Document:

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                                                                     EXHIBIT 4.1

                                                                  EXECUTION COPY

                             RESTRUCTURING AGREEMENT

        This RESTRUCTURING AGREEMENT (this "Agreement") is entered into as of
February 22, 2001 between Quokka Sports, Inc., a Delaware corporation (the
"Company"), and the holders of the Notes (as defined below) set forth on
Schedule A hereto (the "Participating Noteholders").

                                    RECITALS

        WHEREAS, on September 15, 2000, the Company issued $77,400,000 aggregate
principal amount of its 7% Convertible Subordinated Promissory Notes (the
"Notes") and warrants to purchase 2,805,750 shares of the Company's Common
Stock;

        WHEREAS, by letter dated January 12, 2001, the Company notified the
Noteholders that it was in breach the covenant contained in Section 2.6 of the
Noteholders Agreement and acknowledged that such breach constituted an Event of
Default (as defined in the Note) as a result of which Event of Default (as well
as the additional Events of Default referenced in the immediately succeeding
WHEREAS Clause), the maturity of the Notes is subject to acceleration pursuant
to the terms thereof;

        WHEREAS, as of the date hereof, as a result of the accrual of interest
on the Notes since the date of the original issuance through the date hereof,
the Notes are currently outstanding in the principal amount of approximately
$76,000,000;

        WHEREAS, the Company desires (i) to acquire from the Noteholders waivers
of the breach constituting an Event of Default referenced above as well as the
breaches described in Section 7.1(d) hereof and (ii) to redeem for cash certain
outstanding Notes at a discounted price;

        WHEREAS, the Company has offered to the Noteholders to restructure the
terms of the Participating Noteholders' investment in the Company in accordance
with the terms set forth in this Agreement in exchange for the receipt of the
Waiver, and the Participating Noteholders have agreed to accept such offer
subject to the terms set forth in this Agreement.

        WHEREAS, the Participating Noteholders' aggregate holdings represent the
consent of the "Required Holders" for purposes of amending, and waiving
defaults, under the Noteholders Agreement, the consent of the "Required
Purchasers" for purposes of amending, and waiving defaults, under the Note
Purchase Agreement and the requisite consent for amending, and waiving defaults
under, any other Transaction Documents to effectuate the purposes of this
Agreement.

        NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:

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                                    ARTICLE 1
                                   DEFINITIONS

        Section 1.1   Certain Defined Terms.

        Capitalized terms not otherwise defined herein shall have the meanings
set forth in Note Purchase Agreement, dated as of September 15, 2000 between the
Company, GE Capital Equity Investments, Inc. and the other purchasers named on
Schedule 1.1 thereto or, if not defined therein, the definitions set forth in
the other Restructuring Documents or, if not defined therein, the Transaction
Documents. In addition, the following terms shall have the following meanings:

        "Amended Note" means the Amended Promissory Note (amending the
Promissory Note originally issued on September 15, 2000) in the form of Exhibit
A delivered to Participating Noteholders in connection with the transactions
contemplated by this Agreement.

        "Change of Control Transaction" means the merger or consolidation of the
Company with or into another Person or the merger of another Person with or into
the Company, the sale, lease, transfer or conveyance, in a transaction or series
of transactions, of all or substantially all the assets of the Company to
another Person, the acquisition of beneficial ownership (as defined in Rule
13d-3 under the Exchange Act without regard to the 60-day exercise period) by
any person (as defined in Section 13(d) of the Exchange Act) together with its
affiliates and associates (as each of such terms are defined in Rule 405 under
the Securities Act) of securities constituting in excess of 50% of the Company's
voting power (excluding in all cases beneficial ownership of Notes, Amended
Notes or Warrants to the extent such securities are not convertible as a result
of applicable conversions on limitation contained therein) (such beneficial
ownership, the "Controlling Equity Interest Event").

        "Closing Date" has the meaning set forth in Section 8.1 hereof.

        "Note Repurchase Price" means $.50 per $1.00 principal amount of Notes
surrendered by a Participating Noteholder pursuant to Section 4.1.

        "PIK Preferred Certificate of Designations" shall mean the certificate
of Designations establishing the terms of the PIK Preferred Shares.

        "PIK Preferred Shares" means the shares of pay-in-kind preferred stock
of the Company issued pursuant to Section 5.1 of this Agreement.

        "Required Holders" has the meaning set forth in the Noteholders
Agreement.

        "Restructuring Documents" means this Agreement, the Amended Notes and
the PIK Preferred Shares (including the Certificate of Designations establishing
the terms thereof).

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                                    ARTICLE 2
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        The Company hereby represents and warrants to each Participating
Noteholder as of the date hereof as follows:

        Section 2.1   Organization, Good Standing and Qualification.

        (a) Each of the Company and its Subsidiaries (as defined below) is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation, as
the case may be, and has all requisite power and authority to own, lease and
operate its properties and assets and to carry on its business as currently
conducted. The Company has all requisite corporate power and authority to
execute and deliver the Restructuring Documents, to consummate the transactions
contemplated thereby and to perform its obligations thereunder. The Company has
delivered to the Participating Noteholders at the Closing or has made publicly
available a complete and correct copy of the Restated Certificate (as defined in
Section 2.12) and the Bylaws (as defined in Section 2.12).

        (b) Each of the Company and its Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation or
other entity in all jurisdictions in which the character or location of its
activities or of the properties owned or operated by it makes such qualification
necessary, except for such failures which, individually or in the aggregate,
would not have a material adverse effect on the business, assets, operations,
liabilities, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole, or on the ability of the Company
to perform its obligations under the Transaction Documents and the Restructuring
Documents or to consummate the transactions contemplated thereby (a "Material
Adverse Effect").

        Section 2.2   Subsidiaries.

        (a) As used herein, "Subsidiary" means, with respect to any Person (a) a
corporation a majority of whose capital stock with the general voting power
under ordinary circumstances to vote in the election of directors of such
corporation (irrespective of whether or not, the time, any other class or
classes of securities shall have, or might have, voting power by reason of the
happening of any contingency) is at the time beneficially owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof, or (b) any other Person (other than a corporation),
including, without limitation, a joint venture, in which such Person, one or
more Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, (x) have at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Persons performing such functions) or (y)
is a general partner or managing member. Schedule 2.2(a) hereto accurately sets
forth each Subsidiary of the Company, including its name, place of incorporation
or formation, and if not wholly owned directly or indirectly by the Company, the
record ownership as of the date of this Agreement of all capital stock or other
equity interests issued thereby. Except as set forth on Schedule 2.2(a) hereto,
all shares of capital stock or other equity interests of any Subsidiary have
been duly authorized and validly issued, are fully paid and nonassessable and
are directly or indirectly owned by the Company or

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such other person as is set forth herein, free and clear of any Encumbrance and
have not been issued in violation of, nor subject to, any preemptive,
subscription or other similar rights. "Encumbrance" means any security interest,
pledge, mortgage, lien (statutory or other), charge, option to purchase, lease
or otherwise acquire any interest or any claim, restriction, covenant, title
defect, hypothecation, assignment, deposit arrangement or other encumbrance of
any kind or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement).

        (b) Except for the Subsidiaries and as set forth on Schedule 2.2(b)
hereto, neither the Company nor any of its Subsidiaries owns any capital stock,
membership interests, security or other interest in any other Person.

        Section 2.3   Capitalization; Voting Rights.

        (a) As of January 31, 2001, the capitalization of the Company consisted
of the following:

               (i) 250,000,000 shares of Common Stock, of which (A) 63,000,738
shares are issued and outstanding, and (B) 18,222,306 shares have been reserved
for issuance under the Company's Stock Option Plans (as defined below) of which
(1) options to purchase 11,376,450 shares are outstanding, and (2) options to
purchase 1,206,938 shares have been exercised; and

               (ii) 10,000,000 shares of Preferred Stock, par value $ .0001 (the
"Preferred Shares"), none of which are issued and outstanding.

        Since January 31, 2000 no shares of Common Stock or Preferred Shares
have been issued except for issuances of Common Stock under any Stock Option
Plan or upon conversion of the Notes.

        (b) All issued and outstanding shares of the Company's capital stock (i)
have been duly authorized and validly issued, (ii) are fully paid and
nonassessable, (iii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities and (iv) were not issued in
violation of, or subject to, any preemptive, subscription or other similar
rights of any other Person. All shares of the Company's Common Stock issuable
upon conversion of the Notes, the Amended Notes and the PIK Preferred Shares and
upon exercise of the Warrants (i) will be duly authorized and validly issued,
(ii) will be fully paid and nonassessable, (iii) will be issued in compliance
with all applicable state and federal laws concerning the issuance of securities
and (iv) will not be issued in violation of, or subject to, any preemptive
subscription or other similar rights of any other Person.

        (c) The Company has made available to the Participating Noteholders a
copy of the Company's (i) 1999 Non-Employee Directors' Stock Option Plan, (ii)
1997 Stock Option Plan, (iii) ZoneNetwork.com, Inc. 1996 Stock Option Plan, (iv)
option agreements pursuant to which stock options have been granted outside of
the plans described in clauses (i) through (iii) above and (v) 1999 Employee
Stock Purchase Plan (collectively the stock option plans described in clauses
(i) through (iv) are hereinafter referred to as the "Stock Option Plans"). Other
than the 11,376,450 shares of Common Stock which were reserved for future
issuance to employees

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pursuant to outstanding stock option grants under the Stock Options Plans (as
defined above) and 779,908 shares of Common Stock which were reserved for future
issuance to employees pursuant to the Employee Stock Purchase Plan, the stock
options issued pursuant to the Stock Option Plans, and except as may be granted
pursuant to this Agreement or as set forth on Schedule 2.3(c) hereto, there are
no outstanding subscriptions, options, calls, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company or any of its Subsidiaries of any of their
securities, nor has the Company nor any of its Subsidiaries taken or agreed to
take any action to issue or grant the same. Except as described in this
Agreement or set forth on Schedule 2.3(c) hereto, (x) there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any securities of the Company or any voting or equity
securities or interests of any of its Subsidiaries, (y) there is no voting
trust, proxy, stockholder or other agreements or understandings to which the
Company or any of its Subsidiaries or, to the knowledge of the Company, any of
its stockholders is a party or is bound with respect to the voting or transfer
of the capital stock or other voting securities of the Company or any of its
Subsidiaries and (z) there are no other subscriptions, options, calls, warrants
or other rights (including registration rights, whether demand or piggyback
registration rights), agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any of its
Subsidiaries to which the Company or any of its Subsidiaries is a party. Except
as set forth on Schedule 2.3(c) hereto, the consummation of the transactions
contemplated by the Restructuring Documents will not trigger the anti-dilution
provisions or other adjustment mechanisms of any outstanding subscriptions,
options, calls, warrants, commitments, contracts, preemptive rights, rights of
first refusal, demands, conversion rights or other agreements or arrangements of
any character or nature whatsoever under which the Company is or may be
obligated to issue or acquire shares of any of its capital stock. The delivery
of the Amended Notes and the issuance of the PIK Preferred Shares is not and
will not be subject to any preemptive rights, rights of first refusal,
subscription or similar rights that have not been properly waived.

        (d) The Amended Notes and the PIK Preferred Shares have been duly and
validly authorized, will be delivered to the Participating Noteholders (or their
permitted transferees) free and clear of all Encumbrances (other than those
placed thereon by or on behalf of the Participating Noteholders (or their
permitted transferees)) and the Notes and the PIK Preferred Shares will have the
rights, preferences, privileges and restrictions set forth in the Notes and
Restated Certificate, respectively.

        Section 2.4   Authorization; Binding Obligations.

        The execution and delivery of the Restructuring Documents, the
consummation of the transactions contemplated thereby and the performance of all
obligations of the Company thereunder have been duly authorized by all necessary
corporate action of the Company and its stockholders. The Restructuring
Documents have been duly executed and delivered by the Company. The
Restructuring Documents (assuming due execution and delivery by the
Participating Noteholders) are legal, valid and binding obligations of the
Company enforceable against it in accordance with their terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting

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creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.

        Section 2.5   SEC Reports; Financial Statements.

        (a) The Company has filed with the U.S. Securities and Exchange
Commission (the "SEC") all forms, reports and schedules, proxy statements
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein and including all registration
statements and prospectuses filed with the SEC, the "SEC Reports") required to
be filed by the Company with the SEC since July 27, 1999. As of its date of
filing, except as set forth on Schedule 2.5(a) hereto, each SEC Report complied
in all material respects with the requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the Securities Act of 1933, as amended
(the "Securities Act"), as applicable, and the rules and regulations promulgated
thereunder and none of such SEC Reports (including any and all financial
statements included therein) contained when filed or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.

        (b) Each of the consolidated financial statements (including the notes
thereto) included in the SEC Reports (the "Financial Statements") complied as to
form, as of its date of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, has been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly presents the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended, subject (in the
case of unaudited financial statements only) to normal year-end adjustments and
any other adjustments described therein or in the notes or schedules thereto or
the absence of footnotes.

        (c) The Company's unaudited consolidated financial statements for the
three months and nine months ended September 30, 2000 (the "Unaudited Financial
Statements") included in its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000 (the "10-Q") have been prepared in accordance with GAAP
applied in a consistent basis with the financial statements and fairly presents
the consolidated results of operations of the Company and is consolidated
subsidiaries for the three month and nine month periods then ended, subject to
normal year-end adjustments, the absence of footnotes and other presentation
matters.

        (d) The year end financial results announced February 8, 2001 and
attached hereto on Schedule 2.5(d) were prepared in accordance with U.S.
generally accepted accounting principles and present fairly, in all material
respects, the financial position of the Company as of the date thereof except as
stated in such announcement.

        (e) As of January 31, 2001, the amount set forth on Schedule 2.5(e)
hereto represented all the funds available as unrestricted cash of the Company.

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        Section 2.6   Undisclosed Liabilities.

        (a) Except as set forth on Schedule 2.6 hereto and except for (a)
liabilities included or reserved for in (i) the unaudited consolidated balance
sheet of the Company as of September 30, 2000 included the 10-Q or (ii) the
audited consolidated balance sheet of the Company as of December 31, 1999
included in its Annual Report on Form 10-K (the "10-K") for the fiscal year
ended December 31, 1999 (the "Balance Sheet") and (b) current liabilities
incurred in the ordinary course of business consistent with past practice
subsequent to September, 2000, not in excess of $100,000 in the aggregate,
neither the Company nor any of its Subsidiaries had, and since such date none of
them has incurred, liabilities, including contingent liabilities, or any other
obligations whatsoever that could reasonably be expected to have a Material
Adverse Effect.

        Section 2.7   Agreements; Action.

        (a) Attached hereto as Schedule 2.7(a) hereto is a list of (i) all
"material contracts" within the meaning of Item 601 of Regulation S-K of the
SEC, (ii) all of the Company's and its Subsidiaries' contracts, agreements,
leases or other instruments to which the Company or any of its Subsidiaries is a
party or by which the Company, its Subsidiaries or its properties are bound,
which involve payments by or to a Company or its Subsidiaries during any fiscal
year of more than $250,000, (iii) all of Company's and its Subsidiaries' loan
agreements, bank lines of credit agreements, indentures, mortgages, deeds of
trust, pledge and security agreements, factoring agreements, conditional sales
contracts, letters of credit or other debt instruments evidencing indebtedness
for money borrowed and all such instruments or agreements other than for
borrowed money representing payment obligations of $250,000 or more, (iv) all
material operating or capital leases for equipment to which the Company or any
of its Subsidiaries is a party, (v) all contracts for the employment of any
officer or employee, (vi) all material consulting agreements, (vii) any
guarantees by the Company or any of its Subsidiaries, (viii) all material
distributor and sales agency agreements, (ix) all IP Contracts (as defined in
Section 2.11), (x) all contracts restricting the Company or any of its
Subsidiaries from engaging in any line of business or competing with any Person
or in any geographical area, and (xi) all contracts restricting the payment of
interest upon, or the redemption or conversion of, the PIK Preferred Shares and
the Amended Notes (collectively, the "Contracts").

        (b) Except as set forth on Schedule 2.7(b) hereto, neither the Company
nor any of its Subsidiaries is, nor to the Company's knowledge is any other
party to any Contract, in default under, or in breach or violation of, any
Contract and no event has occurred which, with the giving of notice or passage
of time or both would constitute a default by the Company or, to the Company's
knowledge, any other party under any Contract. Other than Contracts which have
terminated or expired in accordance with their terms, each of the Contracts is
in full force and effect and (assuming due execution and delivery by the
counterparties thereto) is a legal, valid and binding obligation of the Company
or its Subsidiary (as applicable) enforceable against the Company or such
Subsidiary in accordance with its terms (subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing) and

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neither the Company nor any of its Subsidiaries has any knowledge that any
Contract is not a legal, valid and binding obligation of the other parties
thereto.

