to 31 July 2006) and is renewable thereafter for 12 month periods by
agreement
4. Sportingbet may only terminate the Consultancy Agreement in certain
limited specified circumstances where the Vendors are unable to provide the
services due
5. Sportingbet will retain the present and future copyright and other
intellectual property rights in any product or work developed by the Vendors
during the term of the agreement. However, the Vendors shall be granted a
royalty free perpetual license to use such copyrights or designs originated by
the Vendors during the term of the agreement
This information is provided by RNS
The company news service from the London Stock Exchange
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