<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
June 29, 1998
YOU BET INTERNATIONAL, INC.
(Exact Name of Registrant as specified in Charter)
Delaware 33-13789LA 95-4627253
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1950 Sawtelle Boulevard, Suite 180, Los Angeles, California 90025
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(Address of principal executive offices) (Zip Code)
(310) 444-3300
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On June 29, 1998, You Bet International, Inc., a Delaware corporation
(the "Company"), entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") with certain private and institutional investors. A copy of the
Stock Purchase Agreement is attached hereto as Exhibit 99.1 and incorporated
herein by reference. Pursuant to the Stock Purchase Agreement, the Company sold
200,000 shares of Series A Preferred Stock for a purchase price of $25.00 per
share (resulting in gross proceeds to the Company of $5,000,000). Purchasers
paid cash for such shares. Although no assurances can be given, the Company may
issue up to 180,000 additional shares of Series A Preferred Stock to private and
institutional investors on the same terms.
The Series A Preferred Stock has a liquidation preference of $25.00 per
share and ranks senior to all other preferred stock (whether currently
outstanding or issued in the future). Each share of Series A Preferred Stock is
convertible into ten shares of common stock of the Company (subject to customary
adjustments). The Series A Preferred Stock will be automatically converted into
common stock at the then prevailing conversion rate at such time as the Company
has completed a secondary public offering which raises not less than $15,000,000
in gross proceeds and has its common stock listed on the New York Stock
Exchange, the American Stock Exchange or the facilities of NASDAQ-National
Market. The holders of Series A Preferred Stock are not entitled to dividends,
except that if dividends are paid on the Company's common stock, holders of
Series A Preferred Stock will be entitled to dividends on the basis of the
number of shares of common stock into which the Series A Preferred Stock is then
convertible. The Series A Preferred Stock will vote together with the holders of
common stock on all matters presented to stockholders for a vote on the basis of
the number of shares of common stock into which the Series A Preferred Stock is
then convertible.
In addition, on June 29, 1998 the Company entered into a Securities
Purchase Agreement (the "Securities Purchase Agreement") with the Robert M. Fell
Living Trust (the "Fell Trust"). A copy of the Securities Purchase Agreement is
attached hereto as Exhibit 99.2 and incorporated herein by reference. Pursuant
to the Securities Purchase Agreement the Fell Trust acquired 20,000 shares of
Series A Preferred Stock and a Warrant to purchase 1,200,000 shares of common
stock of the Company (the "Warrant"). A copy of the Warrant is attached hereto
as Exhibit 99.3 and incorporated herein by reference. The aggregate purchase
price of the Series A Preferred Stock acquired by the Fell Trust was $500,000
($25.00 per share), of which $10,000 was paid in cash and $490,000 was paid by
the delivery of a promissory note (the "$490,000 Note"). The purchase price of
the Warrant was $75,000, of which $5,000 was paid in cash and $70,000 was paid
by the delivery of a promissory note (the "$70,000 Note"). The Warrant, which
expires on June 29, 2008, entitles the Fell Trust to purchase 1,200,000 shares
of common stock for a price of $2.50 per share. The Warrant contains certain
restrictions on exerciseability and the disposition of shares acquired upon
exercise of the Warrant. The $490,000 Note bears interest at a rate of 8% per
annum, which may, at the option of the Fell Trust, be paid currently or added to
the principal amount of the note. The $490,000 Note is due June 29, 2002,
provided
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that the Fell Trust is required to prepay the note, without penalty, as soon as
possible consistent with its other cash requirements. The $70,000 Note bears
interest at a rate of 6% per annum, which may, at the option of the Fell Trust,
be paid currently or added to the principal amount of the note. The $70,000 Note
is due on June 29, 2008. The Fell Trust has pledged the Warrant and the Series A
Preferred Stock acquired pursuant to the Securities Purchase Agreement to secure
its obligations under the $490,000 Note and the $70,000 Note. As a result of the
transactions contemplated by the Stock Purchase Agreement and the Securities
Purchase Agreement the Fell Trust beneficially owns (determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, and assuming
conversion of all Series A Preferred Stock) approximately 3.3% of the Series A
Preferred Stock.
In connection with the Stock Purchase Agreement and the Securities
Purchase Agreement, the parties to such agreements and David Marshall and
Russell Fine entered into a Stockholders Agreement (the "Stockholders
Agreement"), a copy of which is attached hereto as Exhibit 99.4 and incorporated
herein by reference. Pursuant to the Stockholders Agreement the parties agreed
to vote all shares of Series A Preferred Stock and common stock owned by them
(including any Series A Preferred Stock or common stock acquired in the future)
for the election to the Board of Directors of four persons designated by Robert
M. Fell and three persons designated by David Marshall and Russell Fine. The
parties to the Stockholders Agreement beneficially own (determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, and assuming
conversion of all Series A Preferred Stock) approximately 54.6% of the voting
power of the Company. The Stockholders Agreement terminates on June 29, 2000.
The parties to the Stockholders Agreement are also parties to a
Registration Rights Agreement (the "Registration Rights Agreement"), a copy of
which is attached hereto as Exhibit 99.5 and incorporated herein by reference.
Pursuant to the Registration Rights Agreement the parties may have certain
rights to require the Company to register common stock.
Effective as of June 29, 1998, the number of directors of the Company
was increased to seven and Robert M. Fell, Alan Landsburg, Bill Roedy and Caesar
Kimmel were elected to the Board of Directors of the Company. Such persons were
designated by Mr. Fell pursuant to the Stockholders Agreement. David Marshall,
Russell Fine and Jess Rifkind remained as directors as the designees of Messrs.
Marshall and Fine. At such time as the Company retains a permanent Chief
Executive Officer the number of directors of the Company will be increased to
eight and the Chief Executive Officer will be elected to the Board of Directors.
As a result of the ability to designate four directors as provided in the
Stockholders Agreement, Mr. Fell may be deemed to have acquired control of the
Company.
In connection with the Stock Purchase Agreement and the Securities
Purchase Agreement the Company entered into a Services Agreement (the "Services
Agreement") with Fell & Company, Inc. ("FCI") pursuant to which Robert M. Fell
will serve as Chairman of the Board for
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a three year period. A copy of the Services Agreement is attached hereto as
Exhibit 99.6 and incorporated herein by reference. Mr. Fell will also serve as
interim Chief Executive Officer until a new Chief Executive Officer is
appointed, provided that if an employment agreement is not entered into with a
new Chief Executive Officer within six months of June 29, 1998 or such person
does not commence employment within eight months of June 29, 1998, the position
of Chief Executive Officer will become the Office of the Chief Executive and
will be staffed by Mr. Fell, Russell Fine and David Marshall. For making Mr.
Fell's services available to the Company, FCI will receive $150,000 per annum
(subject to cost of living increases), plus the amount of payroll taxes the
Company would pay if Mr. Fell were an employee of the Company. FCI and Mr. Fell
are also eligible to receive incentive compensation at the discretion of the
Board of Directors.
The Company also entered into employment agreements with David Marshall
and Russell Fine pursuant to which Messrs. Marshall and Fine will serve as Vice
Chairman and Chief Technology Officer, respectively. In addition, until a
permanent Chief Executive Officer is appointed, Mr. Marshall will serve as
President and Chief Operating Officer of the Company. Copies of the employment
agreements between the Company and Messrs. Marshall and Fine are attached hereto
as Exhibits 99.7 and 99.8, respectively, and incorporated herein by reference.
Both employment agreements provide for five year terms and compensation of
$150,000 per annum (subject to cost of living increases). Messrs. Marshall and
Fine will also receive other benefits no less favorable than the benefits
received by any other employee of the Company, other than the Chief Executive
Officer.
On June 30, 1998, the Company issued the press release attached hereto
as Exhibit 99.9 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. None
(b) Pro forma financial information. None
(c) Exhibits.
<TABLE>
<CAPTION>
No. Description
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<S> <C>
99.1 Stock Purchase Agreement dated June 29, 1998
99.2 Securities Purchase Agreement dated June 29, 1998
99.3 Warrant to Purchase Common Stock dated June 29,
1998
</TABLE>
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<TABLE>
<S> <C>
99.4 Stockholders Agreement dated June 29, 1998
99.5 Registration Rights Agreement dated June 29, 1998
99.6 Services Agreement dated June 29, 1998 between the
Company and Fell & Company, Inc.
99.7 Employment Agreement dated June 29, 1998 between
the Company and David Marshall
99.8 Employment Agreement dated June 29, 1998 between
the Company and Russell Fine
99.9 Press release issued by the Company on June 30,
1998
</TABLE>
[REMINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf hereunto
duly authorized.
Date: July 13, 1998 YOU BET INTERNATIONAL, INC., a
Delaware corporation
By: /s/ Robert M. Fell
--------------------------------
Robert M. Fell
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT 99.1
YOU BET INTERNATIONAL, INC.
STOCK PURCHASE AGREEMENT
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YOU BET INTERNATIONAL, INC.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
June 29, 1998 by and between YOU BET INTERNATIONAL, INC., a Delaware corporation
(the "Company"), and each of the undersigned purchasers of Series A Convertible
Preferred Stock of the Company (collectively, the "Purchasers"") listed on the
signature pages hereto.
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. Authorization and Sale of the Shares.
1.1 Authorization; Restated Certificate of Incorporation. The
Company has authorized the issuance and sale pursuant to the terms and
conditions hereof of up to 400,000 shares of its Series A Convertible Preferred
Stock (the "Preferred Shares"), having the rights, restrictions, privileges and
preferences as set forth in the form of the Certificate of Designation attached
hereto as Schedule 1.1.