        Section 2.8   Obligations to Related Parties.

        Except as disclosed in Schedule 2.8 hereto or in the 10-K, there are no
obligations of the Company or any of its Subsidiaries to their respective
officers or directors or family members (not more remote than first cousin) or
Affiliates thereof other than (a) for payment of salary for services rendered,
(b) reimbursement for reasonable expenses incurred on behalf of the Company or
one of its Subsidiaries' and (c) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under the Stock Option Plans). Except as disclosed in Schedule 2.8
hereto, there are no currently effective agreements, arrangements or other
transactions between the Company or any of its Subsidiaries and any Affiliate of
the Company (other than it Subsidiaries).

        Section 2.9   Changes.

        (a) Except as set forth in Schedule 2.9(a) hereto, in the SEC Reports
filed and publicly available prior to the date hereof or in press releases
disseminated over PR Newswire, since December 31, 1999, no events, changes or
circumstances have occurred which have had, or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

        (b) Except as set forth in Schedule 2.9(b) hereto, in the SEC Reports
filed and publicly available prior to the date hereof or in press releases
disseminated over PR Newswire, since December 31, 1999, the Company and its
Subsidiaries have carried on their respective businesses only in the ordinary
course consistent with their past practices.

        (c) Except as disclosed on Schedule 2.9(c) hereto or in the SEC Reports
filed and publicly available prior to the date hereof, since December 31, 1999
the Company has not engaged in any sale, assignment, disposition, conveyance,
abandonment, transfer or license, and no event has occurred causing the
invalidation or cancellation, in whole or in part, of the Intellectual Property
(as defined in Section 2.11) other than in the ordinary course of business
consistent with past practice.

        Section 2.10  Title to Properties and Assets; Liens, Condition, Etc.

        The Company and each of its Subsidiaries have good and merchantable
title to their respective personal property and assets, and good title to their
respective leasehold estates, in each case subject to no Encumbrance other than
(i) liens permitted by the Subordinated Loan and Security Agreement dated as of
February 12, 1999, as amended between the Company and Comdisco, Inc. (as
amended, the "Credit Agreement"), (ii) liens for current taxes not yet
delinquent and payable without penalty, (iii) minor Encumbrances which do not in
any case detract in any material respect from the value of the property subject
thereto or impair in any material respect the operations of the Company and its
Subsidiaries, taken as a whole and which have not arisen other than in the
ordinary course of business, (iv) Encumbrances relating to vendor or
installation purchases, so long as such Encumbrances extend only to the
properties or other assets whose purchase was so financed, and (v) as set forth
on Schedule 2.10 hereto

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(collectively "Permitted Encumbrances"). The Company and each of its
Subsidiaries are in compliance in all material respects with all material terms
of each lease to which they are a party or are otherwise bound. All material
properties, equipment and systems of the Company and its Subsidiaries are in
good repair, working order and condition (ordinary wear and tear excepted) and
are in compliance in all material respects with all applicable standards and
rules imposed (a) by any governmental agency or authority in which such
properties, equipment and systems are located, and (b) under any agreements to
which the Company or its Subsidiaries are party.

        Section 2.11  Intellectual Property.

        (a) The Company and its Subsidiaries own or have a valid license to use
all intellectual property, including without limitation patents, trademarks,
service marks, trade names, corporate names, domain names, copyrights, trade
secrets, licenses, information and proprietary rights and processes
("Intellectual Property") necessary to conduct their businesses as now conducted
(the "Company IP") without any conflict, to the Company's knowledge, with, or
infringement of, the rights of others. Schedule 2.11(a) hereto sets forth a list
of (i) all patents, trademark registrations, service mark registrations,
corporate name registrations, domain name registrations, trade name
registrations and copyright registrations, and all applications for any of the
foregoing, owned by the Company or any of its Subsidiaries or used by the
Company or any of its Subsidiaries in conducting its business as now conducted
(the "Registered Intellectual Property"); and (ii) all material licenses,
royalties, consents and other contracts or other agreements of the Company or
its Subsidiaries relating to Intellectual Property ("IP Contracts"). Except as
would not impair the Company's ability to timely perform its obligations under
the Transaction Documents, no IP Contracts are due to expire or terminate during
the next 18 months.

        (b) The Intellectual Property owned by the Company or any of its
Subsidiaries is referred to herein as the "Owned Intellectual Property" and the
Intellectual Property licensed by the Company or its Subsidiaries from other
persons or entities is referred to herein as the "Licensed Intellectual
Property." The Company and its Subsidiaries own and possess all right, title and
interest in and to the Owned Intellectual Property free and clear of any
Encumbrances other than Permitted Encumbrances. The rights of the Company and
its Subsidiaries under all IP Contracts with respect to the Licensed
Intellectual Property are valid and enforceable by the Company or its Subsidiary
(as applicable) except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar Laws affecting creditors' rights generally and by such principles
of equity as may affect the availability of equitable remedies. The execution
and delivery of the Transaction Documents will not cause the acceleration,
termination or the incurrence of liability or fees under any IP Contract.
Neither the Company nor any of its Subsidiaries is or is alleged to be in breach
or default under any IP Contract and, to the Company and its Subsidiaries
knowledge, neither is any other party thereto.

        (c) The Company has no Action (as defined in Section 2.13) pending (or,
to the Company's knowledge, threatened) against any other Person relating to the
Company IP, and, except as set forth in Schedule 2.11(c) hereto, no other person
or entity has any Action pending (or to the Company's and its Subsidiaries'
knowledge, threatened) against the Company or any of its Subsidiaries relating
to the Company IP; and, to the Company's knowledge, the Owned

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Intellectual Property does not infringe, misappropriate, or otherwise impair
("Infringe"), and, except as set forth in Schedule 2.11(c) hereto, the
businesses of the Company and its Subsidiaries as now conducted does not
Infringe, any Intellectual Property owned or controlled by any other Person. To
the Company's knowledge, there is no infringement by a third party of any of the
Company IP. There are no pending or outstanding, or, to the knowledge of the
Company, no threatened Actions or Laws (as defined in Section 2.12) that seek to
limit or challenge the validity, enforceability, ownership or use of any Company
IP.

        (d) To the Company's knowledge, none of the employees of the Company or
of any of its Subsidiaries is obligated under any contract (including licenses,
covenants, or commitments of any nature) or other agreement, or subject to any
Law that would interfere with the use of such employee's best efforts to promote
the interests of the Company and its Subsidiaries or that would conflict with
the Company's and its Subsidiaries' businesses as conducted. To the Company's
knowledge, neither the execution nor delivery of the Restructuring Documents,
nor the carrying on of the execution of the Company's or any of its
Subsidiaries' businesses by the employees of the Company and the Subsidiaries,
nor the conduct of the Company's and its Subsidiaries' businesses, will conflict
with or result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any contract, covenant, or instrument under which
any of such employees is now obligated. Except as listed on Schedule 2.11(c)
hereto, it will not be necessary to use in the conduct of the Company's and its
Subsidiaries businesses any inventions of any of the Company's or its
Subsidiaries' employees (or persons it currently intends to hire) made prior to
their employment by the Company or its Subsidiaries, other than those which have
been assigned to the Company or its Subsidiaries. The Company and its
Subsidiaries take all reasonable actions to maintain and protect the
confidentiality and ownership of all its material Owned Intellectual Property.

        (e) The Company or its Subsidiaries (i) to their knowledge have the
exclusive right to use its name as a trademark, service mark and the name of a
corporation in any jurisdiction in which the Company or its Subsidiaries does
and proposes to do business, except as set forth in Schedule 2.11(e) hereto,
(ii) to their knowledge, have all ownership rights to or the right to use the
domain names listed on Schedule 2.11(a) hereto (the "Domains"), and no other
Person shall have any interest therein or any license or other right to use the
Domains, and (iii) except as set forth in Schedule 2.11(e) hereto, neither the
Company nor its Subsidiaries have received any notice of conflict during the
past two years with respect to the rights of others regarding the trademarks,
service marks and corporate name of the Company, its Subsidiaries or the
Domains. Except as set forth in Schedules 2.11(e) hereto, no other person or
entity is presently authorized by the Company or its Subsidiaries to use the
name of Company or its Subsidiaries.

        Section 2.12  Compliance with Law; Other Instruments.

        Neither the Company nor any of its Subsidiaries is in violation or
default of (i) the Company's Restated Certificate of Incorporation (the
"Restated Certificate") or its Bylaws, as amended (the "Bylaws"), or the
organizational documents of any of its Subsidiaries or (ii) of any judicial or
administrative judgment, decision, decree, order, settlement, injunction, writ,
stipulation, determination or award applicable to the Company, any of its
Subsidiaries, or their respective businesses, operations, assets, or properties
(each, an "Order") or any statute, law, ordinance, rule or regulation applicable
to the Company, any of its Subsidiaries, or their

                                      -10-
<PAGE>   11

respective businesses, operations, assets, or properties (each, a "Law") and has
received no written notice of, and to the knowledge of the Company, no
investigation or review is in process or threatened by any governmental
authority with respect to, any violation or alleged violation of any Order or
Law except, in the case of any Orders or Laws, where such violations or defaults
would not, individually or in the aggregate, have a Material Adverse Effect. The
execution, delivery and performance of the Restructuring Documents, and the
consummation of the transactions contemplated thereby, will not result in (a)
(i) any violation, or be in conflict with or constitute a default (with or
without notice or lapse of time or both) under the Restated Certificate or
Bylaws or the organizational documents of any of the Company's Subsidiaries,
(ii) any violation, or be in conflict with or constitute a default (with or
without notice or lapse of time or both) under, any term or provision of, or any
right of termination, cancellation, modification or acceleration arising under
any Contract or cause any liabilities or additional fees to be due thereunder or
(iii) any violation under any Order or Law applicable to the Company or any of
its Subsidiaries or (b) the imposition of any Encumbrance on the business or
properties or assets of the Company or any of its Subsidiaries. None of the
execution and delivery of the Restructuring Documents, the consummation of the
transactions contemplated thereby or the performance of the obligations of the
Company thereunder will result in the suspension, revocation, impairment,
forfeiture or nonrenewal of any Permit applicable to the Company or any of its
Subsidiaries, their businesses or operations or any of their assets or
properties. "Permits" means all material licenses, permits, orders, consents,
approvals, registrations, authorizations, qualifications and filings with and
under all federal, state, local or foreign laws and governmental authorities and
all industry or other non-governmental self-regulatory organizations. Without
limiting the foregoing, upon and immediately following the Closing the Company
will be in full compliance with all covenants and obligations under its existing
borrowing arrangements, without taking into account any waivers from lenders.

        Section 2.13  Litigation.

        Except as set forth on Schedule 2.13 hereto, there is no Action (as
defined below) pending, or to the Company's knowledge, currently threatened
against the Company or any of its Subsidiaries (including with respect to any
Company Plan (as defined in Section 2.18)). The foregoing includes, without
limitation, any material Order, action, claim, suit, audit, assessment,
arbitration or similar inquiry, or any proceeding or investigation by or before
any government authority (an "Action") pending or threatened involving the prior
employment of any of the Company's or any of its Subsidiaries' employees, their
use in connection with the Company's or any of its Subsidiaries' business of any
Intellectual Property rights of their former employers, or their obligations
under any agreements with prior employers. Except as set forth on Schedule 2.13
hereto, neither the Company nor any of its Subsidiaries is a party or subject to
the provisions of any Order of any court or governmental authority. Except as
set forth on Schedule 2.13 hereto, there is no Action by the Company or any of
its Subsidiaries against any other Person currently pending or which the Company
or any of its Subsidiaries intends to initiate.

        Section 2.14  Tax Matters.

        (a) Except as set forth on Schedule 2.14(a) hereto, (i) all Tax Returns
(as defined below) that are required to be filed by or with respect to the
Company and its Subsidiaries as of the date hereof and of the Closing Date have
been duly filed, (ii) all Taxes (as defined below) of

                                      -11-
<PAGE>   12

the Company and its Subsidiaries due and not yet delinquent and payable without
penalty, whether or not shown on the Tax Returns referred to in clause (i), have
been paid in full, (iii) the Tax Returns referred to in clause (i) have been
audited by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired, (iv) all
deficiencies asserted or assessments made as a result of such examinations have
been paid in full, (v) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns referred
to in clause (i) are currently pending, (vi) no waiver of statutes of limitation
have been given by or requested with respect to any Taxes of the Company or its
Subsidiaries, (vii) there are no liens for Taxes on any asset of the Company or
any of its Subsidiaries other than for current Taxes not yet due and payable, or
if due, are (A) not delinquent or (B) being contested in good faith by
appropriate proceedings, (viii) no consent has been filed relating to the
Company or any of its Subsidiaries pursuant to Section 341(f) of the Code, (ix)
neither the Company nor any Subsidiary has any current liability, or has
knowledge of any events or circumstances which could result in any liability,
for Taxes of any person (other than the Company and its Subsidiaries) (A) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), (B) as a transferee or successor, (C) by contract or (D)
otherwise, (x) the Company's methods of tax accounting are correct in all
material respects and (xi) the transfer pricing methodologies used by the
Company and its Subsidiaries are correct in all material respects.

        (b) For purposes of this Agreement, the term (i) "Taxes" means all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to, income, excise, property, sales and use, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto, and (ii) "Tax Return" means any
return, report, information return or other document (including any related or
supporting information) filed or required to be filed with any taxing authority
with respect to Taxes.

        Section 2.15  Employees.

        Except as set forth on Schedule 2.15, neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other contract
with a labor union. There is, and during the past two years there has been, (i)
no labor strike, labor dispute, work stoppage or lockout pending, or to the
Company's or its Subsidiaries' knowledge, threatened against the Company or any
Subsidiary; (ii) no union or organizational campaign is in progress with respect
to the employees, and no other (formal or informal) union organization
activities are pending or, to the Company's knowledge, threatened between the
Company or any Subsidiary and their respective employees; (iii) neither the
Company nor any of its Subsidiaries is engaged in any unfair labor practice;
(iv) there is no unfair labor practice charge or complaint against the Company
or any Subsidiary pending or, to the Company's or its Subsidiaries' knowledge,
threatened before the National Labor Relations Board; (v) there are no pending
or, to the Company's and any Subsidiaries' knowledge, threatened charges against
the Company or any Subsidiary before the Equal Employment Opportunity Commission
or any state or local agency responsible for the prevention of unlawful
employment practices; and (vi) neither the Company nor any Subsidiary has
received written notice during the past two years of the intent of any
governmental authority responsible for the enforcement of labor or employment
Laws to conduct

                                      -12-
<PAGE>   13

an investigation of the Company and, to the Company's and any Subsidiaries'
knowledge, no such investigation is in progress.

        Section 2.16  Amendment and Issuance Valid.

        Assuming the accuracy of the representations and warranties of the
Participating Noteholders contained in Section 3 hereof, the amendment of the
Amended Notes and the issuance of the PIK Preferred Shares will be exempt from
the registration requirements of the Securities Act and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.

        Section 2.17  Employee Benefit Plans.

        (a) Schedule 2.17(a) hereto contains a true and complete list of each
"employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA, under which any employee or former employee of the Company or its
Subsidiaries has any present or future right to benefits and under which the
Company or its Subsidiaries has any present of future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively referred
to as the "Company Plan."

        (b) Except as disclosed in Schedule 2.17(b) hereto, with respect to each
Company Plan, the Company has delivered to the Participating Noteholders to the
extent requested a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other material written communications (or in the absence of the
foregoing, a description of any oral communications) by the Company or any of
its Subsidiaries to their employees concerning the extent of the benefits
provided under a Company Plan and (iv) for the two most recent years (A) the
Form 5500 and attached schedules, (B) audited financial statements, (C)
actuarial valuation reports and (D) attorney's response to an auditor's request
for information.