1.2 Issuance and Sale. Subject to the terms and conditions
hereof, at the Closing (as defined herein), the Company will issue and sell to
each Purchaser and each such Purchaser will purchase from the Company, the
respective number of Preferred Shares specified on the applicable signature page
hereto at a purchase price of $25.00 per Preferred Share. The Company's
agreement with each of the Purchasers hereunder is a separate agreement and the
sale of Preferred Shares to each of the Purchasers is a separate sale. No
Purchaser shall have any rights against any other Purchaser for any breach or
alleged breach of this Agreement.
2. Closing; Delivery.
2.1 Closing.
(a) The closing of the purchase and sale of the
Preferred Shares hereunder (the "Closing") shall take place at the offices of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, 2121 Avenue of
the Stars, 18th Floor, Los Angeles, California 90067 on June 29, 1998 (the
"Closing Date") at 10:00 a.m., or at such other time as may be agreed upon by
the Company and the Purchasers.
(b) The Company may schedule one or more additional
closings ("Additional Closings") within forty five (45) days after the Closing
for the purchase and sale of a number of Preferred Shares such that the number
of Preferred Shares sold at the Closing and all Additional Closings shall not
exceed 380,000; provided that the Company shall not issue or sell
<PAGE> 3
more than 280,000 Preferred Shares without the consent of Fell & Company, Inc.
Pursuant to this Agreement, the Company may sell Preferred Shares at the
Additional Closings, if any, without any waiver, consent or approval of the
Purchasers who participated in the Closing or any Additional Closing. Each
purchaser of Preferred Shares at any Additional Closing will become a party to
this Agreement and the other agreements relating hereto to which Purchasers are
parties and will be a "Purchaser," and such Purchaser's Shares will be
"Preferred Shares," for all purposes of this Agreement after such Additional
Closing.
2.2 Delivery. Subject to the terms of this Agreement, at the
Closing and at each Additional Closing the Company will deliver to each
Purchaser participating in the Closing or such Additional Closing a stock
certificate representing the number of Preferred Shares to be purchased by such
Purchaser against delivery to the Company by each Purchaser at the Closing of a
check or wire transfer of funds for the purchase price therefor.
3. Representations and Warranties of the Company. The Company represents
and warrants and agrees with each Purchaser as of the date hereof and as of the
Closing Date as follows.
3.1 Organization and Standing; Articles and Bylaws. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has the requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified to
do business as a foreign corporation in every jurisdiction where the failure to
so qualify would have a material adverse impact on the Company's business. The
Company has made available to each Purchaser or their special counsel true,
correct and complete copies of the Company's Certificate of Incorporation and
Bylaws, each as amended to date.
3.2 Corporate Power. The Company has all requisite legal and
corporate power to enter into this Agreement and each other agreement relating
hereto, to sell the Preferred Shares hereunder and to carry out and perform its
obligations under the terms of this Agreement and the other agreements
contemplated hereby.
3.3 Subsidiaries. Schedule 3.3 hereof contains a complete list of
all subsidiaries of the Company, together with the percentage ownership by the
Company, the jurisdiction of formation, the names of the directors, partners or
controlling persons and the nature and extent of the operations of such
subsidiary.
3.4 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of common stock, par value $.001 per share
("Common Shares") and 1,000,000 shares of preferred stock, par value $.001 per
share, including 400,000 shares which have been designated Preferred Shares. As
of the date hereof, there are 9,823,994 shares of Common Stock and no shares of
preferred stock issued and outstanding. Except as set forth on
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Schedule 3.4 hereto, there are no options, warrants or other agreements which
provide for the issuance of capital stock of the Company and there are no
securities outstanding which are convertible into capital stock of the Company.
3.5 Authorization.
(a) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for (i) the issuance and sale of
the Preferred Shares in accordance with this Agreement, (ii) the issuance of
Common Shares upon conversion of the Preferred Shares (the "Conversion Shares"),
and (iii) the execution, delivery and performance by the Company of this
Agreement and the other agreements contemplated hereby have been taken. This
Agreement constitutes and the other agreements executed by the Company at the
Closing will constitute valid and binding obligations of the Company enforceable
against it in accordance with their terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditor's rights and rules
of laws concerning equitable remedies.
(b) The Preferred Shares when issued in compliance with
the provisions of this Agreement and the Conversion Shares will be validly
issued, fully paid and nonassessable, and will be free of any liens,
encumbrances or restrictions on transfer; provided, however, that the Preferred
Shares and the Conversion Shares may be subject to restrictions on transfer
under state and/or federal securities laws. The Company has reserved the
Conversion Shares for issuance upon the conversion of the Preferred Shares.
(c) No stockholder of the Company or any other person
has any right of first refusal or any preemptive rights in connection with the
issuance and sale of the Preferred Shares or the issuance of the Common Shares
upon the conversion of the Preferred Shares.
3.6 Title to Properties and Assets; Liens; Intangible Property
etc.
(a) Except as set forth on Schedule 3.6 hereto, the\
Company and its subsidiaries have good and marketable title to their respective
properties and assets and good title to all their leasehold estates, in each
case not subject to any mortgage, pledge, lien, encumbrance or charge, other
than those resulting from taxes which have not yet become delinquent and those
arising in the ordinary course of business which do not, individually or in the
aggregate, materially detract from the value of the property subject thereto or
threaten to interfere with the use of such property or otherwise materially
impair the operations of the Company or its subsidiaries, and which have not
arisen otherwise than in the ordinary course of business.
(b) The Company or its subsidiaries is the licensee, or
the sole and exclusive owner, of all trade names, unregistered trademarks and
service marks, brand names, patents, copyrights, registered trademarks and
service marks, and all applications for any of the foregoing, and all permits,
grants and licenses or other rights with respect thereto, the absence of
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which would have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries. Except as set forth on
Schedule 3.6 the Company and its subsidiaries (i) do not use any of such
intangible property by consent of any other person, or (ii) are not required to
make any payments to others with respect thereto. The Company and its
subsidiaries have not been charged with any infringement of any intangible
property of the character described above nor has it been notified or advised of
any claim of any other person or entity relating to any of such intangible
property.
3.7 Material Contracts. Except as set forth on Schedule 3.7
hereto, the Company and its subsidiaries do not have any material contract,
agreement, lease, commitment or proposed transaction, written or oral, absolute
or contingent, other than (i) contracts for services that were entered into in
the ordinary course of business that do not involve more than $25,000 or extend
for more than one year beyond the date hereof, (ii) sales contracts entered into
in the ordinary course of business and (iii) contracts (other than employment
and consulting contracts, contracts with labor unions and license and other
agreements relating to the acquisition or disposition of technology) terminable
at will by the Company or its subsidiaries on no more than 30-days notice
without cost or liability to the Company or its subsidiaries. Schedule 3.7
contains a list of all employment, consulting contracts and contracts with labor
unions and license and other agreements relating to the acquisition or
disposition of technology of the Company or its subsidiaries.
3.8 Permits. To the best of the Company's knowledge, the Company
and its subsidiaries have all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it. To the best of the Company's knowledge, the Company and its subsidiaries are
not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
3.9 Patents, Trademarks, etc. To the best of the Company's
knowledge, the Company and its subsidiaries own, or have the right to use all
patents trademarks, service names, trade names, copyrights, licenses, trade
secrets, information or other proprietary rights necessary to their business as
now conducted or proposed to be conducted without conflict with or infringement
of the rights of others, and have not received a notice that they are infringing
upon or otherwise acting adversely to the right or claimed right of any person
under or with respect to any of the foregoing, and to the Company's best
knowledge there is no basis for any such claim. The Company is not aware of any
violation by a third party of any patents, trademarks, service marks, trade
names, copyrights, trade secrets or other proprietary rights of the Company or
its subsidiaries. The Company is not aware that any employees of the Company or
its subsidiaries are obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreements, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Company or its subsidiaries or that would conflict with the
business of the Company or its subsidiaries as proposed to be conducted (as
described in the Company's Form 10-KSB for the fiscal year ended December 31,
1997). The Company does not believe it is or will be necessary for the Company
or its subsidiaries to utilize
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any inventions of any of their employees made prior to the commencement of their
employment, except for inventions that have been assigned to the Company or its
subsidiaries. Schedule 3.9 hereto contains a complete list of the Company's and
its subsidiaries' patents and registered trademarks, service marks, trade names,
and copyrights, and all pending applications therefor. Except as set forth in
Schedule 3.9 hereto, there are no outstanding options, licenses, or agreements
of any kind relating to the foregoing, nor is the Company or its subsidiaries
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity.
3.10 Compliance with Instruments. Except as set forth in
Schedule 3.10 hereto, the Company and its subsidiaries are not in violation of
any terms of their Certificate of Incorporation or its Bylaws, as amended, or
any mortgage, indenture, contract, agreement, instrument, judgment, decree or
order by which they are bound or to which their properties are subject where
such violation would have a material adverse effect on the Company or its
subsidiaries. The execution, delivery and performance of and compliance with
this Agreement and the other agreements contemplated hereby and the transactions
contemplated hereby and thereby will not result in any such violation and will
not be in conflict with or constitute, with or without the giving of notice or
passage of time, a default under any of the foregoing and will not result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company pursuant to any of the foregoing.