        (c) (i) Except as set forth on Schedule 2.17(c), each Company Plan has
been established and administered in accordance with its terms and in
substantial compliance with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations and neither the Company nor any of
its Subsidiaries has incurred in respect of any such Company Plan any material
tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other
applicable law, rule and regulations; (ii) each Company Plan which is intended
to be qualified within the meaning of Code section 401(a) is so qualified and
has received, to the extent applicable, a favorable determination letter and
nothing has occurred, whether by action or failure to act, that could reasonably
be expected to cause the loss of such qualification; (iii) no event has occurred
and no condition exists that would subject the Company or any of its
Subsidiaries, either directly or by reason of their affiliation with any member
of their "Controlled

                                      -13-
<PAGE>   14

Group" (defined as any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o)), to
any material tax, fine, lien, penalty or other liability imposed by ERISA, the
Code or other applicable laws, rules and regulations; (iv) no Company Plan
provides retiree welfare benefits and neither the Company nor any of its
Subsidiaries have any obligation to provide any retiree welfare benefits other
than as required by Section 4980B of the Code; and (v) neither the Company nor
any member of its Controlled Group has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in
Sections 4069 or 4212(c) of ERISA.

        (d) No Company Plan is (i) subject to Title IV of ERISA or (ii) a
"multiemployer plan" (as such term is defined in section 3(37) of ERISA) and
neither the Company nor any of its Subsidiaries has incurred any withdrawal
liability or termination liability with respect to any such plan that remains
unsatisfied. The Company has not engaged in, and is not a successor or parent
corporation to any Person that has engaged in, a transaction described in
Section 4069 or 4212(c) of ERISA.

        (e) Except as set forth on Schedule 2.17(e) hereto, no Company Plan
exists that could result in the payment to any present or former employee of the
Company or its Subsidiaries of any money or other property or accelerate or
provide any other rights or benefits to any present or former employee of the
Company or its Subsidiaries as a direct result of the transactions contemplated
by this Agreement or as a result of transactions which have occurred prior the
date hereof or the Closing Date. Except as set forth on Schedule 2.17(e) hereto,
there is no contract, plan or arrangement (written or otherwise) covering any
employee or former employee of the Company or any of its Subsidiaries that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.

        (f) With respect to any Company Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the knowledge of the Company, threatened; and (ii) no facts or circumstances
exist that could reasonably be expected to give rise to any such actions, suits
or claims.

        (g) The aggregate amount of all severance and change in control payments
(other than the Management Incentive Payments) to members of senior management
and certain members of the board of directors do not and will not exceed an
aggregate amount of $1.4 million. Schedule 2.17(g) hereto sets forth the name of
each individual entitled to a severance or change of control payment and the
amount such person is entitled to receive. The Board of Directors of the Company
shall have the right to reduce the amounts payable to any member of senior
management or the Board of Directors entitled to receive a severance or change
in control payment in order to make a severance or change in control payment to
another member of senior management or the Board of Directors, provided,
however, that (i) the Board of Directors shall not increase the amount payable
to any individual identified on Schedule 2.17(g) and (ii) the aggregate amount
of all severance and change in control payments (other than the Management
Incentive Payments) shall not exceed $1.4 million.

                                      -14-
<PAGE>   15

        Section 2.18  Permits.

        The Company and its Subsidiaries hold all Permits necessary for the
lawful conduct of their respective businesses as they are presently being
conducted. All such Permits are in full force and effect. The Company and its
Subsidiaries have complied with the terms of the Permits and, to the Company's
knowledge, there are no pending modifications, amendments or revocations of any
Permits. All fees due and payable from the Company or any of its Subsidiaries to
governmental authorities or other third parties pursuant to the Permits have
been paid. There are no pending or, to the knowledge of the Company, threatened,
suits, Actions, proceedings or investigations with respect to the possible
revocation, cancellation, suspension, limitation or nonrenewal of any Permits,
and there has occurred no event which (whether with notice or lapse of time or
both) could reasonably be expected to result in or constitute the basis for such
a revocation, cancellation, suspension, limitation or nonrenewal thereof.

        Section 2.19  No Broker.

        Neither the Company nor any of its Subsidiaries has employed any broker
or finder, or incurred any liability for any brokerage or finders' fees or any
similar fees or commissions in connection with the transactions contemplated by
this Agreement.

        Section 2.20  Disclosure.

        Neither this Agreement (including all Exhibits and Schedules hereto) nor
any of the other agreements or instruments contemplated to be executed and
delivered by the Company in connection with this Agreement contain any untrue
statement of material fact; and none of such documents omits to state any
material fact necessary to make any of the representations, warranties or other
statements or information contained therein not misleading in light of the
circumstances under which such information was provided.

        Section 2.21  Employment, Confidential Information and Invention
Assignment Agreement.

        Except as set forth in Schedule 2.21 hereto, each employee, consultant
and officer of the Company and its Subsidiaries has executed an agreement with
the Company or its Subsidiary regarding confidentiality and proprietary
information substantially in the form or forms delivered to the counsel for the
Purchasers. The Company is not aware that any of the Company's or any of its
Subsidiaries' employees or consultants is in violation thereof, and the Company
and its Subsidiaries will use their best efforts to prevent any such violation.
To the Company's knowledge, no current employee, officer or consultant of the
Company or its Subsidiaries has excluded works or inventions from his or her
assignment of inventions pursuant to such employee, officer or consultant's
Confidential Information and Invention Assignment Agreement that were made prior
to his or her employment with the Company and are necessary in the conduct of
the Company's and its Subsidiaries' businesses.

        Section 2.22  Insurance.

        Schedule 2.22 hereto contains a complete and correct list of all
policies of insurance of any kind or nature covering Company and its
Subsidiaries, including, without limitation, policies

                                      -15-
<PAGE>   16

of life, fire, theft, employee fidelity and other casualty and liability
insurance, indicating the type of coverage, name of insured, the insurer, the
premium, the expiration date of each policy and the amount of coverage, and such
policies are in full force and effect. Certificates for each such policy showing
the respective coverages and limits, including deductibles, have been furnished
or made available to Participating Noteholders. Such policies are in amounts
customary for the industry in which Company or such Subsidiary operates.

        Section 2.23  Poison Pill Provisions.

        Neither the Company nor its Subsidiaries have a stockholder rights plan.
None of the acquisition of the Notes, the Amended Notes, the Warrants, the
Conversion Shares, the Warrant Shares, the PIK Preferred Shares or the Common
Stock issuable upon conversion thereof nor the deemed beneficial ownership of
shares of Common Stock prior to, or the acquisition of such shares pursuant to,
the conversion of Notes, the Amended Notes or the PIK Preferred Shares or the
exercise of the Warrants will in any event under any circumstance trigger the
poison pill provisions of any other or subsequently adopted plan or agreement,
or a substantially similar occurrence under any successor or similar plan.

        Section 2.24  Internal Accounting Controls.

        The Company and each of its Subsidiaries maintain a system of internal
accounting controls sufficient, in the judgment of the Company's management, to
provide reasonable assurance that (a) transactions are executed in accordance
with management's general or specific authorizations, (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (c) access to assets is permitted only in accordance with
management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

        Section 2.25  Solvency

        (a) Based on the financial condition of the Company as of the Closing
Date, the Company's assets do not constitute unreasonably small capital to carry
out its business for the year 2001 as now conducted and as proposed to be
conducted, including the Company's year 2001 capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof.

        (b) The Company does not intend to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of its debt). Based on the financial condition of
the Company as of the Closing Date, the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid.

        (c) Neither the Company nor any of its Subsidiaries is subject to any
bankruptcy, insolvency or similar proceeding.

                                      -16-
<PAGE>   17

        Section 2.26  Arms Length Negotiation.

        The Company acknowledges and agrees that the terms of this Agreement and
the other Restructuring Documents and the transactions contemplated thereby were
negotiated in good faith and on an arms length basis with each of the
Participating Noteholders acting individually with respect to its respective
investment in the Notes and that the Company has been represented by counsel
throughout the negotiation process. The Company further acknowledges that no
Participating Noteholder is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Restructuring Documents
and the transactions contemplated thereby. The Company further represents that
the Company's decision to enter into the Restructuring Documents has been based
solely on the independent evaluation by the Company and its representatives.

        Section 2.27  Foreign Corrupt Practices Act.

        Neither the Company nor any Subsidiary, nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of acting for, or on behalf of, the Company: (i)
directly or indirectly used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
(ii) directly or indirectly made any direct or indirect unlawful payment to any
foreign or domestic government or party official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended, or any similar treaties of the United
States; or (iv) directly or indirectly made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.

        Section 2.28  Form S-3 Registration Statement.

        The Form S-3 Registration Statement (Reg. No. 333-49556) filed by
Company on behalf of the original purchasers of the Notes covers the issuance of
the Conversion Shares upon conversion of the Amended Notes.

        Section 2.29  Non-Public Information.

        All information which constituted material nonpublic information and
which was provided by the Company to the Noteholders at the meeting held on
February 1, 2001 has been made public and no other information provided to the
Noteholders in connection with this Agreement or any other Restructuring
Document which is not being publicly filed in connection with the Closing
constitutes material non public information.

        Section 2.30 Section 203.

        In accordance with Section 203 of the Delaware General Corporation Law
("Section 203") the Board of Directors of the Company has approved the issuance
of the Notes, the Amended Notes, the PIK Preferred Shares, the Conversion
Shares, the Warrants and the Warrant Shares to the Participating Noteholders and
any transaction that results in any Participating Noteholder or any "affiliate"
(as defined in Section 203) of a Participating Noteholder, its affiliate or its
associate (as applicable) would not have been an interested stockholder if such

                                      -17-
<PAGE>   18

Person (and its affiliates and associates) did not own the PIK Preferred Shares,
the Conversion Shares or the Warrant Shares for purposes of Section 203.
Accordingly, the ownership of the Conversion Shares and the Warrant Shares for
purposes of Section 203 by any Participating Noteholder or its affiliate or
associate will not result in the provisions of Section 203 being applicable to a
"business combination" (as defined in Section 203) between such Person (or its
affiliate or associate) and the Company.

                                    ARTICLE 3
         REPRESENTATIONS AND WARRANTIES OF THE PARTICIPATING NOTEHOLDERS

        Each of the Participating Noteholders, severally and not jointly, hereby
represents and warrants to the Company as of the date hereof and as of the
Closing Date as follows:

        Section 3.1   Requisite Power and Authority.

        Such Participating Noteholder has all requisite power and authority to
execute and deliver the Restructuring Documents, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. All action on such Participating Noteholder's part necessary for the
execution and delivery of this Agreement, the consummation of the transactions
contemplated thereby and the performance of all obligations of such
Participating Noteholder thereunder as of the Closing has been or will be
effectively taken prior to the Closing. This Agreement has been or will be duly
executed and delivered by such Participating Noteholder. This Agreement
(assuming due execution and delivery by the Company) will be legal, valid and
binding obligations of such Participating Noteholder, enforceable against it in
accordance with their terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

        Section 3.2   Investment Representations.

        Such Participating Noteholder acknowledges that the Preferred Stock has
not been registered under the Securities Act or under any state securities laws.
Such Purchasing Noteholder (a) is acquiring the Preferred Stock for its own
account, not as a nominee or agent, and not with the present view to, or for
resale in connection with, any distribution thereof in violation of applicable
securities laws, (b) is an "accredited investor" within the meaning of
Regulation D, Rule 501(a), promulgated by the SEC, (c) acknowledges that the
Preferred Stock must be held indefinitely unless subsequently registered under
the Securities Act or unless an exemption from the registration requirements of
the Securities Act is available and (d) represents that by reason of its
business or financial experience, such Participating Noteholder has the capacity
to protect its own interests in connection with the transactions contemplated by
the Restructuring Documents. Such Participating Noteholder has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management. Such Participating Noteholder has had an
opportunity to ask questions of and receive answers from, officers of the
Company.

                                      -18-
<PAGE>   19

        Section 3.3   Arms Length Negotiation.

        Each Participating Noteholder acknowledges and agrees that the terms of
this Agreement and the other Restructuring Documents and the transactions
contemplated thereby were negotiated in good faith and on an arms-length basis
with the Company. Each Participating Noteholder has individually, and not
together with any other Participating Noteholder, made a separate analysis of
terms of this Agreement and the other Restructuring Documents and the
transactions contemplated thereby and has negotiated with the Company on an
individual basis and not together with any other Participating Noteholder. Each
Participating Noteholder acknowledges and agrees that Jones, Day, Reavis & Pogue
has acted solely as counsel for Societe Generale in connection with the
Restructuring Documents and that Luskin, Stern & Eisler, LLP has acted solely as
counsel for Deutsche Bank AG and its affiliates and the preparation of
documentation by either of such firms in connection with the foregoing or the
distribution of such documentation to other Participating Noteholders or other
actions undertaken by such firms coordinating the Closing do not constitute the
establishment of an attorney-client relationship between either of such firms
and such other Participating Noteholders.

                                      -19-
<PAGE>   20

                                    ARTICLE 4
                               REPURCHASE OF NOTES

        Section 4.1 Repurchase of Notes. On the Closing Date the Company will
purchase pro rata from the Participating Noteholders and the Participating
Noteholders will, severally and not jointly, sell to the Company, an aggregate
of $24.0 million of the approximately $76.0 million of Notes (including accrued
interest) outstanding at a price of $.50 per $1.00 par amount of each such Note
(the "NOTE PURCHASE CONSIDERATION") as more fully reflected on Schedule A to
this Agreement. Payment to the Participating Noteholders shall be made by wire
transfer of immediately available fund to the account(s) designated by each
Participating Noteholder.

        Section 4.2 Delivery of Certificates Representing Notes. As soon as
practicable, but in no event later than 10 business days following the Closing
Date, each Participating Noteholder will tender and deliver to the Company each
Note being repurchased by the Company which is then held by such Participating
Noteholder and the Company shall deliver to each Participating Noteholder within
five business days thereafter an Amended Note representing the principal amount
of Notes held by a Participating Noteholder that has not been repurchased by the
Company on the Closing Date but which is evidenced in part by a Note delivered
to the Company in connection with the repurchase referred to in Section 4.1 of
this Agreement.

        Section 4.3 Cancellation of Notes. As of the Closing, each Note of a
Participating Noteholder immediately prior to the Closing Date, shall be
converted into the right to receive the Note Repurchase Price and an Amended
Note upon delivery of the Note to the Company. Each such Note, when so
converted, shall no longer be outstanding and shall automatically be deemed
cancelled and retired and shall cease to exist, and each Participating
Noteholder shall cease to have any rights with respect thereto, except the right
to receive the Note Repurchase Price and the Amended Note therefor upon the
delivery of the Note.

        Section 4.4 Election and Irrevocable Waiver Pursuant to Section 15 of
the Notes and Section C5(l) of PIK Preferred Certificate of Designations.

        Each of Deutsche Bank AG and its affiliates (including Deutsche Banc
Alex Brown Inc. (formerly known as Deutsche Bank Securities Inc.)), Societe
Generale and Canadian Imperial Holdings Inc., severally and not jointly, hereby
agrees that the number of shares of Common Stock that may be acquired by it upon
conversion of the Amended Notes or the PIK Preferred Shares to be held by it
following the Closing shall not exceed at any time 4.99% of the total issued and
outstanding shares of Common Stock and accordingly, the Restricted Ownership
Percentage for each of Deutsche Bank AG together with its affiliates, Societe
Generale and Canadian Imperial Holdings Inc. is 4.99%.

                                    ARTICLE 5
                           ISSUANCE OF PREFERRED STOCK

        Section 5.1   Issuance of Preferred Stock.

        On the terms and subject to the conditions of this Agreement, as
promptly as practicable, but in no event later than seven business days
following the Closing Date, the Company will

                                      -20-
<PAGE>   21

issue and deliver to each Participating Noteholder, severally and not jointly,
and each Participating Noteholder, severally and not jointly, will accept from
the Company, the number of PIK Preferred Shares set forth opposite such
Participating Noteholder's name on Schedule A to this Agreement which PIK
Preferred Shares shall initially have an aggregate initial Stated Value of $40.0
million. The Company's agreement with each Participating Noteholder is a
separate agreement, and the issuance of the PIK Preferred Shares to each
Participating Noteholder is a separate issuance. The PIK Preferred Shares
constitute a new series of Preferred Stock of the Company and have the rights,
restrictions, privileges and preferences set forth in the PIK Preferred
Certificate of Designations attached hereto as Exhibit B (the "PIK Preferred
Certificate of Designations").

        Section 5.2   Restrictions on Transfer.

        The PIK Preferred Shares shall be subject to the restrictions on
transfer set forth in Section 2.1 of the Amended and Restated Investors' Rights
Agreement, dated as of September 15, 2000, by and among Quokka Sports, Inc. and
the holders of the Company's Common Stock, Warrants and Convertible Subordinated
Notes.