3.11 Employees. To the Company's best knowledge, no employee of
or consultant to the Company or its subsidiaries is in violation of any term of
any employment contract, consulting agreement, patent disclosure agreement or
any other contract or agreement relating to the right of any such employee or
consultant to be employed or engaged by the Company or its subsidiaries because
of the nature of the business conducted or to be conducted by the Company or its
subsidiaries or for any other reason, and the continued employment and
engagement by the Company or its subsidiaries of their present employees and
consultants will not result in any such violations. The Company is not aware
that any officer or key employee or key consultant, or that any group of key
employees or key consultants, intends to terminate their employment or
engagement with the Company or its subsidiaries, nor does the Company have a
present intention to terminate the employment or engagement of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, except as set forth on Schedule 3.11 hereto, the employment of each
officer and employee of the Company and its subsidiaries is terminable at will
by the Company or its subsidiaries. There are no asserted controversies or labor
disputes or union organization activities pending or, to the best knowledge of
the Company, threatened, between the Company or its subsidiaries and their
respective employees. Each key employee and key consultant of the Company and
its subsidiaries has executed an Employment Inventions and Proprietary Rights
Assignment and Confidentiality Agreement, a copy of which has been made
available to the Purchasers or their special counsel. To the Company's
knowledge, the Company and its subsidiaries has complied with all applicable
state and federal equal employment opportunity and other laws relating to
employment.
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<PAGE> 7
3.12 Litigation, etc. Except as set forth in Schedule 3.12
hereto there are no actions, suits, proceedings or investigations pending or, to
the Company's best knowledge, threatened against the Company or its
subsidiaries, which, either in any case or in the aggregate, result in a
material adverse impact on the business, prospects, affairs or operations of the
Company or its subsidiaries or in any of its properties or assets, or in any
material impairment of the right or ability of the Company or its subsidiaries
to carry on its business as now conducted or as proposed to be conducted, or in
any material liability on the part of the Company or its subsidiaries or in any
material change in the current equity ownership of the Company or its
subsidiaries, and none which questions the validity of this Agreement or the
other agreements contemplated hereby or any action taken or to be taken in
connection herewith or therewith or seeks to restrain, enjoin, prevent the
consummation of or otherwise affect the transactions contemplated hereby. The
foregoing includes, without limitation, any action, suit, proceeding, or
investigation pending or currently threatened involving the prior employment of
any employees of the Company or its subsidiaries, their use of any information
or techniques allegedly proprietary to any of their former employees, their
obligations under any agreements with prior employers, and negotiations by the
Company with potential backers of, or investors in, the Company or its proposed
business. The Company and its subsidiaries are not a party or subject to any
writ, order, decree or judgment.
3.13 Registration Rights. Other than as provided in the
Registration Rights Agreement dated as of the Closing Date or as set forth on
Schedule 3.13 hereof, the Company is not under any obligation to register any
presently outstanding securities, or any securities which may hereafter be
issued, under the Securities Act of 1933, as amended (the "Securities Act").
3.14 Governmental Consents, etc. No consent, approval or
authorization of, or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the other agreements contemplated
hereby or the offer, sale or issuance of the Preferred Shares, the issuance of
Conversion Shares, or the consummation of any other transaction contemplated
hereby or thereby, except for filings under applicable state securities laws
which filings, if required, will be made and will be effective within the time
periods required by law.
3.15 Securities Act. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Preferred Shares in conformity with the terms of this Agreement and the issuance
of the Conversion Shares constitute, or will constitute, transactions exempt
from the registration requirements of Section 5 of the Securities Act.
3.16 Insurance. Set forth on Schedule 3.16 hereto is a list of
all insurance policies maintained by the Company.
3.17 Disclosure. No statement by the Company contained in this
Agreement or the other agreements contemplated hereby, including all exhibits
contain any untrue statement of
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a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Confidential Private Placement
Memorandum dated May 26, 1998 previously delivered to each Purchaser does not
contain any untrue statement of material fact nor does it omit to state a
material fact necessary to make the statements therein not misleading.
3.18 Taxes. Except as set forth on Schedule 3.18 hereto, the
Company and its subsidiaries have filed all tax returns and reports as required
by law. These returns and reports are true and correct in all material respects.
The Company and its subsidiaries have paid all taxes and other assessments due,
except those contested by it in good faith. The provision for taxes of the
Company as shown in the Financial Statements (as defined in Section 3.20 below)
is adequate for taxes due or accrued as of the date thereof. The Company and its
subsidiaries have never had any tax deficiency proposed or assessed against it
and have not executed any waiver of any statute of limitations on the assessment
or collection of any tax or governmental charge. None of the Company's or its
subsidiaries' federal income tax returns and none of their state or franchise
tax or sales or use tax returns has ever been audited by governmental
authorities. Since the date of the Financial Statements, the Company has made
adequate provision on its books of account for all taxes, assessments and
governmental charges with respect to its business, properties and operations for
such period. The Company and its subsidiaries have withheld or collected from
each payment made to each of their employees, the amount of all taxes
(including, but not limited to, those required by relevant federal statutes)
required to be withheld or collected therefrom, and have paid the same to the
proper tax receiving officers or authorized depositories.
3.19 Transactions with Principals. Except as set forth on
Schedule 3.19 hereto, no employee, stockholder, director or officer of the
Company or its subsidiaries, consultant to the Company or its subsidiaries, or
any affiliate or immediate family member thereof (a "Related Party") is indebted
to the Company or its subsidiaries, nor is the Company or its subsidiaries
indebted (or committed to make loans or extend or guarantee credit) to any
Related Party. To the best of the Company's knowledge, except as set forth on
Schedule 3.19 hereto, no Related Party is, directly or indirectly, interested in
any material contract with the Company or its subsidiaries. Set forth on
Schedule 3.19 hereto is a list of each agreement, instrument or other writing
intended to constitute a legal obligation between the Company or its
subsidiaries and any Related Party at the time of the Closing. Except as set
forth in that certain Stockholders Agreement of even date herewith, to the best
of the Company's knowledge, there is no voting agreement or other arrangement
among its stockholders with respect to the election of any individual or
individuals to the Company's Board of Directors.
3.20 Company SEC Filings. The Company has delivered to
Purchasers a copy of the Company's Form 10-KSB for the year ended December 31,
1997 and a copy of the Company's Form 10-QSB for the quarter ended March 31,
1998 (collectively, the "SEC Filings"). The SEC Filings, and the financial
statements contained therein, comply in all material respects with applicable
securities laws and regulations. The SEC Filings do not contain any
misstatements of material fact or fail to state all material facts necessary to
make the statements
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therein not misleading. The audited financial statements included in the SEC
Filings comply as to form with applicable accounting requirements and with the
published rules and regulations of the Securities and Exchange Commission with
respect thereto. The financial statements included in the SEC Filings have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto.)
The balance sheets contained in the SEC Filings present fairly, in all material
respects, the financial conditions of the Company as of the date of the SEC
Filings. The income statements contained in the SEC Filings present fairly, in
all material respects, the results of the Company's operations for the period
covered thereby and do not contain any items of special or nonrecurring income,
except as specifically set forth therein. Since the date of the SEC Filings
there has been no material adverse change in the financial condition,
liabilities, assets or business of the Company and its subsidiaries.
3.21 Liabilities. The Company and its subsidiaries have no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except (a) the liabilities and obligations of the Company as set
forth in the financial statements included in the SEC Filings, (b) liabilities
and obligations which have occurred subsequent to March 31, 1998 in the ordinary
course of business, which in the aggregate have not been material, and (c)
obligations under contracts incurred in the ordinary course of business, which
obligations are not required to be set forth on a balance sheet or in the notes
thereto in accordance with generally accepted accounting principles, and which
in any event are not material.
3.22 Absence of Certain Changes. Since March 31, 1998, there has
not been:
(a) Any change in the assets, liabilities, financial
condition or operating results of the Company and its subsidiaries from that
reflected in the financial statements included in the SEC Filings, except
changes in the ordinary course of business that have not been, in the aggregate,
material;
(b) Any material damage, destruction, or loss, whether or
not covered by insurance, affecting the business, properties, prospects or
financial condition of the Company and its subsidiaries (as such business is
presently conducted and as it is proposed to be conducted);
(c) Any waiver or compromise by the Company or its
subsidiaries of a valuable right or of a material debt owed to it;
(d) Any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or its subsidiaries,
except in the ordinary course of business and which is not material;
(e) Any material change to any agreement listed on
Schedule 3.7 hereof;
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<PAGE> 10
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director, or stockholder of the Company or
its subsidiaries;
(g) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets by the Company
or its subsidiaries;
(h) Receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company or its
subsidiaries;
(i) Any declaration, setting aside or payment of a
dividend or other distribution in respect of any of the Company's capital stock,
or any direct or indirect redemption, purchase or other acquisition of any such
stock by the Company; or
(j) Any other event or condition of any character that
might materially and adversely affect the business, properties, prospects or
financial condition of the Company and its subsidiaries (as such business is
presently conducted and as it is proposed to be conducted) or any agreement or
commitment by the Company or its subsidiaries to do any of the things described
in this Section 3.22.
3.23 Environmental and Safety Laws. To the best of the Company's
knowledge, the Company and its subsidiaries are not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to the best of the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
3.24 Minute Book. The minute books of the Company and its
subsidiaries provided to the Purchaser, or their special counsel, contain a
complete and accurate summary of all meetings of directors and stockholders, and
all actions by written consent taken thereby, since the date of incorporation of
the Company or its subsidiaries, as applicable.
3.25 Year 2000. The systems of the Company and its subsidiaries
will properly recognize and process date sensitive information when the year
changes to 2000. To the Company's best knowledge, each party with which the
Company or its subsidiaries conducts business will be able to properly recognize
and process date sensitive information when the year changes to 2000, except
where the failure to recognize and process such information would not have a
material adverse effect on the Company or its subsidiaries their business.