                                    ARTICLE 6
                       AMENDMENT OF TRANSACTION DOCUMENTS

        Section 6.1   Amended Notes.

        Upon the Closing, the Company will amend the Notes of each Participating
Noteholder not repurchased by the Company pursuant to Section 4.1 of this
Agreement.

        Section 6.2   Noteholders Agreement.

        Upon the Closing, the following provisions of the Noteholders Agreement
shall be amended and restated:

        (a) The definition of Permitted Indebtedness in the Noteholders
Agreement is hereby amended and restated in its entirety as follows:

               "Permitted Indebtedness" means, with respect to the Company, (i)
        taxes or assessments or other governmental charges or levies, either not
        yet due and payable or to the extent that nonpayment thereof is
        permitted by the terms of this Agreement; (ii) obligations under
        workmen's compensation, unemployment insurance, social security or
        public liability laws or similar legislation; (iii) bids, tenders or
        contracts (other than contracts for the payment of money) to which the
        Company or any of its Subsidiaries is a party made in the ordinary
        course of business; (iv) public or statutory obligations of the Company
        or any of its Subsidiaries; (v) all deferred taxes and (vi) all unfunded
        pension fund and other employee benefit plan obligations and liabilities
        but only to the extent permitted to remain unfunded under applicable
        law.

        (b) The definition of Required Holders in the Noteholders Agreement is
hereby amended and restated in its entirety as follows:

                                      -21-
<PAGE>   22

        "Required Holders" means the Holders of a majority of the Face Amount of
the Notes then outstanding.

        (c) Section 2.3 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "The Company will not, and will not permit any of its
        Subsidiaries to, Incur or suffer to exist any Indebtedness except: (i)
        Indebtedness evidenced by the Notes or the Amended Notes, (ii)
        Indebtedness existing on February 22, 2001 which was incurred in
        compliance with the Noteholders Agreement, (iii) Permitted Indebtedness
        or (iv) outstanding Indebtedness owing by the Company to any of its
        Wholly-Owned Subsidiaries or by any of the Company's Wholly-Owned
        Subsidiaries to any other Wholly-Owned Subsidiaries or the Company."

        (d) Section 2.4 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "The Company will not and will not permit any of its Subsidiaries
        to make any Restricted Payments nor will the Company permit any
        Subsidiary to make such payments with respect to the Company's Capital
        Stock; provided, however, that (a) payment of the PIK Preferred Shares
        redemption amount shall not be deemed a Restricted Payment, (b) only to
        the extent contractually required to do so, Subsidiaries of the Company
        may pay dividends to the Company or Subsidiaries of the Company (and
        make pro rata dividend payments to other equity holders of NBC/Quokka
        Ventures, LLC), and (c) the Company may make payments for the repurchase
        of Capital Stock of the Company held by a deceased former employee
        following the death of such employee, to the extent repurchased with the
        proceeds of an insurance policy on the life of such employee."

        (e) Section 2.5 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "(a) Other than in connection with a Change of Control
        Transaction or as provided in subsection (b) below, the Company will
        not, and will not permit any of its Subsidiaries to, (i) sell, transfer,
        convey or otherwise dispose of any assets or properties or (ii)
        liquidate, dissolve or wind up the Company, or any of its Subsidiaries,
        except for transfers to the Company, whether voluntary or involuntary;
        provided, however, that the foregoing shall not prohibit (i) the sale,
        lease or license of inventory in the ordinary course of business, (ii)
        the sale, lease, sublease, license or sublicense of surplus or obsolete
        equipment and fixtures or other property that is not useful in the
        business of the Company and its Subsidiaries, (iii) transfers resulting
        from any casualty or condemnation of assets or properties, or (iv)
        leases and subleases and licenses and sublicenses of property in the
        ordinary course of the business of the Company and its Subsidiaries.

               (b) Notwithstanding the foregoing, the Company and its
        Subsidiaries may sell or otherwise dispose of (whether through sale of
        assets, sale of Subsidiary stock, Subsidiary merger or otherwise) one or
        more individual business units or lines of business in one or more
        transactions (i) in which all or substantially all of the proceeds to

                                      -22-
<PAGE>   23

        the Company or its Subsidiaries consist of cash (whether payable
        currently or in the future), equity securities to the extent
        contemplated by Section 9.4 of the Restructuring Agreement or a
        combination thereof or (ii) which are approved by the Required Holders;
        provided, however, that the net proceeds to the Company and its
        Subsidiaries of any such sales or other dispositions shall be applied in
        accordance with the applicable provisions of the PIK Preferred
        Certificate of Designations and the Amended Notes (a "Permitted Asset
        Sale")."

        (f) Section 2.6 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "The Company's total cash expenditures for each of the following
        months (excluding severance payments within the parameters of Section
        2.17(g) of the Restructuring Agreement, repurchases of Notes pursuant to
        Section 4.1 of the Restructuring Agreement, the fees paid pursuant to
        Section 7.2(h) of the Restructuring Agreement and legal fees paid to the
        Company's counsel in connection with the negotiation of the
        Restructuring Documents) will not exceed the amount set forth below
        opposite such month (provided, however, that if as of the last day of
        any month the Company's total cash expenditures for such month shall be
        less than the amount set forth below (as adjusted hereunder), 80% of the
        amount by which such total cash expenditures is less than the amount set
        forth below (as adjusted hereunder) shall be carried forwarded and added
        to the Company's total cash expenditures for the immediately succeeding
        month):

               February 2001                        $10.0 Million
               March 2001                            $5.0 Million
               April 2001                            $5.0 Million
               May 2001                              $4.0 Million
               June 2001                             $4.0 Million
               July 2001                             $4.0 Million
               August 2001                           $4.0 Million
               September 2001                        $4.0 Million
               October 2001                          $4.0 Million
               November 2001                         $4.0 Million
               December 2001                         $4.0 Million
               January 2002 and thereafter-- As agreed between a majority
                             in principal amount of the Noteholders and the
                             Company based on good faith negotiations completed
                             prior to the commencement of the period.

        (g) Section 2.7 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows;

                "The Company's total cash and cash equivalents on hand on the
        last day of each of the following months (excluding severance payments
        within the parameters of Section 2.17(g) of the Restructuring Agreement,
        repurchases of Notes pursuant to Section 4.1 of the Restructuring
        Agreement, the fees paid pursuant to Section 7.2(h) of the

                                      -23-
<PAGE>   24

        Restructuring Agreement and legal fees paid to the Company's counsel in
        connection with the negotiation of the Restructuring Documents) shall
        not decrease by more than the following amounts from the last day of the
        immediately preceding month (provided, however, that if as of the last
        day of any month, any such decrease shall be less than the amount set
        forth below (as adjusted hereunder), 80% of the amount by which such
        decrease shall be less than the amount set forth below (as adjusted
        hereunder) shall be carried forward and added to the amount by which the
        Company's total cash and cash equivalents on hand shall be allowed to
        decrease for the immediately succeeding month):

               February 2001                         $8.0 Million
               March 2001                            $4.0 Million
               April 2001                            $4.0 Million
               May 2001                              $2.5 Million
               June 2001                             $2.5 Million
               July 2001                             $2.5 Million
               August 2001                           $2.5 Million
               September 2001                        $2.5 Million
               October 2001                          $2.5 Million
               November 2001                         $2.5 Million
               December 2001                         $2.5 Million
               January 2002 and thereafter-- As agreed between a majority
                             in principal amount of the Noteholders and the
                             Company based on good faith negotiations completed
                             prior to the commencement of the period.

        (h) Section 2.9 of the Noteholders Agreement is hereby deleted in its
entirety and is replaced with "[INTENTIONALLY LEFT BLANK]".

        (i) Section 2.10 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "The Company will not, and will not permit any Subsidiary of the
        Company to, transfer, convey, sell, lease or otherwise dispose of any
        Voting Stock of any Subsidiary or to issue any of the Voting Stock of a
        Subsidiary to any Person except to the Company or a Wholly-Owned
        Subsidiary other than pursuant to a Change of Control Transaction or as
        contemplated by Section 2.5 hereof. The Company will not permit any
        Subsidiaries to merge or consolidate with or into any other Person
        except to the Company or a Wholly-Owned Subsidiary other than pursuant
        to a Change of Control Transaction or as contemplated by Section 2.5
        hereof.

        (j) Section 2.12 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "The Company will not, and will not permit any of its
        Subsidiaries to, directly or indirectly, in any transaction or series of
        transactions, acquire or invest in any assets or business of any Person
        for cash. The Company will not, and will not permit any of its
        Subsidiaries to, directly or indirectly, in any transaction or related
        series of transactions,

                                      -24-
<PAGE>   25

        acquire or invest in, whether for debt, Capital Stock, or other property
        or assets or by guaranty of any obligation, any assets or business of
        any Person other than (i) acquisitions of assets in the ordinary course
        of business of the Company, (ii) acquisitions by the Company or its
        Wholly-Owned Subsidiaries from the Company or any such Wholly-Owned
        Subsidiary or investments therein, (iii) investments in Cash Equivalents
        that comply with the investment policy approved by the board of
        directors of the Company, (iv) investments existing as of the date
        hereof, (v) investments received in connection with a sale or other
        disposition permitted by Section 2.5 or the bankruptcy or reorganization
        in settlement of delinquent obligations of, or other disputes with,
        Persons arising in the ordinary course of business and (vi) accounts
        receivable in the ordinary course of business. Except as permitted in
        this Agreement (including this Section 2.12), the Company shall not, and
        shall not permit any of its Subsidiaries to invest in any Person if,
        after giving effect thereto, such Person would be an Affiliate of
        Company, other than investments in existing Wholly-Owned Subsidiaries of
        the Company."

        (k) Section 3.1 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "The Company shall not consolidate with or merge with or into, or
        convey, transfer or lease all or substantially all its assets to, any
        Person, unless such transaction is a Change of Control Transaction as
        defined in the Restructuring Agreement, dated February 22, 2001, by and
        among the Company and the holders of Notes set forth on Schedule A
        thereto (the "Restructuring Agreement") and provided that the Company
        shall have delivered to the Holders an Officers' Certificate and an
        Opinion of Counsel, each stating that consummation of such
        consolidation, merger or transfer does not constitute a violation of the
        terms and conditions of the Restructuring Documents and the Transaction
        Documents, as amended.

        For purposes of this Section 3.1, the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to constitute a Change of
Control Transaction under the Restructuring Agreement.

        Notwithstanding the first sentence of this Section 3.1, (i) any
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company."

        (l) Section 6.2 of the Noteholders Agreement is hereby amended and
restated in its entirety to read as follows:

               "No modification, amendment or waiver of any provision of this
        Agreement shall be effective against the Company or any Holder unless
        such modification, amendment or waiver is approved in writing by the
        Company and the Required Holders. The failure of any party to enforce
        any of the provisions of this Agreement shall in no way be construed

                                      -25-
<PAGE>   26

        as a waiver of such provisions and shall not affect the right of such
        party thereafter to enforce each and every provision of this Agreement
        in accordance with its terms."

        Section 6.3   Note Purchase Agreement.

        (a) The second sentence of Section 5.5(a) of the Note Purchase Agreement
is hereby deleted in its entirety.

        (b) Section 5.5(b) of the Note Purchase Agreement is hereby amended and
restated in its entirety to read as follows:

               "(b) The Company shall at its expense (i) within twenty (20) days
        of the Closing Date, prepare and submit an application to NASDAQ for
        Listing the Conversion Shares and Warrant Shares and (ii) use its best
        efforts to cause all shares of Common Stock issued upon the conversion
        of this Note to be listed at the time of such issuance on NASDAQ and/or
        such other national securities exchanges shares on which shares of
        Common Stock are then listed and shall use its best efforts to maintain
        such listing."

        (c) Section 8.9 of the Note Purchase Agreement is hereby amended and
restated in its entirety to read as follows:

        "This Agreement may be amended or modified, and the rights of the
Company or Purchaser hereunder may only be waived, upon the written consent of
the Company and, prior to the Closing, the Purchasers obligated to purchase a
majority of the face amount of the Notes then outstanding (collectively, the
"Required Holders")."

        Section 6.4   Investors' Rights Agreement.

        (a) Section 2.7(a)(i) of the Investor's Rights Agreement is hereby
amended and restated in its entirety to read as follows:

        "But in any event within 35 days thereafter, prepare and file a shelf
registration statement with the Commission on Form S-3 under the Securities Act
(or in the event that the Company is ineligible to use such form, such other
form as the Company is eligible to use under the Securities Act) covering the
sale from time to time by the Purchasers of the Purchasers Registrable
Securities (such registration statement, including any amendments or supplements
thereto and prospectuses contained therein, is referred to herein as the
"PURCHASER REGISTRATION STATEMENT"), which Purchaser Registration Statement, to
the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that the initial Purchaser
Registration Statement also covers such number of additional shares of Voting
Common Stock as may become issuable to prevent dilution resulting from stock
splits, stock dividends or similar events. The number of shares of Voting Common
Stock initially included in the initial Purchaser Registration Statement shall
not exceed the number of shares allowed under Rule 415 and in no event will
exceed 150% of the number of shares of Voting Common Stock into which (i) the
Convertible Notes may be converted and (ii) the Purchaser Warrants may be
exercised which shares of Voting Common Stock shall be allocated pro rata among
the Purchasers whose securities are included in such Purchaser's Registration
Statement.

                                      -26-
<PAGE>   27

        Thereafter, the Company shall use its best efforts to cause such
        Purchaser Registration Statement to be declared effective as soon as
        practicable, and in any event prior to January 15, 2001 (the
        "EFFECTIVENESS DEADLINE"). Following the closing of the restructuring
        contemplated by the Restructuring Agreement, dated February 22, 2001,
        the Company will cause the number of shares of Voting Common Stock
        included in the Purchaser Registration Statement not to exceed the
        number of shares allowed under Rule 415 and not to be less than 125% of
        the number of shares of Voting Common Stock into which (i) the PIK
        Preferred Shares may be converted, (ii) the Amended Convertible Notes
        may be converted, and (iii) the Purchaser Warrants may be exercised
        which shares of Voting Common Stock shall be allocated pro rata among
        the Purchasers who securities are included in such Purchaser's
        Registration Statement. The Company shall provide Purchasers and their
        legal counsel reasonable opportunity, but not less than four (4) full
        business days, to review the Purchaser Registration Statement or
        amendment or supplement thereto prior to filing. Without limiting the
        foregoing, the Company will promptly respond to all SEC comments,
        inquiries and requests, and shall request acceleration of effectiveness
        at the earliest practicable date."

        (b) Section 2.7(b)(ii)(B) of the Investors' Rights Agreement is hereby
amended and restated in its entirety to read as follows:

               "In the event that shares of Voting Common Stock of the Company
        are delisted from the Approved Market and the Company shall not have
        used its best efforts to avoid such delisting at any time following the
        Convertible Note Closing Date and remain delisted for 5 consecutive
        business days, then at the option of each Purchaser and to the extent
        such Purchaser so elects, the Company shall on 2 business days notice
        either (1) pay in cash (as provided in Section 2(b)(v)) to such
        Purchaser a Monthly Delay Payment for each 30-day period (or portion
        thereof) that the shares are delisted or (2) redeem the Purchaser
        Registrable Securities held by such Purchaser, in whole or in part, at a
        redemption price equal to the Premium Redemption Price; provided,
        however, that such Purchaser may revoke such request at any time prior
        to receipt of payment of such Monthly Delay Payments or Premium
        Redemption Price, as the case may be; provided, further, that the
        Company's obligation to pay the Monthly Delay Payment (other than
        accrued but unpaid Monthly Delay Payments at the time of the Company's
        cure) and/or redeem the Purchaser Registrable Securities after receipt
        of a Purchaser notice shall cease if the delisting has been cured by the
        Company prior to the payment and/or redemption."

        (c) Section 2.7(b)(iii) of the Investors' Rights Agreement is hereby
amended and restated in its entirety to read as follows:

               "BLACKOUT PERIODS. In the event any Purchaser is unable to sell
        Purchaser Registrable Securities under the Purchaser Registration
        Statement for more than an aggregate of forty-five (45) days in any 12
        month period ("SUSPENSION GRACE PERIOD"), including without limitation
        by reason of a suspension of trading of the Voting Common Stock on the
        Approved Market, any suspension or stop order with respect to the
        Purchaser Registration Statement or the fact that an event has occurred
        as a result of which the prospectus (including any supplements thereto)
        included in such Purchaser Registration Statement then in effect
        includes an untrue statement of material fact or

                                      -27-
<PAGE>   28

        omits to state a material fact required to be stated therein or
        necessary to make the statements therein not misleading in light of the
        circumstances then existing, or the number of shares of Voting Common
        Stock covered by the Purchaser Registration Statement is insufficient at
        such time to make such sales (a "BLACKOUT"), then the Company shall pay
        in cash to each Purchaser a Monthly Delay Payment for each 30-day period
        (or portion thereof) from and after the expiration of the Suspension
        Grace Period. For purposes only of the initial Purchaser Registration
        Statements reflected in Section 9.5 of the Restructuring Agreement dated
        February 22, 2001, the Suspension Grace Period shall be an aggregate of
        sixty (60) days rather than forty-five (45) days. In lieu of receiving
        the Monthly Delay Payment as provided above, a Purchaser shall have the
        right, in the event the Blackout Period exceeds the Suspension Grace
        Period by more than 60 days, but not the obligation, to elect (until the
        Company has no longer exceeded the Suspension Grace Period) to have the
        Company redeem its Convertible Notes at the price equal to the Premium
        Redemption Price."

        Section 6.5   Transaction Documents.

        (a) All references in each of the Transaction Documents to the Notes are
deemed to also refer to the Amended Notes unless the context clearly indicates
otherwise.

        (b) Except as expressly amended hereby, the Transaction Documents shall
remain in full force and effect.

                                    ARTICLE 7
                              CONDITIONS TO CLOSING

        Section 7.1 Conditions to Obligations of the Company.

        The Company's obligations to (i) repurchase the Notes, (ii) issue the
PIK Preferred Shares, (iii) amend the Notes not being repurchased and amend the
terms of the Noteholders Agreement, and (iv) repay existing bank debt on the
Closing Date are subject to the satisfaction (or waiver by the Company), on or
prior to the Closing Date, of the conditions:

        (a) Representations and Warranties. Each of the representations and
warranties of the Participating Noteholders contained in this Agreement shall be
true and correct in all material respects as of the Closing Date. The
Participating Noteholders shall have performed in all material respects all
agreements, obligations, covenants and conditions herein required to be
performed by them on or prior to the Closing Date.

        (b) Legal Investment. On the Closing Date, there shall not be in effect
any Law or Order directing that the purchase or amendment of the Notes, the
issuance of the PIK Preferred Shares and the other transactions contemplated by
this Agreement not be consummated or which has the effect of rendering it
unlawful to consummate such transactions.

        (c) Proceedings and Litigation. No Action shall have been commenced by
any governmental authority or other person against any party hereto seeking to
restrain or delay the

                                      -28-
<PAGE>   29

purchase and sale of the Notes, the issuance of the PIK Preferred Shares or the
other transactions contemplated by this Agreement.

        (d) Delivery of Waivers. Each Participating Noteholder shall have waived
the defaults under Section 2.6 of the Noteholders Agreement and Section 5.5(a)
of the Note Purchase Agreement (which default under Section 5.5(a) shall
effectively be cured as a result of the effectiveness of this Agreement) and any
related cross default to the extent cured by such waiver; such waivers shall be
deemed delivered by a Participating Noteholders as a result of such
Participating Noteholder's execution and delivery of this Agreement provided
that such waivers shall only become effective upon completion of the Closing.

        (e) Consent of 100% of the Noteholders. 100% of the holders of the
outstanding Notes shall have consented to the transactions contemplated by this
Agreement and the other Restructuring Documents, such consent to be evidenced by
their execution and delivery of this Agreement.

        Section 7.2 Conditions to Obligations of the Participating Noteholders.

        The obligations of the Participating Noteholders to (i) sell Notes
pursuant to Article 4 hereof, (ii) issue the PIK Preferred Shares, (iii) amend
the Notes not being repurchased and amend the terms of the Noteholders Agreement
and the other Transaction Documents, and (iv) deliver the waivers referenced in
Section 7.1(d) hereof at the Closing are subject to the satisfaction (or waiver
by a majority of the aggregate principal amount of Notes held by the
Participating Holders), on or prior to the Closing Date, of the following
conditions:

        (a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects as of the Closing Date. The Company shall have
performed in all material respects all agreements, obligations, covenants and
conditions herein required to be performed by it on or prior to the Closing
Date.

        (b) Legal Investment. On the Closing Date, there shall not be in effect
any Law or Order directing that the purchase or amendment of the Notes, the
issuance of the PIK Preferred Shares and the other transactions contemplated by
this Agreement not be consummated or which has the effect of rendering it
unlawful to consummate such transactions.

        (c) Proceedings and Litigation. No Action shall have been commenced by
any governmental authority or other person against any party hereto seeking to
restrain or delay the purchase and sale of the Notes, the issuance of the PIK
Preferred Shares or the other transactions contemplated by this Agreement.

        (d) Opinion of Counsel. Each Participating Noteholder shall have
received an opinion addressed to such Participating Noteholder from Cooley
Godward LLP, counsel to the Company, dated the Closing Date and in substantially
the form attached hereto as Exhibit C.

        (e) Corporate Action. All Board and shareholder proceedings of the
Company required in connection with the transactions contemplated hereby shall
be evidenced by an

                                      -29-
<PAGE>   30

officer's certificate and shall reasonably satisfactory in form and substance to
each Participating Noteholder.

        (f) Filing of PIK Preferred Certification of Designations. The Company
shall have filed or caused to be filed, the PIK Preferred Certificate of
Designations with the Secretary of State of the State of Delaware and evidence
of the acceptance thereof shall have been delivered to the Participating
Noteholders.

        (g) Payment of Note Repurchase Price. The Company shall have paid to
each Participating Noteholder, by wire transfer in immediately available funds,
the Note Repurchase Price set forth beside such Participating Noteholder's name
on Schedule A to this Agreement.

        (h) Payment of Legal Fees. Immediately prior to the Closing, the Company
shall have paid up to an aggregate of $150,000 of documented legal fees and
expenses for Jones, Day, Reavis & Pogue, counsel to Societe Generale and Luskin,
Stern & Eisler LLP, counsel to Deutsche Bank AG and its affiliates.

        (i) Consent of 100% of the Noteholders. 100% of the holders of the
outstanding Notes shall have consented to the transactions contemplated by this
Agreement and the other Restructuring Documents, such consent to be evidenced by
their execution and delivery of this Agreement.

                                    ARTICLE 8
                              CLOSING; TERMINATION

        Section 8.1 Closing.

        The Closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Jones, Day, Reavis & Pogue, 599
Lexington Avenue, New York, New York, at 10:00 a.m. Eastern Standard Time on the
date hereof, or at such other place or time as the parties hereto may mutually
agree. The date on which the closing occurs is referred to herein as the
"Closing Date".

                                   ARTICLE 9
                             POST-CLOSING COVENANTS

        Section 9.1 Delivery of PIK Preferred Shares.

        As promptly as practicable, but in no event later than seven business
days following the Closing, the Company shall deliver to each Participating
Noteholder a certificate, in such denominations and registered in such
Participating Noteholder's name as set forth on Schedule A attached hereto,
representing the number of PIK Preferred Shares which such Participating
Noteholder is receiving from the Company in connection with the transactions
contemplated with this Agreement.

                                      -30-
<PAGE>   31

        Section 9.2 Repayment of Bank Debt and Termination of Credit Facility.

        Immediately following the Closing but in all events on the Closing Date,
the Company shall use the restricted cash on deposit with Silicon Valley Bank to
repay in full its indebtedness to Silicon Valley Bank. The Company shall deliver
a notice of termination to Silicon Valley Bank in the form attached hereto as
Exhibit D with respect to the credit facility in place with Silicon Valley Bank
and Silicon Valley Bank shall deliver evidence of such repayment and
termination. Confirmation of the repayment and termination described in the
immediately preceding sentence shall be delivered to each Participating
Noteholder within three business days of receipt by the Company of such evidence
of repayment and termination. Notwithstanding the foregoing, the Company may
maintain in effect (but not increase the maximum amount of) its existing $32,500
corporate credit card facility with Silicon Valley Bank, and doing so shall not,
in and of itself, constitute a breach of any covenant, representation or
condition set forth herein.

        Section 9.3 Company Indebtedness.

        For so long as any PIK Preferred Shares or the Amended Notes remain
issued and outstanding, the Company shall not incur any Indebtedness other than
as contemplated by the Noteholders Agreement.

        Section 9.4 Change of Control Transaction; Permitted Asset Sale.

        For so long as any PIK Preferred Shares or any Amended Notes remain
issued and outstanding, the Company shall not enter into or commence any Change
of Control Transaction or Permitted Asset Sale other than a Change of Control
Transaction or Permitted Asset Sale to be effected for cash; provided, however,
that the Company may effect a Change of Control Transaction or Permitted Asset
Sale in which part or all of the consideration therefore consists of common
stock (or American Depositary Receipts) of the acquiring company provided that
(i) the acquiring company's common stock (or American Depositary Shares) shall
be listed on the NASDAQ National Market, the American Stock Exchange or the New
York Stock Exchange, (ii) the company shall have a market capitalization of at
least $500 million as of the closing date of such Change of Control Transaction
or Permitted Asset Sale, (iii) the common stock (or American Depositary
Receipts) received shall be freely tradeable upon distribution to the holders of
the PIK Preferred Shares of the Amended Notes, as appropriate; for purposes of
determining the cash value of such distribution the common stock distributed
shall be valued based upon the average of the closing bid prices for such common
stock for the 10 trading days ending two trading days prior to the closing date
of such Change of Control Transaction or Permitted Asset Sale (such closing to
occur at least 10 trading days after the announcement of such transaction).

        Section 9.5 Registration Statement.

        As promptly as practicable, but in no event later than 10 calendar days
following the filing with the SEC of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000, the Company will file or cause to
be filed an additional Registration Statement on Form S-3 covering the resale of
additional shares of common stock issuable upon conversion of the Notes and the
Amended Notes as contemplated by the Investor Rights Agreement. As promptly as
practicable, but in no event later than 90 calendar days following the

                                      -31-
<PAGE>   32

Closing Date. the Company will file or cause to be filed an additional
Registration Statement on Form S-3 covering the resale of additional shares of
Common Stock issuable upon conversion of the PIK Preferred Shares.

        Section 9.6 Severance; Change in Control Payments.

        From and after the Closing, the Company will not increase the aggregate
amount of severance and change in control payments payable to members of senior
management of the Company in excess of the amounts set forth on Schedule 2.17(g)
hereto.

        Section 9.7 Notice to Non-Participating Holders.

        Within three business days following the Closing Date, the Company shall
notify the holders of the Notes that the Amended Notes constitute "Senior
Indebtedness" for purposes of the Notes.

        Section 9.8 Press Release; Filing of 8-K.

        Promptly following the Closing, the Company shall issue a press release
describing the transactions contemplated by this Agreement and the other
Restructuring Documents and shall file with the SEC a Form 8-K containing such
description and appending as exhibits this Agreement and the other Restructuring
Documents.

                                   ARTICLE 10
                       MANAGEMENT/EMPLOYEE INCENTIVE POOL

        Section 10.1 The Participating Noteholders acknowledge that subsequent
to the Closing, the Company will establish a management/employee incentive pool
pursuant to which 10% of the (i) Change of Control Net Sale Proceeds and (ii)
Asset Sale Net Sale Proceeds) (such 10% amount being hereinafter referred to as
the "MANAGEMENT INCENTIVE PAYMENT") shall be distributed for the benefit of the
management and employees of the Company in the manner described on Schedule
10.1.

                                   ARTICLE 11
                                 INDEMNIFICATION

        Section 11.1 Indemnification.

        The Company (the "Participating Noteholder Indemnitor") shall defend,
indemnify and hold harmless the Participating Noteholders and their Affiliates
and each director, officer, member, partner, employee and agent of such Persons
(the "Participating Noteholder Indemnitees") against any obligations, loss,
damage, claim, liability, judgment, suits or settlement of any nature or kind,
including all costs and expenses relating thereto, including without limitation,
interest, penalties and reasonable attorneys' fees (including any attorneys'
fees incurred in enforcing this Section 11.1) (collectively "Damages"), arising
out of, resulting from or relating to:

                                      -32-
<PAGE>   33

        (i) the breach of any representation or warranty of failure to perform
any covenants or agreements by the Company contained in Articles 2 or 9, or any
certificate or document delivered pursuant to any Restructuring Document;

        (ii) the breach by the Company of any covenant or agreement (whether to
be performed prior to or after the Closing) contained in any Restructuring
Document; or

        (iii) the transactions contemplated hereby (other than Damages resulting
from a change in the price of the Company's common stock);

        in each case other than Damages which are the result of such
Participating Noteholder's gross negligence or willful misconduct.

        Section 11.2 Non-Exclusive Remedy.

        The indemnification remedies provided in this Article 11 shall not be
deemed to be exclusive. Accordingly, the exercise by any Person of any of its
rights under this Article 11 shall not be deemed to be an election of remedies
and shall not be deemed to prejudice, or to constitute or operate as a waiver
of, any other right or remedy that such Person may be entitled to exercise
(whether under this Agreement, any other Transaction Document, under any
Restructuring Document, under any other contract, under any law or otherwise).

        Section 11.3 Specific Performance.

        The Company and the Participating Noteholders acknowledge and agree that
irreparable damage to the Participating Noteholders would occur in the event
that any of the provisions of the Restructuring Documents were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that each Participating Noteholder shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of the
Restructuring Documents and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any Participating
Noteholder may be entitled by law or equity.

                                   ARTICLE 12
                                  MISCELLANEOUS

        Section 12.1 Governing Law; Jurisdiction; Waiver of Jury Trial.

        THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN
THAT STATE. EACH OF THE PARTIES HEREBY SUBMITS TO THE EXCLUSIVE PERSONAL
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND IF SUCH COURT SHALL NOT HAVE JURISDICTION TO HEAR SUCH MATTER, TO
THE NEW YORK STATE SUPREME COURT LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK AND WAIVES ANY OBJECTION AS TO VENUE IN EITHER SUCH LOCATION. SERVICE OF
PROCESS ON

                                      -33-
<PAGE>   34

THE PARTIES IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
EFFECTIVE IF MAILED TO THE PARTIES IN ACCORDANCE WITH SECTION 11.8 HEREOF. THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT.

        Section 12.2 Successors and Assigns; Assignment.

        Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, permitted
assigns, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each Person who shall be a holder
of the Amended Notes and the PIK Preferred Shares from time to time. This
Agreement may not be assigned by the Company without the prior written consent
of the Required Holders (as defined in the Noteholder Agreement). This Agreement
may not be assigned by the Participating Noteholders prior to the Closing
without the consent of the Company, except that each Participating Noteholder
may assign its rights and obligations hereunder to any Affiliate or Affiliates.
After the Closing, this Agreement may be assigned by the Participating
Noteholders to any transferee of the Amended Notes or the PIK Preferred Shares
so long as each assignee (i) agrees to be bound hereunder, (ii) agrees that the
representations and warranties made by the Participating Noteholders herein
shall be deemed to have been made by such assignee and (iii) shall execute a
counterpart to this Agreement the execution of which shall constitute such
assignee's agreement to the terms of this Section 12.2. Any purported assignment
of this Agreement in violation of the provisions of this paragraph is null and
void.

        Section 12.3 Entire Agreement.

        This Agreement and the Schedules and Exhibits hereto, the other
Restructuring Documents, the Transaction Documents and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein. This Agreement and the Schedules and Exhibits hereto and the other
Restructuring Documents and the Transaction Documents to the extent not
expressly amended by this Agreement supersede any other agreement or
understanding, whether written or oral, that may have been made or entered into
by any party or their respective affiliates or representatives prior to the date
hereof relating to the matters contemplated hereby and thereby. All references
in this Agreement to Schedules refer to sections of the Company Disclosure
Letter delivered in connection with this Agreement.

        Section 12.4 Severability.

        In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

                                      -34-
<PAGE>   35

        Section 12.5 Survival of Warranties.

        The warranties, representations and covenants of the Company and
Participating Noteholders contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing, and shall
continue as long as any Amended Notes or PIK Preferred Shares are outstanding or
issuable.

        Section 12.6 Amendment and Waiver.

        This Agreement may be amended or modified, and the rights of the Company
or Participating Noteholders hereunder may only be waived, upon the written
consent of the Company and the Participating Noteholders representing a majority
of the principal amount of the outstanding Amended Notes.