3.26 Purchaser Consents and Approvals. Except as set forth in
Schedule 3.26 hereto, no Purchaser shall, solely by reason of his/her/its
purchase of Preferred Shares, be required to obtain any license, consent,
approval or authorization, or make any designation, declaration or filing with
any governmental authority or other entity except as may be required pursuant to
Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended.
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<PAGE> 11
3.27 Employee Benefit Plans. Except as set forth on Schedule
3.27 hereto, the Company and its ERISA affiliates (as defined in the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), if any, do not
maintain, administer or contribute to, and are not required to contribute to,
or, within the six years prior to the Closing Date, have not maintained,
administered or contributed to or were required to contribute to any employee
benefit plan that covers any of their respective employees or former employees
(with respect to any such employee's relationship with any of them). The Company
and its ERISA affiliates, if any, do not maintain and have not established any
welfare benefit plan within the meaning of Section 3(1) of ERISA that provides
for continuing benefits or coverage for any employee, former employee or any
beneficiary of any employee or former employee after such employee or former
employee's termination of employment, except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations thereunder. The Company and its ERISA Affiliates, if any, do not
contribute to, and are not obligated to contribute to, and within the past six
years have not contributed to or been obligated to contribute to, any
multiemployer plan.
3.28 Hazardous Materials. The Company and its subsidiaries have
not, at any time, used, generated, disposed of, discharged, stored, transported
to or from, released or threatened to release any hazardous materials, in any
form, quantity or concentration, on, from, under or affecting such property,
nor, to the best of the Company's knowledge, are any hazardous materials present
or existing on, from, under or affecting any such property other than as used by
the Company or its subsidiaries in the ordinary course of business and in
compliance with applicable law.
4. Representations and Warranties by Each Purchaser. Each Purchaser,
severally and not jointly, represents and warrants to the Company as follows:
4.1 Investment Intent. The Preferred Shares are being acquired,
and the Common Shares issuable upon conversion of the Preferred Shares will be
acquired, for the Purchaser's own account, for investment and not with a view
to, or for resale in connection with, any distribution or public offering in
violation of the Securities Act.
4.2 Unregistered Securities. The Purchaser understands that the
Preferred Shares have not been, and the Conversion Shares will not be,
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act pursuant to Section 4(2) thereof, that the Company has no present
intention of registering the Preferred Shares or Conversion Shares, that the
securities must be held by the Purchaser indefinitely, and that the Purchaser
must therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from registration.
4.3 Access to Information. During the negotiation of the
transactions contemplated herein, the Purchaser and its representatives and
legal counsel have been afforded
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<PAGE> 12
full and free access to corporate books, financial statements, records,
contracts, documents, and other information concerning the Company and to its
offices and facilities, have been afforded an opportunity to ask such questions
of the Company's officers, employees, agents, accountants and representatives
concerning the Company's business, operations, financial conditions, assets,
liabilities and other relevant matters as they have deemed necessary or
desirable, and have been given all such information as has been requested, in
order to evaluate the merits and risks of the prospective investments
contemplated herein. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement or
the right of each Purchaser to rely thereon, provided that Purchaser shall
promptly notify the Company of any breaches of any such representations and
warranties of which it has actual knowledge.
4.4 Due Diligence Investigation. The Purchaser and its
representatives have been solely responsible for the Purchaser's own "due
diligence" investigation of the Company and its management and business, for its
own analysis of the merits and risks of this investment, and for its own
analysis of the fairness and desirability of the terms of the investment. In
taking any action or performing any role relative to the arranging of the
proposed investment, the Purchaser has acted solely in its own interest, and
none of the Purchaser's (or any of their agents or employees) has acted as an
agent of the Company. The Purchaser has such knowledge and experience in
financial and business matters that the Purchaser is capable of evaluating the
merits and risks of the purchase of the Preferred Shares pursuant to the terms
of this Agreement and of protecting the Purchaser's interests in connection
therewith.
4.5 Accredited Investor. The Purchaser is an "Accredited
Investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act. The Purchaser is able to bear the economic risk of the
purchase of the Securities pursuant to the terms of this Agreement, including a
complete loss of the Purchaser's investment in the Securities.
4.6 Power and Authority. The Purchaser has the full right, power
and authority to enter into and perform the Purchaser's obligations under this
Agreement and the other agreements contemplated hereby to which the Purchaser is
a party, and this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party constitute valid and binding obligations of the
Purchaser enforceable in accordance with their terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules of law concerning equitable remedies.
4.7 Legend. Purchaser acknowledges that each certificate
representing the Preferred Shares and Conversion Shares may be endorsed with
substantially the following legends:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
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<PAGE> 13
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE APPLICABLE SECURITIES UNDER THE ACT AND
ANY STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION.
Any other legends required by applicable state securities
laws or any applicable state laws regulating the Company's business.
5. Conditions to Closing.
5.1 Conditions to Obligations of the Purchasers. The obligation
of each Purchaser to purchase Preferred Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived by the Purchasers:
(a) Representations and Warranties Correct; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof and in the other agreements to be delivered by the Company at the Closing
were true and correct when made, and shall be true and correct on the Closing
Date with the same force and effect as if they had been made on and as of said
date; and the Company shall have performed all obligations and conditions
required herein or therein to be performed or observed by it on or prior to the
Closing Date.
(b) Opinion of Company's Counsel. The Purchasers shall
have received from Loeb & Loeb LLP an opinion, dated the Closing Date,
substantially in the form as that attached hereto as Schedule 5.1(b) attached
hereto.
(c) Consents and Waivers. The Company shall have obtained
any and all consents (including all governmental or regulatory consents,
approvals or authorizations required in connection with the valid execution and
delivery of this Agreement and the other agreements contemplated hereby),
permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
(d) Legislative Changes. There shall not have been any
change to federal or state law which would have a material adverse effect on the
business, properties, prospectus or financial condition of the Company (as such
business is presently conducted as it is proposed to be conducted).
(e) Minimum Condition. The Company shall concurrently with
the Closing sell at least 220,000 Preferred Shares (including 20,000 Preferred
Shares to be sold to Robert M. Fell Living Trust pursuant to that certain
Securities Purchase Agreement of even date herewith).
(f) Registration Rights Agreement. The Company shall have
entered into a Registration Rights Agreement substantially in the form of
Schedule 5.1 (f) hereof.
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<PAGE> 14
(g) Management Agreement. The Company shall have entered
into a Services Agreement with Fell & Company, Inc. substantially in the form of
Schedule 5.1(g) hereto. (h) Employment Agreement. The Company shall have entered
into Employment Agreements with David Marshall and Russell Fine substantially in
the form of Schedule 5.1(h) hereto.
(i) Stockholders Agreement. The Company, David Marshall
and Russell Fine shall have entered into a Stockholders Agreement substantially
in the form of Schedule 5.1(i) hereto.
(j) Compliance Certificate. The Company shall have
delivered to the Purchasers a certificate, executed by the President of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions
specified in this subsection 5.1.
(k) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
5.2 Conditions to Obligations of the Company. The Company's
obligation to sell and issue the Preferred Shares at the Closing is subject to
the fulfillment on or prior to the Closing Date of the following conditions, any
of which may be waived by the Company:
(a) Representations and Warranties. The representations
and warranties made by each Purchaser in Section 4 and in the other agreements
to be delivered at the Closing hereof shall be true and correct with made, and
shall be true and correct on the Closing Date with the same force and effect as
if they had been made on and as of said date.
(b) Minimum Condition. The Company shall concurrently with
the Closing sell at least 220,000 Preferred Shares (including 20,000 Preferred
Shares to be sold to Robert M. Fell Living Trust pursuant to that certain
Securities Purchase Agreement of even date herewith).
(c) Registration Rights Agreement. The Company shall have
entered into a Registration Rights Agreement substantially in the form of
Schedule 5.1 (f) hereof.
(d) Employment Agreements. The Company shall have entered
into Employment Agreements with David Marshall and Russell Fine substantially in
the form of Schedule 5.1(h) hereto.
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<PAGE> 15
(e) Stockholders Agreement. The Company, David Marshall,
Russell Fine and each Purchaser shall have entered into a Stockholders Agreement
substantially in the form of Schedule 5.1(i) hereto.
6. Removal of Legend and Transfer Restrictions. Any legend endorsed on a
certificate pursuant to subsection 4.2(a) and the stop transfer instructions
with respect to such securities shall be removed and the Company shall issue a
certificate without such legend to the holder thereof if (i) such securities are
registered under the Securities Act, a prospectus meeting the requirements of
Section 10 of the Securities Act is available, and the holder of such securities
agrees to deliver such prospectus to the extent required by law, (ii) if such
legend may be properly removed under the terms of Rule 144 promulgated under the
Securities Act or (iii) if such holder provides the Company with an opinion of
counsel for such holder, reasonably satisfactory to legal counsel for the
Company, to the effect that a sale, transfer or assignment of such Securities
may be made without registration.
7. Use of Proceeds. The Company shall use the proceeds of the sale of
the Preferred Shares, after payment of expenses relating to the transactions
contemplated hereby, as set forth on Schedule 7 hereto.
8. Miscellaneous.
81. Waivers and Amendments. Neither this Agreement nor any
provision hereof may be amended, changed, waived, discharged or terminated
orally, but only by a statement in writing signed by the party against which
enforcement of the amendment, change, waiver, discharge or termination is
sought, except to the extent provided in this Section 8.1
8.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California, without regard to conflicts of
laws principles.
8.3 Survival. The representations and warranties made herein
shall survive until the first anniversary of the execution of this Agreement and
the closing of the transactions contemplated hereby.
8.4 Attorneys' Fees. Should any party hereto or any person bound
by the provisions of this Agreement institute any legal action against any other
person(s) and/or party to enforce the provisions hereof (including any claim for
breaches of representations and warranties), the prevailing party in such action
shall be entitled to receive from the losing party, in addition to any other
relief to which the prevailing party may be entitled, such amount as the court
may adjudge to be reasonable attorneys' fees and court costs.
8.5 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns,
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<PAGE> 16
heirs, executors and administrators of the parties hereto. The Company may not
assign this Agreement.
8.6 Entire Agreement. This Agreement, including the schedules
hereto, embodies the entire agreement and understanding between the parties
hereto with respect to the matters dealt with herein and supersedes all prior
written or oral agreements and understandings with respect to such matters,
including but not limited to, the Memorandum of Understanding dated as of April
1, 1998 between the Company and Fell & Company, Inc.
8.7 Notices, etc. All notices and other communications provided
for hereunder shall be in writing and shall be sent by first class mail, telex,
telecopy or hand delivery:
If to the Company, to:
YOU BET INTERNATIONAL, INC.
1950 Sawtelle Boulevard
Suite 180
Los Angeles, CA 90025
Attention: David Marshall
Telecopy No.: 310-444-3390
With a copy to:
LOEB & LOEB LLP
1000 Wilshire Boulevard
Suite 1800
Los Angeles, CA 90017
Attention: David Ficksman, Esq.
Telecopy No.: (213) 688-3460
If to any Purchaser, to the address of such Purchaser as shown on the
signature pages hereto, or to such other address as any of the above shall have
designated in writing, with a copy to: Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP, 2121 Avenue of the Stars 18th Floor, Los Angeles,
California, Attention: Gary N. Jacobs, Esq., Telecopy No.: (310) 556- 2920.
All such notices and communications shall be deemed to have been given or made
(a) when delivered by hand, (b) five business days after being deposited in the
mail, postage prepaid, (c) when telexed, answer-back received or (d) when
telecopied, receipt acknowledged.
8.8 Severability. In the event that anyone or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the
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<PAGE> 17
validity, legality and enforceability of any such provision, paragraph, word,
clause, phrase or sentences hereof shall not be in any way impaired, it being
intended that all rights, powers and privileges of he parties hereto shall be
enforceable to the fullest extent of the law.
8.9 Finder's Fees.
(a) The Company (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement other than West Coast Capital Corp., whose compensation
arrangements are fully and accurately set forth on Schedule 8.9 hereto, and (ii)
hereby agrees to indemnify and to hold the Purchasers harmless of and from any
liability for any commission or compensation in the nature of a finder's fee to
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which the Company, or any of
its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company and
the other Purchasers harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which it, or any of its employees or representatives, are
responsible.
8.10 Expenses. The Company shall bear expenses and legal fees
incurred with respect to this Agreement and the transactions contemplated
hereby. The Company agrees to pay the fees, expenses and disbursements of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, special counsel
to Purchasers, incurred in connection with the transactions contemplated hereby
and by that certain Securities Purchase Agreement of even date herewith between
the Company and Robert M. Fell Living Trust; provided that the Company shall not
be obligated to pay any fees, expenses or disbursements in excess of $100,000.
At the closing the Company shall pay an amount estimated by Christensen, Miller,
Fink, Jacobs, Glaser, Weil, & Shapiro, LLP to have been incurred by it in
connection with the transaction contemplated hereby. Thereafter, the Company,
upon receipt of supplemental statements, shall pay any additional fees, expenses
and disbursements of Christensen, Miller, Fink, Jacobs, Glaser, Weil, & Shapiro,
LLP, provided that the aggregate amount paid to Christensen, Miller, Fink,
Jacobs, Glaser, Weil, & Shapiro, LLP shall not exceed $100,000.
8.11 Descriptive Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meanings of terms contained herein.
8.12 Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto or hereunder may be executed any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
<PAGE> 18
8.13 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any Purchaser, upon any breach or default of
the Company under this Agreement, shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
remedies, either under this Agreement, or by law or otherwise afforded to a
Purchaser, shall be cumulative and not alternative.
8.14 Appointment of Agent.
(a) Each Purchaser by executing this Agreement does hereby
irrevocably appoint Robert M. Fell and his successor (the "Purchaser Agent") as
his/her/its agent and attorney in fact for the purposes set forth in this
Agreement. Purchasers' Agent may, on behalf of the Purchasers, and each of them,
as their agent and attorney-in-fact, for the purposes set forth in this
Agreement, (i) waive any of the provisions of and execute and deliver such
amendments to this Agreements as he, in his sole judgment, shall deem necessary
or advisable; (ii) execute and deliver such documents pursuant to this Agreement
as the Purchasers' Agent, in his sole judgment, shall deem necessary or
advisable; (iii) execute and give all notices, requests and other communications
required, permitted or contemplated under this Agreement as the Purchasers'
Agent, in his sole judgment, shall deem necessary and advisable; (iv) contest,
dispute, compromise, adjust, settle, litigate appeal or otherwise deal with any
and all set-offs, claims, breaches, obligations, liabilities, assessments,
suits, actions, proceedings, liens, charges, encumbrances, orders, judgments and
decrees with respect to this Agreement or to refrain so to do, as Purchasers'
Agent, in his sole judgment, shall deem necessary or advisable; (v) expend such
amounts in the exercise of his rights and powers and in the performance of his
duties hereunder as the Purchasers' Agent, in his sole judgment, shall deem
necessary or advisable; and (vi) generally act for and on behalf of the
Purchasers, and each of them, in all matters connected with this Agreement with
the same force and effect as though such act had been taken by them, or any of
them, personally. This appointment and power-of-attorney is a special
power-of-attorney confined to the purposes stated in this paragraph coupled with
an interest and is irrevocable, and shall survive the death or incompetency of a
person granting such power of attorney.
(b) The Purchasers agree that (i) the Company may deal
solely with the Purchasers' Agent as the exclusive representative of the
Purchasers, with reference to the matters set forth in paragraph (a), above,
(ii) the actions of the Purchasers' Agent are binding on the Purchasers and
(iii) the Company has no duty to ascertain if the Purchasers' Agent is properly
carrying out his obligations under this Agreement.
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<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"COMPANY"
YOU BET INTERNATIONAL, INC.
By:____________________________________
Its:___________________________________
By:____________________________________
Its:___________________________________
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<PAGE> 20
PURCHASER'S COUNTERPART SIGNATURE PAGE
YOU BET INTERNATIONAL, INC. PREFERRED STOCK PURCHASE AGREEMENT
June __, 1998
"PURCHASER"
If Purchaser is an entity:
Name of entity:___________________________________
By:_______________________________________________
Name:
Title:
If Purchaser is an individual:
Name:_____________________________________________
- --------------------------------------------------
(Signed Name)
Address of Purchaser
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
Number of Preferred Shares to be purchased:_______
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<PAGE> 1
EXHIBIT 99.2
YOU BET INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
<PAGE> 2
YOU BET INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this AAgreement@) is entered into as
of June 29, 1998 by and between YOU BET INTERNATIONAL, INC., a Delaware
corporation (the "Company"), and the purchaser listed on the signature page
hereto (the "Purchaser").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. Authorization and Sale of Securities.
1.1 Authorization; Preferred Shares and Warrant. The Company has
authorized the issuance and sale pursuant to the terms and conditions hereof of
20,000 shares of its Series A Convertible Preferred Stock (the "Preferred
Shares") and has authorized the issuance and sale pursuant to the terms and
conditions hereof of a ten (10) year warrant (the "Warrant") to purchase
1,200,000 shares of the Company's common stock, par value $.001 per share (the
"Common Stock"). The Warrant shall be in the form of Schedule 1.1 hereof.
1.2 Issuance and Sale of Preferred Shares. Subject to the terms
and conditions hereof, at the Closing (as defined herein), the Company will
issue and sell to Purchaser, and Purchaser will purchase from the Company,
20,000 Preferred Shares at a purchase price of $25.00 per Preferred Share.
Purchaser shall pay the purchase price of the Preferred Shares by delivering
$10,000 in cash and a promissory note in the amount of $490,000. The promissory
note shall be in the form of Schedule 1.2 hereof; provided that the Purchaser
shall use his reasonable best efforts to prepay the promissory note as soon as
practicably consistent with his other cash requirements. Such promissory note
shall be secured by the Preferred Shares and the Common Stock issuable upon
conversion of the Preferred Shares (the "Conversion Shares").
1.3 Issuance and Sale of Warrant. Subject to the terms and
conditions hereof, at the Closing, the Company will issue and sell to Purchaser,
and the Purchaser will purchase from the Company, the Warrant. The purchase
price of the Warrant will be $75,000. Purchaser shall pay the purchase price of
the Warrant by delivering $5,000 in cash and a promissory note in the amount of
$70,000. The promissory note shall be in the form of Schedule 1.3 hereof. Such
promissory note shall be secured by the Warrant and the shares of Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares").
<PAGE> 3
2. Closing; Delivery.
2.1 Closing.
(a) The closing of the purchase and sale of the
Preferred Shares and the Warrant hereunder (the "Closing") shall take place at
the offices of Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP,
2121 Avenue of the Stars, 18th Floor, Los Angeles, California 90067 on June 29,
1998 (the AClosing Date@) at 10:00 a.m., or at such other time as may be agreed
upon by the Company and the Purchaser.
2.2 Delivery. Subject to the terms of this Agreement, at the
Closing (A) the Company will deliver to the Purchaser (i) a stock certificate
representing the Preferred Shares to be purchased by the Purchaser, and (ii) the
Warrant, and (B) the Purchaser shall deliver the purchase price for the
Preferred Shares and the Warrant.
3. Representations and Warranties of the Company. The Company represents
and warrants and agrees with the Purchaser as of the date hereof and as of the
Closing Date as follows.