        Section 12.7 Delays or Omissions.

        It is agreed that no delay or omission to exercise any right, power or
remedy accruing to any party, upon any breach, default or noncompliance by
another party under this Agreement or any other Restructuring Document, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or of
or in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character on a Participating Noteholder's part of any breach, default or
noncompliance under this Agreement, the other Restructuring Documents or any
waiver on such party's part of any provisions or conditions of this Agreement or
the Restructuring Documents must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or the other Restructuring Documents, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.

        Section 12.8 Notices.

        All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified; (b) upon receipt of successful complete transmission when sent by
facsimile if sent during normal business hours of the recipient, if not, then on
the business day next succeeding receipt of successful, complete transmission;
(c) three (3) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the addresses set forth in the Note Purchase Agreement.

        Section 12.9 Titles and Subtitles.

        The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.

                                      -35-
<PAGE>   36

        Section 12.10 Counterparts; Execution by Facsimile Signature.

        This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument. This Agreement may be executed by facsimile signature(s).

        Section 12.11 Participating Noteholders' Obligations Several and Not
                      Joint.

        All obligations of the Participating Noteholders hereunder shall be
several and not joint and no Participating Noteholder shall have any liability
or obligation hereunder as a result of any other Participating Noteholder's
breach of any provisions of this Agreement.

        Section 12.12 Obligations Absolute.

        The Company's obligations under the Restructuring Documents are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction.

        Section 12.13 No Strict Construction.

        The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

        Section 12.14 Releases and Waivers.

        The Company hereby irrevocably and unconditionally waives, forever
releases and discharges the Participating Noteholders (and any of its respective
affiliates, officers, directors, employees and partners) in any and all
capacities from and against any and all claims, covenants, promises, agreements,
obligations, controversies, losses, damages, costs, expenses, demands, causes of
action, judgments or liabilities of any kind or character whatsoever, whether
matured or contingent, or known or unknown, including for indemnity or
contribution, that the Company has or may have to the extent it or they arise
out of, or in connection with, the Transaction Documents, the Restructuring
Documents or the transactions contemplated thereby.

                                      -36-
<PAGE>   37

               IN WITNESS WHEREOF, the parties hereto have executed the
Restructuring Agreement as of the date set forth in the first paragraph hereof.

                                            QUOKKA SPORTS, INC.

                                            -------------------

                                            Name:

                                            Title:

                                            PARTICIPATING NOTEHOLDER

                                            -------------------

                                            Name of Participating Noteholder

                                            Name of Signatory:

                                            Title:

                                      -37-
<PAGE>   38

                                   SCHEDULE A
<TABLE>
<CAPTION>

                   Original
                   Principal      Principal                           Redemption                              Stated
                   Amount of       Amount           Principal           Price          Remaining            Valued PIK
 Participating       Notes     of Notes as of        Amount            for Notes        Principal             Preferred
    Holder           Held        February 22   of Notes Redeemed        Redeemed     Amount of Notes        Shares Issued
 -------------    ----------   --------------  -----------------    --------------   ---------------     ------------------
<S>               <C>          <C>             <C>                  <C>              <C>                 <C>

</TABLE><PAGE>   1

                                                                     EXHIBIT 4.2

                                                                DRAFT OF 2/20/01

                                    AMENDED
                        7.0% CONVERTIBLE PROMISSORY NOTE,
                                   SERIES A-1

$                                                             New York, New York
                                                               February __, 2001

               THIS AMENDED 7.0% CONVERTIBLE PROMISSORY NOTE, SERIES A-1 WAS
               AMENDED PURSUANT TO THE RESTRUCTURING AGREEMENT DATED AS OF
               FEBRUARY __, 2001 BETWEEN QUOKKA SPORTS INC. AND THE PARTIES
               NAMED ON SCHEDULE 1.1 THERETO AND AMENDS AND RESTATES IN ITS
               ENTIRETY CERTAIN OF THE 7.0% CONVERTIBLE SUBORDINATED PROMISSORY
               NOTES ORIGINALLY ISSUED ON SEPTEMBER 15, 2000 PURSUANT TO NOTE
               PURCHASE AGREEMENT DATED AS OF SEPTEMBER 15, 2000 BETWEEN QUOKKA
               SPORTS, INC., GE CAPITAL EQUITY INVESTMENTS, INC. AND THE OTHER
               PURCHASERS NAMED ON SCHEDULE 1.1 THERETO.

               THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
               1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
               OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS NOTE IS ALSO
               SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE NOTEHOLDERS
               AGREEMENT, DATED AS OF SEPTEMBER 15, 2000 (THE "NOTEHOLDERS
               AGREEMENT"), AS SUCH AGREEMENT MAY BE AMENDED, SUPPLEMENTED OR
               OTHERWISE MODIFIED FROM TIME TO TIME.

        FOR VALUE RECEIVED, the undersigned, QUOKKA SPORTS, INC., a Delaware
corporation (the "COMPANY"), promises to pay to ____________ (the "INVESTOR"),
in lawful money of the United States and in immediately available funds, the
principal amount of $-Field_2-- (together with increases to such amount
pursuant to Section 1 below, the "FACE AMOUNT") together with interest thereon
calculated from the date hereof and delay or default payments ("PAYMENTS")
thereon, all in accordance with the provisions of this Note or such other amount
determined pursuant to Section 2 hereof. The Face Amount set forth above
represents the sum of (i) the Original Face Amount of this Note as of September
15, 2000, the date of original issuance, plus (ii) all accrued interest
(including penalty interest) through the date hereof and other Payments.

        This Amended Note was amended pursuant to the Restructuring Agreement
dated as of February __, 2001 (the "AGREEMENT") between the Company and the
parties set forth in Schedule 1.1 thereto (the "PARTICIPATING NOTEHOLDERS") and
amends and restates in its entirety the Notes originally issued to the
Participating Noteholders pursuant to the Note Purchase Agreement dated

<PAGE>   2

as of September 15, 2000 (the "NOTE PURCHASE AGREEMENT") among the Company, GE
Capital Equity Investments, Inc. and the other parties thereto. Unless the
context otherwise requires, as used herein, "NOTE" means any of the 7.0%
Convertible Promissory Notes, Series A-1 issued pursuant to the Note Purchase
Agreement and amended pursuant to the Agreement and any other similar
convertible promissory notes issued by the Company in exchange for, or to effect
a transfer of, any Note and "NOTES" means all such Notes in the aggregate.

        1. ACCRUAL OF INTEREST. Except as otherwise expressly provided in
Section 6 hereof, interest shall accrue at the rate of seven percent (7.0%) per
annum (based on a year of 365 days for the actual days elapsed), accruing daily
and compounded quarterly, on each Interest Payment Date on the Face Amount and,
if not paid in cash on the Interest Payment Date (as defined below) shall
result, on each Interest Payment Date, in a corresponding increase in the then
outstanding Face Amount of the Notes.

        2. PAYMENT OF PRINCIPAL AND INTEREST ON NOTE.

               (a)    SCHEDULED PAYMENT OF PRINCIPAL.

                      (i) The Company shall pay an amount determined pursuant to
Section 2.1(a)(ii) or amounts determined pursuant to Section 2.1(a)(iii), as
applicable, which may exceed the Face Amount with any excess being treated as a
payment of premium), together with all accrued and unpaid interest and Payments
thereon, if any, in cash (or in kind to the extent permitted by the Agreement)
to the holder of this Note on the earlier to occur of (x) a Change of Control
Transaction or Permitted Asset Sale, as applicable, and (y) September 15, 2005
(the "FINAL MATURITY DATE"). For purposes of the foregoing, a "CHANGE OF CONTROL
TRANSACTION" shall mean the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the Company, the
sale, lease, transfer or conveyance, in a transaction or series of transactions,
of all or substantially all the assets of the Company to another Person, the
acquisition of beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act without regard to the 60-day exercise period) by any person (as defined in
Section 13(d) of the Exchange Act) together with its affiliates and associates
(as each of such terms are defined in Rule 405 under the Securities Act) of
securities constituting in excess of 50% of the Company's voting power
(excluding in all cases beneficial ownership of Notes, Amended Notes or Warrants
to the extent such securities are not convertible as a result of applicable
conversions on limitation contained therein) (such beneficial ownership, the
"CONTROLLING EQUITY INTEREST EVENT").

                      (ii) In the event that this Note shall be payable as a
result of the occurrence of a Change of Control Transaction, the payment due
with respect to this Note shall equal this Note's proportionate share (together
with other outstanding 7.0% Convertible Promissory Notes, Series A-1) of an
amount in cash or Permitted Common Stock Consideration equal to the product of
(A) 0.45 multiplied by (B) a fraction, the numerator of which is the principal
amount plus accrued interest of Notes issued in connection with the Closing
minus the principal amount plus accrued interest of Notes converted prior to the
redemption date and the denominator of which is the principal amount plus
accrued interest of Notes issued in connection with the Closing, times (C) the
amount by which the Change of Control Net Sale Proceeds from such Change of
Control Transaction exceed the Liquidation Value of the PIK Preferred Shares

                                       2
<PAGE>   3

and Management Incentive Payment (such amount, the "BASE AMOUNT"). For purposes
of the foregoing, "CHANGE OF CONTROL NET SALE PROCEEDS" shall mean the gross
cash proceeds or other non-cash consideration permitted under the Agreement (the
"PERMITTED COMMON STOCK CONSIDERATION") from such Change of Control Transaction,
in each case less the fees of investment bankers and finders, if any, and
severance payments paid, or expected to be paid, to senior management or
executive members of the board of the Company not exceeding the maximum amount
set forth on Schedule 2.17(g) to the Agreement in connection with such Change of
Control Transaction; provided that in the case of a Controlling Equity Interest
Event, the Change of Control Net Sale Proceeds shall mean an amount necessary to
pay the sum of (i) the Liquidation Value of the PIK Preferred Shares (as
contemplated by Section 11 hereof), (ii) the Management Incentive Payment and
(iii) the aggregate outstanding Face Amount of the Notes, together with interest
and Payments thereon through the date of repayment; and provided, further, that
in connection with a Change of Control Transaction involving a merger or
consolidation of the Company with or into another Person or the merger of
another Person with or into the Company, the gross sale proceeds (as used for
purposes of determining the Change of Control Net Sale Proceeds) shall be
determined based upon the value of the aggregate consideration paid directly or
indirectly by or on behalf of such other Person (or any affiliate thereof), to
all holders of the Company's securities (including, without limitation, holders
of the Company's Common Stock, PIK Preferred Shares, Notes, Amended Notes and
Warrants), in connection with such transaction, calculated as if such
transaction constituted the acquisition of a 100% interest in the Company
without regard to whether such entity was a stockholder of the Company prior to
effecting such transaction. The Company shall not permit a Change of Control
Transaction to occur unless the consideration therefore is payable entirely in
cash or Permitted Common Stock Consideration. The amount payable pursuant to a
Change of Control Transaction calculated as determined above shall represent
payment in full of this Note and in the event that no amount shall be payable
pursuant to the Change of Control Transaction pursuant to such calculation, this
Note shall be deemed paid in full and shall be extinguished.

                      (iii) In the event that this Note shall be payable as a
result of the occurrence of a Permitted Asset Sale, the payment then due with
respect to this Note shall equal this Note's proportionate share (together with
other outstanding 7.0% Convertible Promissory Notes, Series A-1) of an amount in
cash or Permitted Common Stock Consideration equal to the product of (A) 0.45
multiplied by (B) a fraction, the numerator of which is the principal amount
plus accrued interest of Notes issued in connection with the Closing minus the
principal amount plus accrued interest of Notes converted prior to the
redemption date and the denominator of which is the principal amount plus
accrued interest of Notes issued in connection with the Closing, times (C) the
amount by which the Asset Sale Net Sale Proceeds from all Permitted Asset Sales
that have occurred, together exceed the Liquidation Value of the PIK Preferred
Shares and Management Incentive Payment (such amount, the "BASE AMOUNT"). For
purposes of the foregoing, "ASSET SALE NET SALE PROCEEDS" shall mean the gross
cash proceeds or Permitted Common Stock Consideration from such Permitted Asset
Sale, in each case less the fees of investment bankers and finders, if any, and
severance payments of senior management associated with such Permitted Asset
Sale not exceeding the maximum amount set forth in Section 2.17(g) of the
Agreement, in connection with such Permitted Asset Sale. The Company shall not
permit a Permitted Asset Sale to occur unless the consideration therefore is
payable entirely in cash or Permitted Common Stock Consideration. The amount
payable pursuant to a

                                       3
<PAGE>   4

Permitted Asset Sale calculated as determined above shall reduce the Face Amount
of this Note by the amount of such cash payment or Permitted Common Stock
Consideration. In the event the Asset Sale Net Proceeds payable pursuant to a
Permitted Asset Sale shall be less than $2,500,000, the Company shall hold such
proceeds in a segregated account for the benefit of the persons entitled thereto
and shall pay such amounts (together with any interest earned thereon) to the
persons entitled thereto upon the occurrence of an additional Permitted Asset
Sale which results in the cumulative proceeds available for distribution
exceeding $2,500,000 or upon a Change of Control Transaction. In no event shall
the Company accept non-cash consideration in connection with any Permitted Asset
Sale if the value thereof (determined as provided in the Agreement) is less than
$2,500,000.

               (b) PAYMENT OF INTEREST. Commencing on December 31, 2000, the
Company shall pay interest on this Note quarterly in arrears on March 31, June
30, September 30 and December 31 of each year and on the Final Maturity Date, or
if any such day is not a business day, on the next succeeding business day (each
an "INTEREST PAYMENT DATE") to holders of record on the immediately preceding
March 15, June 15, September 15 and December 15, respectively. Any interest and
Payments payable on this Note shall be paid, at the Company's option, either in
cash or by adding an amount equal to the interest and Payments payable on such
Interest Payment Date ("PIK INTEREST") to the then outstanding Face Amount of
this Note on such Interest Payment Date. If the Company chooses to pay the
interest and Payments due on a particular Interest Payment Date in cash, the
Company shall deliver an irrevocable written notice in the form of Exhibit 1 to
the holder of this Note five (5) business days prior to such Interest Payment
Date. Following each Interest Payment Date in which the Company has elected not
to pay interest due on such Interest Payment Date in cash, the Company shall
promptly deliver a written notice to the holder of this Note specifying (a) the
amount of the increase to the Face Amount of this Note as a result of the
interest and Payments on the immediately preceding Interest Payment Date and (b)
the aggregate Face Amount of this Note immediately following such Interest
Payment Date. If no such notice is delivered, by default PIK Interest will be
paid on the Interest Payment Date.

               (c) PRO RATA PAYMENT. The Company agrees that any payments to the
holders of the Notes (including, without limitation, upon acceleration pursuant
to Section 6) (whether for principal, interest, or otherwise) shall be made pro
rata among all such holders based upon the aggregate unpaid principal amount of
the Notes held by each such holder. If any holder of a Note obtains any payment
(whether voluntary, involuntary, by application of offset or otherwise) of
principal, interest or Payments on such Note in excess of such holder's pro rata
share of payments obtained by all holders of the Notes, such holder shall make
payments to the other holders of the Notes based on such participation in the
Notes held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this Section 2(c).

        3. OPTIONAL REDEMPTION.

               (a) OPTIONAL REDEMPTION. At such time as no PIK Preferred Shares
are outstanding, the Company, at its option, upon written notice redeem the
Notes, in whole but not in part and from all but not less than all the holders
of the Notes, to the extent it has funds legally available and irrevocably
reserved therefor and such redemption is not prohibited by the terms of

                                       4
<PAGE>   5

its outstanding indebtedness, at the redemption price of 100% of the Face Amount
thereof, plus an amount equal to the accrued and unpaid interest and Payments
thereon, if any, to the redemption date; provided the Company intends and has
the financial resources and ability to repurchase all of the outstanding Notes,
and certifies to those facts in it written notice of redemption.

               (b) PAYMENT OF REDEMPTION PRICE.

                      (i) The amount of the redemption price on the Notes
redeemed, on any redemption set forth herein, shall be paid to the holders of
the Notes in cash or Permitted Common Stock Consideration as provided herein.