3.1 Organization and Standing; Articles and Bylaws. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has the requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified to
do business as a foreign corporation in every jurisdiction where the failure to
so qualify would have a material adverse impact on the Company's business. The
Company has made available to the Purchaser or his special counsel true, correct
and complete copies of the Company's Certificate of Incorporation and Bylaws,
each as amended to date.
3.2 Corporate Power. The Company has all requisite legal and
corporate power to enter into this Agreement and each other agreement relating
hereto, to sell the Preferred Shares and the Warrant hereunder and to carry out
and perform its obligations under the terms of this Agreement, the Warrant and
the other agreements contemplated hereby.
3.3 Subsidiaries. Schedule 3.3 hereof contains a complete list
of all subsidiaries of the Company, together with the percentage ownership by
the Company, the jurisdiction of formation, the names of the directors, partners
or controlling persons and the nature and extent of the operations of such
subsidiary.
3.4 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of common stock, par value $.001 per share
("Common Shares") and 1,000,000 shares of preferred stock, par value $.001 per
share, including 400,000 shares which have been designated Preferred Shares. As
of the date hereof, there are 9,823,994 shares of Common Stock and no shares of
preferred stock issued and outstanding. Except as set forth on
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Schedule 3.4 hereto, there are no options, warrants or other agreements which
provide for the issuance of capital stock of the Company and there are no
securities outstanding which are convertible into capital stock of the Company.
3.5 Authorization.
(a) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for (i) the issuance and sale of
the Preferred Shares in accordance with this Agreement, (ii) the issuance of the
Conversion Shares upon conversion of the Preferred Shares, (iii) the issuance
and sale of the Warrant in accordance with this Agreement, (iv) the issuance of
Warrant Shares upon exercise of the Warrant, and (v) the execution, delivery and
performance by the Company of this Agreement, the Warrant and the other
agreements contemplated hereby have been taken. This Agreement constitutes and
the Warrant and other agreements executed by the Company at the Closing will
constitute valid and binding obligations of the Company enforceable against it
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditor's rights and rules of laws
concerning equitable remedies.
(b) (i) The Preferred Shares, when issued in compliance
with the provisions of this Agreement, (ii) the Conversion Shares, when issued
upon conversion of the Preferred Shares, and (iii) Warrant Shares, when issued
upon exercise of the Warrant, will be validly issued, fully paid and
nonassessable, and will be free of any liens, encumbrances or restrictions on
transfer; provided, however, that the Preferred Shares, the Conversion Shares
and the Warrant Shares may be subject to restrictions on transfer under state
and/or federal securities laws. The Company has reserved the Conversion Shares
for issuance upon the conversion of the Preferred Shares and has reserved the
Warrant Shares for issuance upon the exercise of the Warrant.
(c) No stockholder of the Company or any other person has
any right of first refusal or any preemptive rights in connection with the
issuance and sale of the Preferred Shares or the issuance of the Conversion
Shares upon the conversion of the Preferred Shares. No stockholder of the
Company or any other person has any right of first refusal or any preemptive
rights in connection with the issuance and sale of the Warrant or the issuance
of the Warrant Shares upon the exercise of the Warrant.
3.6 Title to Properties and Assets; Liens; Intangible Property
etc.
(a) Except as set forth on Schedule 3.6 hereto, the
Company and its subsidiaries have good and marketable title to their respective
properties and assets and good title to all their leasehold estates, in each
case not subject to any mortgage, pledge, lien, encumbrance or charge, other
than those resulting from taxes which have not yet become delinquent and those
arising in the ordinary course of business which do not, individually or in the
aggregate,
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materially detract from the value of the property subject thereto or threaten to
interfere with the use of such property or otherwise materially impair the
operations of the Company or its subsidiaries, and which have not arisen
otherwise than in the ordinary course of business.
(b) The Company or its subsidiaries is the licensee, or
the sole and exclusive owner, of all trade names, unregistered trademarks and
service marks, brand names, patents, copyrights, registered trademarks and
service marks, and all applications for any of the foregoing, and all permits,
grants and licenses or other rights with respect thereto, the absence of which
would have a material adverse effect on the business, operations or financial
condition of the Company and its subsidiaries. Except as set forth on Schedule
3.6 the Company and its subsidiaries (i) do not use any of such intangible
property by consent of any other person, or (ii) are not required to make any
payments to others with respect thereto. The Company and its subsidiaries have
not been charged with any infringement of any intangible property of the
character described above nor has it been notified or advised of any claim of
any other person or entity relating to any of such intangible property.
3.7 Material ContractsContracts. Except as set forth on Schedule
3.7 hereto, the Company and its subsidiaries do not have any material contract,
agreement, lease, commitment or proposed transaction, written or oral, absolute
or contingent, other than (i) contracts for services that were entered into in
the ordinary course of business that do not involve more than $25,000 or extend
for more than one year beyond the date hereof, (ii) sales contracts entered into
in the ordinary course of business and (iii) contracts (other than employment
and consulting contracts, contracts with labor unions and license and other
agreements relating to the acquisition or disposition of technology) terminable
at will by the Company or its subsidiaries on no more than 30-days notice
without cost or liability to the Company or its subsidiaries. Schedule 3.7
contains a list of all employment, consulting contracts and contracts with labor
unions and license and other agreements relating to the acquisition or
disposition of technology of the Company or its subsidiaries.
3.8 Permits. To the best of the Company's knowledge, the Company
and its subsidiaries have all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it. To the best of the Company's knowledge, the Company and its subsidiaries are
not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
3.9 Patents, Trademarks, etc, Trademarks, etc. To the best of
the Company's knowledge, the Company and its subsidiaries own, or have the right
to use all patents trademarks, service names, trade names, copyrights, licenses,
trade secrets, information or other proprietary rights necessary to their
business as now conducted or proposed to be conducted without conflict with or
infringement of the rights of others, and have not received a notice that they
are infringing upon or otherwise acting adversely to the right or claimed right
of any person under or with respect to any of the foregoing, and to the
Company's best knowledge there is no basis for any such claim. The Company is
not aware of any violation by a third party of any patents, trademarks, service
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<PAGE> 6
marks, trade names, copyrights, trade secrets or other proprietary rights of the
Company or its subsidiaries. The Company is not aware that any employees of the
Company or its subsidiaries are obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreements, or
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with their duties to the Company or its subsidiaries or
that would conflict with the business of the Company or its subsidiaries as
proposed to be conducted (as described in the Company's Form 10-KSB for the
fiscal year ended December 31, 1997). The Company does not believe it is or will
be necessary for the Company or its subsidiaries to utilize any inventions of
any of their employees made prior to the commencement of their employment,
except for inventions that have been assigned to the Company or its
subsidiaries. Schedule 3.9 hereto contains a complete list of the Company's and
its subsidiaries' patents and registered trademarks, service marks, trade names,
and copyrights, and all pending applications therefor. Except as set forth in
Schedule 3.9 hereto, there are no outstanding options, licenses, or agreements
of any kind relating to the foregoing, nor is the Company or its subsidiaries
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity.
3.10 Compliance with Instruments. Except as set forth in
Schedule 3.10 hereto, the Company and its subsidiaries are not in violation of
any terms of their Certificate of Incorporation or its Bylaws, as amended, or
any mortgage, indenture, contract, agreement, instrument, judgment, decree or
order by which they are bound or to which their properties are subject where
such violation would have a material adverse effect on the Company or its
subsidiaries. The execution, delivery and performance of and compliance with
this Agreement and the other agreements contemplated hereby and the transactions
contemplated hereby and thereby will not result in any such violation and will
not be in conflict with or constitute, with or without the giving of notice or
passage of time, a default under any of the foregoing and will not result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company pursuant to any of the foregoing.
3.11 Employees. To the Company's best knowledge, no employee of
or consultant to the Company or its subsidiaries is in violation of any term of
any employment contract, consulting agreement, patent disclosure agreement or
any other contract or agreement relating to the right of any such employee or
consultant to be employed or engaged by the Company or its subsidiaries because
of the nature of the business conducted or to be conducted by the Company or its
subsidiaries or for any other reason, and the continued employment and
engagement by the Company or its subsidiaries of their present employees and
consultants will not result in any such violations. The Company is not aware
that any officer or key employee or key consultant, or that any group of key
employees or key consultants, intends to terminate their employment or
engagement with the Company or its subsidiaries, nor does the Company have a
present intention to terminate the employment or engagement of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, except as set forth on Schedule 3.11 hereto, the employment of each
officer and employee of the Company and its subsidiaries is
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<PAGE> 7
terminable at will by the Company or its subsidiaries. There are no asserted
controversies or labor disputes or union organization activities pending or, to
the best knowledge of the Company, threatened, between the Company or its
subsidiaries and their respective employees. Each key employee and key
consultant of the Company and its subsidiaries has executed an Employment
Inventions and Proprietary Rights Assignment and Confidentiality Agreement, a
copy of which has been made available to the Purchaser or his special counsel.
To the Company's knowledge, the Company and its subsidiaries has complied with
all applicable state and federal equal employment opportunity and other laws
relating to employment.
3.12 Litigation, etc. Except as set forth in Schedule 3.12
hereto there are no actions, suits, proceedings or investigations pending or, to
the Company's best knowledge, threatened against the Company or its
subsidiaries, which, either in any case or in the aggregate, result in a
material adverse impact on the business, prospects, affairs or operations of the
Company or its subsidiaries or in any of its properties or assets, or in any
material impairment of the right or ability of the Company or its subsidiaries
to carry on its business as now conducted or as proposed to be conducted, or in
any material liability on the part of the Company or its subsidiaries or in any
material change in the current equity ownership of the Company or its
subsidiaries, and none which questions the validity of this Agreement or the
other agreements contemplated hereby or any action taken or to be taken in
connection herewith or therewith or seeks to restrain, enjoin, prevent the
consummation of or otherwise affect the transactions contemplated hereby. The
foregoing includes, without limitation, any action, suit, proceeding, or
investigation pending or currently threatened involving the prior employment of
any employees of the Company or its subsidiaries, their use of any information
or techniques allegedly proprietary to any of their former employees, their
obligations under any agreements with prior employers, and negotiations by the
Company with potential backers of, or investors in, the Company or its proposed
business. The Company and its subsidiaries are not a party or subject to any
writ, order, decree or judgment.
3.13 Registration Rights. Other than as provided in the
Registration Rights Agreement dated as of the Closing Date or as set forth on
Schedule 3.13 hereof, the Company is not under any obligation to register any
presently outstanding securities, or any securities which may hereafter be
issued, under the Securities Act of 1933, as amended (the "Securities Act").
3.14 Governmental Consents, etc. No consent, approval or
authorization of, or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the other agreements contemplated
hereby or the offer, sale or issuance of the Preferred Shares, the Warrant, or
the issuance of Conversion Shares or Warrant Shares, or the consummation of any
other transaction contemplated hereby or thereby, except for filings under
applicable state securities laws which filings, if required, will be made and
will be effective within the time periods required by law.
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<PAGE> 8
3.15 Securities Act. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Preferred Shares and the Warrant in conformity with the terms of this Agreement
and the issuance of the Conversion Shares and the Warrant Shares constitutes, or
will constitute, transactions exempt from the registration requirements of
Section 5 of the Securities Act.
3.16 Insurance. The Company maintains insurance with extended
coverage, covering such risks and providing such coverage as is customary for
companies in the same stage of development as the Company.
3.17 Disclosure. No statement by the Company contained in this
Agreement or the other agreements contemplated hereby, including all exhibits
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. The
Confidential Private Placement Memorandum dated May 18, 1998 previously
delivered to the Purchaser does not contain any untrue statement of material
fact nor does it omit to state a material fact necessary to make the statements
therein not misleading.
3.18 Taxes. The Company and its subsidiaries have filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company and its subsidiaries have paid all
taxes and other assessments due, except those contested by it in good faith. The
provision for taxes of the Company as shown in the Financial Statements (as
defined in Section 3.20 below) is adequate for taxes due or accrued as of the
date thereof. The Company and its subsidiaries have never had any tax deficiency
proposed or assessed against it and have not executed any waiver of any statute
of limitations on the assessment or collection of any tax or governmental
charge. None of the Company's or its subsidiaries' federal income tax returns
and none of their state or franchise tax or sales or use tax returns has ever
been audited by governmental authorities. Since the date of the Financial
Statements, the Company has made adequate provision on its books of account for
all taxes, assessments and governmental charges with respect to its business,
properties and operations for such period. The Company and its subsidiaries have
withheld or collected from each payment made to each of their employees, the
amount of all taxes (including, but not limited to, those required by relevant
federal statutes) required to be withheld or collected therefrom, and have paid
the same to the proper tax receiving officers or authorized depositories.
3.19 Transactions with Principals. Except as set forth on
Schedule 3.19 hereto, no employee, stockholder, director or officer of the
Company or its subsidiaries, consultant to the Company or its subsidiaries, or
any affiliate or immediate family member thereof (a "Related Party") is indebted
to the Company or its subsidiaries, nor is the Company or its subsidiaries
indebted (or committed to make loans or extend or guarantee credit) to any
Related Party. To the best of the Company's knowledge, except as set forth on
Schedule 3.19 hereto, no Related Party is, directly or indirectly, interested in
any material contract with the Company or its subsidiaries. Set forth on
Schedule 3.19 hereto is a list of each agreement, instrument or other writing
intended
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<PAGE> 9
to constitute a legal obligation between the Company or its subsidiaries and any
Related Party at the time of the Closing. Except as set forth in that certain
Stockholders Agreement of even date herewith, to the best of the Company's
knowledge, there is no voting agreement or other arrangement among its
stockholders with respect to the election of any individual or individuals to
the Company's Board of Directors.
3.20 Company SEC Filings. The Company has delivered to the
Purchaser a copy of the Company's Form 10-KSB for the year ended December 31,
1997 and a copy of the Company's Form 10-QSB for the quarter ended March 31,
1998 (collectively the "SEC Filings"). The SEC Filings, and the financial
statements contained therein, comply in all material respects with applicable
securities laws and regulations. The SEC Filings do not contain any
misstatements of material fact or fail to state a material facts necessary to
make the statements therein not misleading. The audited financial statements
included in the SEC Filings comply as to form with applicable accounting
requirements and with the published rules and regulations of the Securities and
Exchange Commission with respect thereto. The financial statements included in
the SEC Filings have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto.) The balance sheets contained in the SEC
Filings present fairly, in all material respects, the financial condition of the
Company as of the date of the SEC Filings. The income statements contained in
the SEC Filings present fairly, in all material respects, the results of the
Company's operations for the period covered thereby and do not contain any items
of special or nonrecurring income, except as specifically set forth therein.
Since the date of the SEC Filings there has been no material adverse change in
the financial condition, liabilities, assets or business of the Company and its
subsidiaries.
3.21 Liabilities. The Company and its subsidiaries have no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except (a) the liabilities and obligations of the Company as set
forth in the financial statements included in the SEC Filings, (b) liabilities
and obligations which have occurred subsequent to December 31, 1997 in the
ordinary course of business, which in the aggregate have not been material, and
(c) obligations under contracts incurred in the ordinary course of business,
which obligations are not required to be set forth on a balance sheet or in the
notes thereto in accordance with generally accepted accounting principles, and
which in any event are not material.
3.22 Absence of Certain Changes. Since the December 31, 1997,
there has not been:
(a) Any change in the assets, liabilities, financial
condition or operating results of the Company and its subsidiaries from that
reflected in the financial statements included in the SEC Filings, except
changes in the ordinary course of business that have not been, in the aggregate,
material;
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<PAGE> 10
(b) Any material damage, destruction, or loss, whether or
not covered by insurance, affecting the business, properties, prospects or
financial condition of the Company and its subsidiaries (as such business is
presently conducted and as it is proposed to be conducted);
(c) Any waiver or compromise by the Company or its
subsidiaries of a valuable right or of a material debt owed to it;
(d) Any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or its subsidiaries,
except in the ordinary course of business and which is not material;
(e) Any material change to any agreement listed on
Schedule 3.7 hereof;
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director, or stockholder of the Company or
its subsidiaries;
(g) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets by the Company
or its subsidiaries;
(h) Receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company or its
subsidiaries;
(i) Any declaration, setting aside or payment of a
dividend or other distribution in respect of any of the Company's capital stock,
or any direct or indirect redemption, purchase or other acquisition of any such
stock by the Company; or
(j) Any other event or condition of any character that
might materially and adversely affect the business, properties, prospects or
financial condition of the Company and its subsidiaries (as such business is
presently conducted and as it is proposed to be conducted) or any agreement or
commitment by the Company or its subsidiaries to do any of the things described
in this Section 3.22.
3.23 Environmental and Safety Laws. To the best of the Company's
knowledge, the Company and its subsidiaries are not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to the best of the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
3.24 Minute Book. The minute books of the Company and its
subsidiaries provided to the Purchaser, or his special counsel, contain a
complete and accurate summary of all meetings of directors and stockholders, and
all actions by written consent taken thereby, since the date of incorporation of
the Company or its subsidiaries, as applicable.
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3.25 Year 2000. The systems of the Company and its subsidiaries
will properly recognize and process date sensitive information when the year
changes to 2000. To the Company's best knowledge, each party with which the
Company or its subsidiaries conducts business will be able to properly recognize
and process date sensitive information when the year changes to 2000, except
where the failure to recognize and process such information would not have a
material adverse effect on the Company or its subsidiaries their business.
3.26 Purchaser Consents and Approvals. Except as set forth in
Schedule 3.26 hereto, the Purchaser shall not, solely by reason of his purchase
of Preferred Shares or Warrant, be required to obtain any license, consent,
approval or authorization, or make any designation, declaration or filing with
any governmental authority or other entity except as may be required pursuant to
Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended.
3.27 Employee Benefit Plans. Except as set forth on Schedule
3.27 hereto, the Company and its ERISA affiliates (as defined in the Employment
Retirement Income Security Act of 1974, as amended ("ERISA")), if any, do not
maintain, administer or contribute to, and are not required to contribute to,
or, within the six years prior to the Closing Date, have not maintained,
administered or contributed to or were required to contribute to any employee
benefit plan that covers any of their respective employees or former employees
(with respect to any such employee's relationship with any of them). The Company
and its ERISA affiliates, if any, do not maintain and have not established any
welfare benefit plan within the meaning of Section 3(1) of ERISA that provides
for continuing benefits or coverage for any employee, former employee or any
beneficiary of any employee or former employee after such employee or former
employee's termination of employment, except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations thereunder. The Company and its ERISA Affiliates, if any, do not
contribute to, and are not obligated to contribute to, and within the past six
years have not contributed to or been obligated to contribute to, any
multiemployer plan.
3.28 Hazardous Materials. The Company and its subsidiaries have
not, at any time, used, generated, disposed of, discharged, stored, transported
to or from, released or threatened to release of any hazardous materials, in any
form, quantity or concentration, on, from, under or affecting such property,
nor, to the best of the Company's knowledge, are any hazardous materials present
or existing on, from, under or affecting any such property other than as used by
the Company or its subsidiaries in the ordinary course of business and in
compliance with applicable law.