                      (ii) The Company's written notice shall specify the time
and place of the redemption of all but not less than all the Notes, calling upon
each holder of record to surrender to the Company on the redemption date at the
place designated in the notice all the Notes still owned of record by such
holder on the redemption date. The date such written notice is received by a
holder is the "REDEMPTION RECORD DATE." The redemption date shall be not fewer
than three (3) nor more than five (5) trading days after the Redemption Record
Date. Such written redemption notice will be of no effect unless (i) there shall
be Effective Registration and (ii) the Company shall have complied with its
obligations to convert Notes pursuant to the terms of Section 4 hereof, in the
case of each of clause (i) and clause (ii), during the period of the Redemption
Record Date through the redemption date, inclusive. On or after the redemption
date, each holder of Notes to be redeemed shall present and surrender such
holder's Notes to the Company at the place designated in the redemption notice
and thereupon the redemption price of the Notes, and any unpaid interest and
Payments thereon to the redemption date, shall be paid in cash to or on the
order of the person whose name appears in the Note Register (as herein defined)
as the owner thereof, and each surrendered Note shall be canceled by the
Company. Any notice of redemption by the Company shall be irrevocable, and any
failure by the Company to redeem all the unconverted Notes for cash on the
redemption date under this Section 3 shall result (without limiting the holder's
other rights under Section 6 and the other provisions of the Transaction
Documents) in the automatic and permanent termination of all its rights under
this Section 3.

                      (iii) If a notice of redemption has been given pursuant to
this Section 3 and any holder of Notes shall, prior to the close of business on
the business day immediately preceding the redemption date, give written notice
to the Company pursuant to Section 4 below of the conversion of any or all of
the Notes held by the holder and to be redeemed, then such redemption shall not
become effective as to such Notes to be converted and such conversion shall
become effective as provided in Section 4 below.

        4. CONVERSION RIGHTS; ADJUSTMENTS. The holders of the Notes shall have
conversion rights as follows (the "CONVERSION RIGHTS"):

               (a) HOLDER'S RIGHT TO CONVERT. At any time the Face Amount of
this Note plus all accrued and unpaid interest and Payments thereon shall be
convertible, in whole or in part (subject to Section 15 hereof), at the option
of the holder thereof, at any time and from time to time into fully paid and
nonassessable shares of the Company's Common Stock, par value

                                       5
<PAGE>   6

$.0001 per share (the "COMMON STOCK") at the then effective Conversion Rate (as
defined below) (each such conversion, a "HOLDER'S OPTIONAL CONVERSION").

        The "CONVERSION RATE", as of any Conversion Date (as defined below),
shall equal an amount determined by dividing (i) the portion of the Face Amount
proposed to be converted into common stock outstanding on such date, plus the
ratable portion of any accrued and unpaid interest and Payments on the Notes
proposed to be converted into common stock, by (ii) the Conversion Price (as
defined below) in effect as of such Conversion Date. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of the Notes
without the payment of additional consideration by the holder thereof (the
"CONVERSION PRICE") shall initially be $0.75. Such initial Conversion Price and
the rate at which the Notes may be converted into shares of Common Stock, shall
be subject to adjustment as provided below.

               (b) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of the Notes. In lieu of fractional shares, the
Company shall pay cash equal to such fraction multiplied by the Closing Price
per share of Common Stock on the trading date immediately preceding the related
Conversion Date (as defined below).

               (c) MECHANICS OF CONVERSION.

                      (i) In order to exercise its rights pursuant to a holder's
Optional Conversion, the holder shall deliver written notice in the form of
Exhibit 2 to the Company stating that such holder elects to convert all or part
of the Face Amount, plus the ratable portion of any accrued but unpaid interest
and Payments, represented by such Note or Notes. Such notice shall state the
Face Amount, plus the ratable portion of any accrued but unpaid interest and
Payments, of Notes which the holder seeks to convert and shall be accompanied
within one (1) trading day by the Note or Notes subject to conversion. The date
contained in the notice shall be the conversion date ("CONVERSION DATE") and the
holder shall be deemed to own the underlying Common Stock as of such date. As
soon as practicable (but no later than three days) after the Conversion Date,
the Company shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled (which number of shares may be reduced by the Company in
accordance with Section 16 hereof so as not to exceed the Holder's pro rata
share of the Maximum Share Amount) and, in the case where only part of a Note is
converted, the Company shall execute and deliver (at its own expense) a new Note
of any authorized denomination as requested by a holder in an aggregate
principal amount equal to and in exchange for the unconverted portion of the
principal amount of the Note so surrendered. Notwithstanding anything to the
contrary in this Section 4, in the case where only a part of a Note is
converted, the amount of the unconverted portion of such Note shall be at least
$10,000. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion of Notes, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder, the Company
shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion or
exercise to the holder, by crediting the account of holder's prime broker with
DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery described above shall apply to the electronic transmittals
through the DWAC system. The parties agree to coordinate with DTC to accomplish
this objective. The

                                       6
<PAGE>   7

conversions pursuant to Sections 4 shall be deemed to have been made immediately
prior to the close of business on the Conversion Date. The person or persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common Shares
at the close of business on the Conversion Date.

                      (ii) The Company shall at all times during which the Notes
shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Notes, such
number of its duly authorized shares of Common Stock as shall from time to time
be sufficient to effect the conversion of 125% of the outstanding Notes. Before
taking any action which would cause an adjustment reducing the Conversion Price
below the then par value of the shares of Common Stock issuable upon conversion
of the Notes, the Company will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.

                      (iii) All Notes (or the portions thereof) which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such Notes, including the rights,
if any, to receive interest, notices and consent rights shall immediately cease
and terminate on the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock or cash, as the case may be, in
exchange therefor, and, if applicable, cash for any fractional shares of Common
Stock. Any Notes, to the extent so converted, shall be retired and canceled.

                      (iv) If a Holder's Optional Conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may, at the option of any
holder tendering Notes for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which event
the holders entitled to receive the Common Stock issuable upon such conversion
of the Notes shall not be deemed to have converted such Notes until immediately
prior to the closing of the sale of securities.

               (d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.

                      (i) SPECIAL DEFINITIONS. For purposes of this Section
4(d), the following definitions shall apply:

                             (A) "OPTION" shall mean Rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, other than such Rights, options or warrants granted to employees,
directors or bona fide consultants of the Company pursuant to plans or
arrangements approved by the Company's board of directors.

                             (B) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.

                             (C) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section 4(d)(ii) below,
deemed to be issued) by

                                       7
<PAGE>   8

the Company after September 15, 2000 (the "ISSUE DATE") other than the Reserved
Employee Shares.

                             (D) "RIGHTS TO ACQUIRE COMMON STOCK" (or "RIGHTS")
shall mean all rights issued by the Company to acquire Common Stock whether by
exercise of a warrant, option or similar call, or conversion of any existing
instruments, in either case for consideration fixed, in amount or by formula, as
of the date of issuance.

                             (E) "RESERVED EMPLOYEE SHARES" shall mean shares of
Common Stock issued after the Issue Date to employees, directors or bona fide
consultants of the Company or any affiliate, pursuant to stock purchase or stock
option plans or arrangements approved by the Company's board of directors or
shares issued after repurchase pursuant to any restricted stock purchase
agreement following a termination, in an aggregate amount of up to the sum of
(i) 16,031,363 shares of Common Stock, (ii) an additional 1,500,000 shares of
Common Stock for each twelve month period that begins (each January 31st) after
the Issue Date while the Notes are outstanding and (iii) that number of
additional shares of Common Stock equal to 10% of the number of shares of Common
Stock issued as consideration in an acquisition of a business, assets or a legal
entity that is permitted pursuant to the provisions of the Noteholders Agreement
and is approved by the Company's board of directors.

                      (ii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON STOCK. If the Company at any time or from time to time after the Issue
Date issues (other than pursuant to the Transaction Documents) any Options or
Convertible Securities or Rights to Acquire Common Stock, then the maximum
number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options, Rights to
Acquire Common Stock or, in the case of Convertible Securities, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue; provided, however,
that in any such case:

                            (A) No further adjustment in the Conversion Price
shall be made upon the subsequent issue of shares of Common Stock upon the
exercise of such Options, Rights or conversion or exchange of such Convertible
Securities;

                            (B) Upon the expiration or termination of any
unexercised Option, Right or Convertible Security issued or granted after the
Issue Date, the Conversion Price shall be adjusted immediately to reflect the
applicable Conversion Price which would have been in effect had such Option,
Right or Convertible Security (to the extent outstanding immediately prior to
such expiration or termination) never been issued; and

                            (C) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange of any
Option, Right or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Conversion Price then
in effect shall forthwith be readjusted to such Conversion Price as would have
been obtained had the Conversion Price adjustment that was originally made upon
the issuance of such Option, Right or Convertible Security which were not
exercised or converted prior to such change been made upon the basis of such
change, but no

                                       8
<PAGE>   9

further adjustment shall be made for the actual issuance of Common Stock upon
the exercise or conversion of any such Option, Right or Convertible Security.

                      (iii) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK.

                             (A) If the Company shall at any time after the
Issue Date issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 4(d)(ii) but excluding
shares issued as a dividend or distribution as provided in Section 4(g) or upon
a stock split or combination as provided in Section 4(e)), without
consideration, or for a consideration per share less than the average Closing
Price per share of Common Stock for the ten (10) consecutive trading days
immediately preceding the date of such issue (the "MARKET PRICE"), then and in
such event, the Conversion Price shall be reduced, concurrently with such
issuance, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the sum of
(A) the number of shares of Common Stock outstanding immediately prior to such
issuance plus (B) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of Additional Shares
of Common Stock so issued would purchase at the Market Price per share of Common
Stock on the date immediately prior to such issue and the denominator of which
shall be the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issuance plus (2) the number of such Additional Shares
of Common Stock so issued.

                             (B) If the Company shall at any time after the
Issue Date issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 4(d)(ii), but excluding
shares issued as a dividend or distribution as provided in Section 4(g) or upon
a stock split or combination as provided in Section 4(e)), for a consideration
per share less than the Conversion Price (as adjusted) on the date of and
immediately prior to such issue, then and in such event, the Conversion Price
shall be reduced, concurrently with such issuance, to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance plus (B) the number of shares of
Common Stock which the aggregate consideration received by the Company for the
total number of Additional Shares of Common Stock so issued would purchase if
the amount paid for such shares was equal to the Conversion Price and the
denominator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issuance plus (2) the number of such
Additional Shares of Common Stock so issued.

                             (C) If the Company shall at any time after the
Issue Date issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 4(d)(ii), but excluding
shares issued as a dividend or distribution as provided in Section 4(g) or upon
a stock split or combination as provided in Section 4(e)), for a consideration
per share that is less than the Fair Market Value and less than the Conversion
Price (as adjusted), in each case on the date of and immediately prior to such
issue, then and in such event, the Conversion Price shall be reduced, to equal
the lesser of (a) the Conversion Price as

                                       9
<PAGE>   10

adjusted pursuant to Section 4(d)(iii)(a) or (b) the Conversion Price as
adjusted pursuant to Section 4(d)(iii)(b).

        Notwithstanding the foregoing, the applicable Conversion Price shall not
be reduced if the amount of such reduction would be an amount less than $.01,
but any such amount shall be carried forward and reduction with respect thereto
made at the time of and together with any subsequent reduction which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate $.01 or more. No adjustment of the Conversion Price pursuant to this
Section 4(d) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment except for
reverse stock splits.

                      (iv) DETERMINATION OF CONSIDERATION. For purposes
of this Section 4(d), "FAIR MARKET VALUE" of the consideration received by the
Company for the issue of any Additional Shares of Common Stock shall be computed
as follows:

                             (A) CASH AND PROPERTY. Such consideration shall:

                                    (1) insofar as it consists of cash, be
computed at the aggregate of cash received by the Company, excluding amounts
paid or payable for accrued interest or accrued dividends;

                                    (2) insofar as it consists of property other
than cash, be computed at the Fair Market Value thereof at the time of such
issue, as determined in good faith by the Company's board of directors with the
assistance of qualified professionals, as necessary; and

                                    (3) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Company for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (1) and (2) above, as
determined in good faith by the Company's board of directors.

                             (B) OPTIONS, RIGHTS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 4(d)(ii), relating to
Options, Rights and Convertible Securities, shall be determined by dividing

                                    (1) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options, Rights
or Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options, Rights
or the conversion or exchange of such Convertible Securities, by

                                    (2) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options, Rights or the conversion or exchange of such
Convertible Securities.

                                       10
<PAGE>   11

               (e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the Issue Date effect a subdivision
of the outstanding Common Stock, the Conversion Price then in effect immediately
before that subdivision shall be proportionately decreased. If the Company shall
at any time or from time to time after the Issue Date combine the outstanding
shares of Common Stock, the Conversion Price then in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.

               (f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time after the Issue Date shall
make or issue a dividend or other distribution payable in Additional Shares of
Common Stock, then and in each such event the Conversion Price shall be
decreased as of the time of such issuance, by multiplying such Conversion Price
by a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such issuance and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of such Additional Shares of
Common Stock issuable in payment of such dividend or distribution.

               (g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time, or from time to time after the Issue Date shall
make or issue, a dividend or other distribution payable in securities of the
Company (other than shares of Common Stock) or other assets or properties
(including, without limitation, cash dividends), then and in each such event
provision shall be made so that the holders of the Notes shall receive in
addition to the number of shares of Common Stock receivable upon conversion of
the Notes, the amount of securities of the Company or other assets or properties
that they would have received had their Notes been converted into Common Stock
on the date of such event and had thereafter, during the period from the date of
such event to and including the Conversion Date, retained such securities or
other assets or properties receivable by them as aforesaid during such period
giving application to all adjustments called for during such period, under this
paragraph with respect to the rights of the holders of the Notes; provided that,
in the event rights or benefits under such securities, assets or properties
shall terminate prior to the time that the holder of this Note may elect to
convert this Note into shares of Common Stock, such amount of securities, assets
or properties that the holder would have received had such holder converted his
or her notes immediately prior to the distribution shall be distributed to the
holder of this Note on the date the securities, assets or properties are
distributed to the holders of Common Stock.

               (h) NO RECLASSIFICATION, RECAPITALIZATION, EXCHANGE OR
SUBSTITUTION. The Common Stock issuable upon the conversion of the Notes shall
not be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification,
recapitalization or otherwise (other than (x) a subdivision or combination of
shares or (y) merger, consolidation or asset sale permitted under the
Noteholders' Agreement and in which at least 90% of the Net Proceeds are applied
to the redemption of the PIK Preferred Shares until such PIK Preferred Shares
are redeemed in accordance with the terms thereof and the Notes are redeemed in
accordance with the provisions hereof).

                                       11
<PAGE>   12

               (i) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Notes against impairment to the extent required hereunder. Nothing in this
Section 4 shall affect the continued accrual of interest on the Notes in
accordance with the terms of this Note.

               (j) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder, if
any, of Notes outstanding a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment are based and shall file a copy of such certificate with its
corporate records. The Company shall, upon the reasonable written request of any
holder of Notes, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price then in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which then would be received upon the
conversion of Notes. Despite such adjustment or readjustment, the form of each
or all Notes, if the same shall reflect the initial or any subsequent Conversion
Price, need not be changed in order for the adjustments or readjustments to be
valid in accordance with the provisions of this Note, which shall control.

               (k) NOTICE OF RECORD DATE.  In the event:

                      (i) that the Company declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Company;

                      (ii) that the Company subdivides or combines its
outstanding shares of Common Stock;

                      (iii) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding shares of
Common Stock or a stock dividend or stock distribution thereon);

                      (iv) of any Capital Reorganization; or

                      (v) of the involuntary or voluntary dissolution,
liquidation or winding up of the Company;

        THEN the Company shall cause to be filed at its principal office, and
shall cause to be mailed to the holders of the Notes at their last addresses as
shown on the records of the Company, at least ten (10) days prior to the record
date specified in (A) below or twenty (20) days prior to the date specified in
(B) below, a notice stating

                            (A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of Common

                                       12
<PAGE>   13

Stock of record to be entitled to such dividend, distribution, subdivision or
combination are to be determined, or

                             (B) the date on which such reclassification,
Capital Reorganization, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification, Capital
Reorganization, dissolution or winding up.

        5.  [INTENTIONALLY OMITTED]

        6.  EVENTS OF DEFAULT.

               (a) DEFINITION. For purposes of this Note, an Event of Default
shall be deemed to have occurred if:

                      (i) the Company fails to pay when due the principal of or
premium, if any, on any Note when due at its stated maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise;

                      (ii) (A) the Company or any of its Subsidiaries makes an
assignment for the benefit of creditors, (B) an order, judgment or decree is
entered adjudicating the Company or any of its Subsidiaries bankrupt or
insolvent, (C) any order for relief with respect to the Company or any of its
Subsidiaries is entered under the Bankruptcy Reform Act, Title 11 of the United
States Code, (D) the Company or any of its Subsidiaries petitions or applies to
any tribunal for the appointment of a custodian, trustee, receiver or liquidator
of the Company or any of its Subsidiaries or of any substantial part of the
assets of the Company or any of its Subsidiaries, or commences any proceeding
relating to the Company or any of its Subsidiaries under any bankruptcy
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, or (E) any such petition or application is
filed, or any such proceeding is commenced, against the Company or any of its
Subsidiaries and either (1) the Company or any of its Subsidiaries by any act
indicates its approval thereof, consent thereto or acquiescence therein or (2)
such petition, application or proceeding is not dismissed within sixty (60)
days;

                      (iii) a judgment in excess of $1,000,000 (net of any
insurance coverage accepted by the carrier) is rendered against the Company and,
within sixty (60) days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within sixty (60) days after the
expiration of any such stay, such judgment is not discharged or paid; provided
that if such unstayed or undischarged judgment exceeds 20% of the sum of the
Company's cash on hand and Cash Equivalents (as defined in the Noteholders
Agreement), in each case at the Initial Closing under the Agreement, the
judgment shall be deemed for purposes of remedies to be an event of default
under Section 6(a)(v);

                      (iv) the Company defaults under any mortgage, indenture,
agreement or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) the aggregate outstanding

                                       13
<PAGE>   14

principal amount of which exceeds $4,000,000, other than indebtedness owed to
the Company or any of its Subsidiary, whether such indebtedness or guarantee now
exists, or is created after the date hereof which default:

                             (A) is caused by a failure to pay principal of, or
interest or premium, if any, on such indebtedness prior to the expiration of the
grace period provided in such indebtedness ("payment default"); or

                             (B) results in the acceleration of such
indebtedness prior to its maturity ("cross acceleration provision");

                      (v) failure of the Company to redeem all the unconverted
Notes for cash on the redemption date if the Company has elected to exercise its
optional redemption rights pursuant to Section 3 or the failure of the Company
to comply with its obligations under Section 4;

                      (vi) an Interfering Event (as defined in the Investors'
Rights Agreement) with respect to any Investor;

                      (vii) only to the extent not otherwise covered under (i)
through (vi) above, the failure to comply with the terms of or a breach of a
covenant or a breach of a representation or warranty (except for an immaterial
breach of a representation or warranty not otherwise qualified by materiality)
contained in the Transaction Documents or the Restructuring Documents for a
period of three (3) days following notice of such failure from holders of the
Notes, provided that such notice shall be required only to the extent such
breach is curable.

               (b) CONSEQUENCES OF EVENTS OF DEFAULT.

                      (i) Subject to the provisions of Section 11 of this Note,
if an Event of Default has occurred pursuant to Sections 6(a)(i), (v) or (vi) of
this Note, then the holder of the Note may declare all or any portion of the
outstanding Face Amount of and accrued but unpaid interest and Payments on the
Note due and payable and demand immediate payment of the Premium Redemption
Price thereon. If an Event of Default specified in Section 6(a)(ii) occurs, all
of the Notes shall automatically and immediately become due and payable at the
Premium Redemption Price. The Company shall give prompt written notice of any
such demand to the other holders, if any, of any portion of the Notes, each of
which may demand immediate payment of all or any portion of such holder's
portion of the Notes. If any holder of the Notes demands immediate payment of
all or any portion of such holder's portion of the Notes, the Company shall,
subject to the other provisions of this Note (including Section 11), immediately
pay the Premium Redemption Price in cash to such holder.

                      (ii) Subject to the provisions of Section 11 of this Note,
if an Event of Default has occurred pursuant to Sections 6(a)(iii), (iv) or
(vii) of this Note, then (in addition to the other remedies available) the
holders of not less than 25% of the aggregate principal amounts of all Notes
then outstanding may declare, by written notice to the Company, all or any
portion of the Notes due and payable at the applicable Premium Redemption Price.

                                       14
<PAGE>   15

                      (iii) During the continuance of an Event of Default, the
interest on the Note shall accrue at a rate of eleven percent (11.0%) per annum
(based on a year of 365 days) on the Face Amount, plus any accrued but unpaid
interest and Payments hereon.

                      (iv) Subject to the other provisions of this Note
(including Section 11), each holder of any portion of this Note shall also have,
upon the occurrence and continuance of an Event of Default, any other rights
which such holder may have pursuant to applicable law or contract.

        7. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein,
the provisions of this Note (and all other outstanding Notes) may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of at least a majority of the aggregate principal
amount then outstanding of the Notes; provided that no such action shall change
(i) the amount of Notes whose holders must consent to an amendment, (ii) the
stated rate of or extend the stated time for or manner in which interest accrues
or payment of interest is made on any Note, (iii) reduce the amount of or any
provision relating to the scheduled payment of principal on the Notes, (iv)
reduce the amount, including any applicable premium payable upon the redemption
of any Note, change the time at which any Note may be redeemed or amend the
conversion rights as set forth under Section 4, (v) modify the provisions of
Section 11 in a manner adverse to the holders of any Notes, (vi) make any Note
payable in any money or at any place other than as stated in the Note, (vii)
impair the right of any holder to receive payment of, premium, if any, principal
and interest on such holder's Notes on or after the due dates therefore or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes, [or (ix) make any change in this Section 7 with respect to
provisions requiring each holder's consent or in the waiver provisions, in each
such case without the consent of the applicable holder if such change is adverse
to such holder.

        8. PLACE OF PAYMENT. Payments of principal and interest and all notices
and other communications to the Investor hereunder or with respect hereto are to
be delivered to the Investor by wire transfer of immediately available funds to
the account identified on Schedule 1.1 attached to the Agreement or to such
other address or to the attention of such other person as specified by prior
written notice to the Company, including any transferee of this Note.

        9. COSTS OF COLLECTION. In the event that the Company fails to pay when
due (including, without limitation upon acceleration in connection with an Event
of Default) the full amount of principal and/or interest hereunder, the Company
shall indemnify and hold harmless the holder of any portion of this Note from
and against all reasonable costs and expenses incurred in connection with the
enforcement of this provision or collection of such principal and interest,
including, without limitation, reasonable attorneys' fees and expenses.

        10. WAIVERS. The Company hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note.

        11. RANKING. The Company agrees, and by the acceptance hereof each
holder agrees, this Note shall constitute a senior unsubordinated obligation of
the Company and shall rank pari

                                       15
<PAGE>   16

passu with all other senior, unsubordinated obligations of the Company.
Notwithstanding the foregoing, the Holder of this Note expressly consents to the
redemption of the PIK Preferred Shares prior to the payment of this Note upon
the occurrence of a Change of Control Transaction or Permitted Asset Sale.

        12. BENEFITS OF THE AGREEMENT. The Investor and all transferees (to the
extent permitted in the Agreement) shall be entitled to the rights and benefits
granted to them in the Agreement.

        13. REGISTRATION OF TRANSFER AND EXCHANGE GENERALLY.

               (a) REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
GENERALLY. The Company shall keep at its principal executive offices a register
(the register maintained in such being herein sometimes collectively referred to
as the "NOTE REGISTER") in which the Company shall provide for the registration
of Notes and of transfers and exchanges of Notes.

        Subject to the provisions of the Noteholders Agreement regarding
restrictions on transfer and provided the transferee agrees to be bound by the
terms of the Note Purchase Agreement, upon surrender for registration of
transfer of any Note at its principal executive office, the Company shall
execute and deliver, in the name of the designated transferee or transferees,
one or more new Notes in denominations of not less than $500,000 each (provided
that if necessary to enable the registration by a holder of its entire holding
of Notes, one Note may be in a denomination of less than $500,000) or integral
multiples thereof, of a like aggregate principal amount and bearing such
restrictive legends as may be required by law.

        At the option of a holder, Notes may be exchanged for other Notes of any
authorized denominations, of a like aggregate principal amount and bearing such
restrictive legends as may be required by law upon surrender of the Notes to be
exchanged at the Company's principal executive offices. Whenever any Notes are
so surrendered for exchange, the Company shall execute and make available for
delivery the Notes which the holder making the exchange is entitled to receive.

        All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits as the Notes surrendered upon such registration of
transfer or exchange.

        Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer, in form satisfactory to the
Company, duly executed by the holder thereof or his attorney duly authorized in
writing.

        No service charge shall be made for any registration of transfer or
exchange of Notes.

               (b) MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If any mutilated
Note is surrendered to the Company, the Company shall execute and make available
for delivery in exchange therefor a new Note of like tenor and principal amount
and bearing a number not contemporaneously outstanding.

                                       16
<PAGE>   17

        If there shall be delivered to the Company (i) evidence to its
reasonable satisfaction of the destruction, loss or theft of any Note and (ii)
such security or indemnity as may be required by the Company to save itself
harmless, then, in the absence of notice to the Company that such Note has been
acquired by a protected purchaser, the Company shall execute and make available
for delivery, in lieu of any such destroyed, lost or stolen Note, a new Note of
like tenor and principal amount and bearing a number not contemporaneously
outstanding.

        In case any such mutilated, destroyed, lost or stolen Note has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Note, pay such Note, subject to the holders' conversion rights
pursuant to Section 3 hereof.

        Every new Note issued pursuant to this Section in lieu of any mutilated,
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone.

        The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.

        14. GOVERNING LAW. THIS NOTE AND THE RIGHTS AND DUTIES OF THE COMPANY
AND THE HOLDER HEREOF SHALL BE GOVERNED BY, CONSTRUED IN AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE. THE COMPANY AND THE
HOLDER HEREBY SUBMIT TO THE EXCLUSIVE PERSONAL JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND IF SUCH COURT SHALL NOT
HAVE JURISDICTION TO HEAR SUCH MATTER, TO THE NEW YORK STATE SUPREME COURT
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND WAIVES ANY OBJECTION AS
TO VENUE IN EITHER SUCH LOCATION. THE COMPANY AND THE HOLDER WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS NOTE.

        15. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.

               (a) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by the holder upon
conversion of this Note pursuant to the terms hereof shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the holder's
right to convert, exercise or purchase similar to the limitation set forth
herein), together with all shares of Common Stock deemed beneficially owned
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the right to convert, exercise or purchase
similar to the limitation set forth herein) by the holder's "affiliates" (as
defined in Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated
for purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would

                                       17
<PAGE>   18

exceed 9.99% (or 4.99% to the extent the Holder so provides in the Agreement) of
the total issued and outstanding shares of the Common Stock (the "RESTRICTED
OWNERSHIP PERCENTAGE").

               (b) The Holder covenants at all times on each day (each such day
being referred to as a "COVENANT DAY") as follows: During the balance of such
Covenant Day and the succeeding sixty-one (61) days (the balance of such
Covenant Day and the succeeding 61 days being referred to as the "COVENANT
PERIOD") such holder will not acquire shares of Common Stock pursuant to any
right existing at the commencement of the Covenant Period to the extent the
number of shares so acquired by such holder and its Aggregation Parties
(ignoring all dispositions) would exceed:

                (x) the Restricted Ownership Percentage of the total number of
                shares of Common Stock outstanding at the commencement of the
                Covenant Period,

                minus

                (y) the number of shares of Common Stock owned by such holder
                and its Aggregation Parties at the commencement of the Covenant
                Period.

        A new and independent covenant will be deemed to be given by the holder
as of each moment of each Covenant Day. No covenant will terminate, diminish or
modify any other covenant. The holder agrees to comply with each such covenant.
This Section 15 controls in the case of any conflict with any other provision of
any other agreement to which the Company and the holder may be a party.

               (c) The Company's obligation to issue shares of Common Stock
which would exceed such limits referred to in this Section 15 shall be suspended
to the extent necessary until such time, if any, as shares of Common Stock may
be issued in compliance with such restrictions.

        16. INCORPORATION OF TERMS. All capitalized terms not otherwise defined
in this Note shall have the definition set forth in the Agreement.

                                       18
<PAGE>   19

        IN WITNESS WHEREOF, the Company has executed and delivered this Amended
Note (which amends the Note originally issued on September 15, 2000) on February
__, 2001.

                                                   QUOKKA SPORTS, INC.

                                                   By:
                                                      --------------------------
                                                      Name:
                                                      Title:

<PAGE>   20

                                    EXHIBIT 1

                                PAYMENT STATEMENT

Date:
     ----------------

To:                              ("HOLDER")
     ---------------------------

Re:     7% CONVERTIBLE PROMISSORY NOTE, SERIES A-1 ("NOTE") OF QUOKKA SPORTS,
        INC. (THE "COMPANY").

        The Company hereby irrevocably elects to pay interest on the Note, for
the Interest Payment Date indicated below, in the following manner (the Company
should check its selection):

                    cash interest; or
               ----

                    PIK Interest.
               ----

               Interest Payment Date:
                                     --------------------------

               If the selection above is PIK Interest, the Company should fill
        in the following:

               Outstanding Principal Amount prior
               to issuance of this Payment Statement:      US$
                                                              -------------
               PIK Interest:                               US$
                                                              -------------
               Outstanding Principal Amount after
               issuance of this Payment Statement:         US$
                                                              -------------

        The Company hereby certifies to the Holder, its successors and assigns
that the Face Amount due under the Note after delivery of this Payment Statement
equals the amount indicated below. Capitalized terms used in this Payment
Statement and not otherwise defined shall have the meaning ascribed thereto in
the Note.

        IN WITNESS WHEREOF, this Payment Statement has been duly executed and
delivered on the date first written above.

                                                   QUOKKA SPORTS, INC.

                                                   By:
                                                      --------------------------
                                                      Name:
                                                      Title:

<PAGE>   21

                                    EXHIBIT 2

                      (TO BE EXECUTED BY REGISTERED HOLDER
                            IN ORDER TO CONVERT NOTE)

                                CONVERSION NOTICE
                                       FOR
                 7% CONVERTIBLE PROMISSORY NOTE DUE, SERIES A-1

        The undersigned, as Holder of the 7% Convertible Promissory Note, Series
A-1 of QUOKKA SPORTS, INC. (the "COMPANY"), in the outstanding principal amount
of U.S. $_____________ (the "Note"), hereby elects to convert that portion of
the outstanding principal amount of the Note shown on the next page into shares
of Common Stock, $.0001 par value per share (the "COMMON STOCK"), of the Company
according to the conditions of the Note, as of the date written below. The
undersigned hereby requests that share certificates for the Common Stock to be
issued to the undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as indicated below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No fee
will be charged to the Holder for any conversion, except for transfer taxes, if
any.

Conversion Information:           NAME OF HOLDER:
                                                 -------------------------------

                                  By:
                                     -------------------------------------------
                                     Print Name:
                                     Print Title:

                                     Print Address of Holder:

                                     -------------------------------------------

                                     -------------------------------------------

                                     Issue Common Stock to:
                                                           ---------------------
                                     at:
                                        ----------------------------------------

                                     Electronically transmit and credit Common
                                     Stock to:              at:
                                              --------------   -----------------

                                     -------------------------------------------
                                     Date of Conversion

                                     -------------------------------------------
                                     Applicable Conversion Price

                THE COMPUTATION OF THE NUMBER OF COMMON SHARES TO
                  BE RECEIVED IS SET FORTH ON THE ATTACHED PAGE

<PAGE>   22

Page 2 to Conversion Notice for:
                                ------------------------------------------------
                                               (NAME OF HOLDER)

              COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
<TABLE>
<CAPTION>

<S>     <C>                                                          <C>
A.      Face Amount converted:                                       $
                                                                      --------

B.      Accrued, unpaid interest on Face Amount converted:           $
                                                                      --------

C.      Delay payments due Holder on Face Amount converted:          $
                                                                      --------

TOTAL DOLLAR AMOUNT CONVERTED (TOTAL OF A + B + C)                   $
                                                                      --------

                                                                     =========

Conversion Price                                                     $
                                                                      --------

Number of Shares of Common Stock = Total dollar amount converted =   $
                                   -----------------------------      --------
                                            Conversion Price         $
                                                                      --------
Number of shares of Common Stock =
                                  ------------------------
</TABLE>

If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for shares of Common Stock in the following amount(s):

--------------------------------------------------------------------------------

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Please issue and deliver _____ new Note(s) in the following amounts:

--------------------------------------------------------------------------------

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