4. Representations and Warranties by the Purchaser. The Purchaser
represents and warrants to the Company as follows:
4.1 Investment Intent. The Preferred Shares and the Warrant are
being acquired, and the Conversion Shares and the Warrant Shares will be
acquired, for the Purchaser's
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own account, for investment and not with a view to, or for resale in connection
with, any distribution or public offering in violation of the Securities Act.
4.2 Unregistered Securities. The Purchaser understands that
the Preferred Shares and the Warrant have not been, and the Conversion Shares
and the Warrant Shares will not be, registered under the Securities Act by
reason of their issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof, that the Company has no present intention of registering the Preferred
Shares, Warrant, Conversion Shares or Warrant Shares, that the securities must
be held by the Purchaser indefinitely, and that the Purchaser must therefore
bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
registration.
4.3 Access to Information. During the negotiation of the
transactions contemplated herein, the Purchaser and his representatives and
legal counsel have been afforded full and free access to corporate books,
financial statements, records, contracts, documents, and other information
concerning the Company and to its offices and facilities, have been afforded an
opportunity to ask such questions of the Company's officers, employees, agents,
accountants and representatives concerning the Company's business, operations,
financial conditions, assets, liabilities and other relevant matters as they
have deemed necessary or desirable, and have been given all such information as
has been requested, in order to evaluate the merits and risks of the prospective
investments contemplated herein. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 3 of this
Agreement or the right of the Purchaser to rely thereon, provided that the
Purchaser shall promptly notify the Company of any breaches of any such
representations and warranties of which he has actual knowledge.
4.4 Due Diligence Investigation. The Purchaser has been solely
responsible for the Purchaser's own "due diligence" investigation of the Company
and its management and business, for his own analysis of the merits and risks of
this investment, and for his own analysis of the fairness and desirability of
the terms of the investment. In taking any action or performing any role
relative to the arranging of the proposed investment, the Purchaser has acted
solely in his own interest, and the Purchaser (or any of his agents or
employees) has not acted as an agent of the Company. The Purchaser has such
knowledge and experience in financial and business matters that the Purchaser is
capable of evaluating the merits and risks of the purchase of the Preferred
Shares and the Warrant pursuant to the terms of this Agreement and of protecting
the Purchaser's interests in connection therewith.
4.5 Accredited Investor. The Purchaser is an "Accredited
Investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act. The Purchaser is able to bear the economic risk of the
purchase of the Securities pursuant to the terms of this Agreement, including a
complete loss of the Purchaser's investment in the Securities.
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4.6 Power and Authority. The Purchaser has the full right, power
and authority to enter into and perform the Purchaser's obligations under this
Agreement and the other agreements contemplated hereby to which the Purchaser is
a party, and this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party constitute valid and binding obligations of the
Purchaser enforceable in accordance with their terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules of law concerning equitable remedies.
4.7 Legend. Purchaser acknowledges that each certificate
representing the Preferred Shares, the Warrant, the Conversion Shares and the
Warrant Shares may be endorsed with substantially the following legends:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE AACT@), OR ANY
STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
APPLICABLE SECURITIES UNDER THE ACT AND ANY STATE SECURITIES
LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION.
Any other legends required by applicable state
securities laws or any applicable state laws regulating the
Company's business.
5. Conditions to Closing.
5.1 Conditions to Obligations of the Purchaser. The obligation
of the Purchaser to purchase the Preferred Shares and the Warrant at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions, any of which may be waived by the Purchaser:
(a) Representations and Warranties Correct; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof and in the other agreements to be delivered by the Company at the Closing
were true and correct when made, and shall be true and correct on the Closing
Date with the same force and effect as if they had been made on and as of said
date; and the Company shall have performed all obligations and conditions
required herein or therein to be performed or observed by it on or prior to the
Closing Date.
(b) Opinion of Company's Counsel. The Purchaser shall have
received from Loeb & Loeb LLP an opinion, dated the Closing Date, substantially
in the form as that attached hereto as Schedule 5.1(b) attached hereto.
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(c) Consents and Waivers. The Company shall have obtained
any and all consents (including all governmental or regulatory consents,
approvals or authorizations required in connection with the valid execution and
delivery of this Agreement and the other agreements contemplated hereby),
permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
(d) Legislative Changes. There shall not have been any
change to federal or state law which would have a material adverse effect on the
business, properties, prospectus or financial condition of the Company (as such
business is presently conducted as it is proposed to be conducted).
(e) Registration Rights Agreement. The Company shall have
entered into a Registration Rights Agreement substantially in the form of
Schedule 5.1(e)(i) covering the Conversion Shares and the Warrant Shares.
(f) Related Transactions. Concurrent with the Closing the
Company shall sell at least 200,000 additional Preferred Shares as contemplated
by that certain Private Placement Memorandum dated May 18, 1998. The Company
shall also have substantially complied with the requirements of the other
related transactions contemplated by the parties hereto of even date herewith.
(g) Compliance Certificate. The Company shall have
delivered to the Purchaser a certificate, executed by the President of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions
specified in this subsection 5.1.
(h) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser and his special
counsel, and the Purchaser and his special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
5.2 Conditions to Obligations of the Company. The Company's obligation
to sell and issue the Preferred Shares and the Warrant at the Closing is subject
to the fulfillment on or prior to the Closing Date of the following conditions,
any of which may be waived by the Company:
(a) Representations and Warranties. The representations
and warranties made by the Purchaser in Section 4 and in the other agreements to
be delivered att the Closing hereof shall be true and correct with made, and
shall be true and correct on the Closing Date with the same force and effect as
if they had been made on and as of said date.
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<PAGE> 15
(b) Related Transactions. Concurrent with the Closing the
Company shall sell at least 200,000 additional Preferred Shares as contemplated
by that certain Private Placement Memorandum dated May 18, 1998.
6. Removal of Legend and Transfer Restrictions. Any legend endorsed on a
certificate pursuant to subsection 4.2(a) and the stop transfer instructions
with respect to such securities shall be removed and the Company shall issue a
certificate without such legend to the holder thereof if (i) such securities are
registered under the Securities Act, a prospectus meeting the requirements of
Section 10 of the Securities Act is available, and the holder of such securities
agrees to deliver such prospectus to the extent required by law, (ii) if such
legend may be properly removed under the terms of Rule 144 promulgated under the
Securities Act or (iii) if such holder provides the Company with an opinion of
counsel for such holder, reasonably satisfactory to legal counsel for the
Company, to the effect that a sale, transfer or assignment of such Securities
may be made without registration.
7. Miscellaneous.
7.1 Waivers and Amendments. Neither this Agreement nor any
provision hereof may be amended, changed, waived, discharged or terminated
orally, but only by a statement in writing signed by the party against which
enforcement of the amendment, change, waiver, discharge or termination is
sought, except to the extent provided in this Section 7.1.
7.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California, without regard to conflicts of
laws principles.
7.3 Survival. The representations and warranties made herein
shall survive until the first anniversary of the execution of this Agreement and
the closing of the transactions contemplated hereby.
7.4 Attorneys' Fees. Should any party hereto or any person bound
by the provisions of this Agreement institute any legal action against any other
person(s) and/or party to enforce the provisions hereof (including any claim for
breaches of representations and warranties), the prevailing party in such action
shall be entitled to receive from the losing party, in addition to any other
relief to which the prevailing party may be entitled, such amount as the court
may adjudge to be reasonable attorneys' fees and court costs.
7.5 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto. The Company may not assign this Agreement.
7.6 Entire Agreement. This Agreement, including the schedules
hereto, embodies the entire agreement and understanding between the parties
hereto with respect to the
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<PAGE> 16
matters dealt with herein and supersedes all prior written or oral agreements
and understandings with respect to such matters, including but not limited to,
the Memorandum of Understanding dated as of April 1, 1998 between the Company
and Fell & Company, Inc.
7.7 Notices, etc. All notices and other communications provided
for hereunder shall be in writing and shall be sent by first class mail, telex,
telecopy or hand delivery:
If to the Company, to:
YOU BET INTERNATIONAL, INC.
1950 Sawtelle Boulevard, Suite 180
Los Angeles, CA 90025
Attention: David Marshall
Telecopy No.: 310-444-3390
With a copy to:
LOEB & LOEB LLP
1000 Wilshire Boulevard, Suite 1800
Los Angeles, CA 90017
Attention: David Ficksman, Esq.
Telecopy No.: (213) 688-3460
If to the Purchaser, to the address of the Purchaser as shown on the
signature page hereto, or to such other address as the Purchaser shall have
designated in writing, with a copy to: Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP, 2121 Avenue of the Stars 18th Floor, Los Angeles,
California, Attention: Gary N. Jacobs, Esq., Telecopy No.: (310) 556-2920.
All such notices and communications shall be deemed to have been given or made
(a) when delivered by hand, (b) five business days after being deposited in the
mail, postage prepaid, (c) when telexed, answer-back received or (d) when
telecopied, receipt acknowledged.
7.8 Severability. In the event that anyone or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentences hereof shall not be in any way impaired, it being intended that all
rights, powers and privileges of the parties hereto shall be enforceable to the
fullest extent of the law.
7.9 Finder's Fees.
(a) The Company (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement other than West
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<PAGE> 17
Coast Capital Corp., whose compensation arrangements are fully and accurately
set forth on Schedule 7.9 hereto, and (ii) hereby agrees to indemnify and to
hold the Purchaser harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Company, or any of its employees or representatives,
are responsible.
(b) The Purchaser (i) represents and warrants that he has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which he, or any of his employees or representatives, are responsible.
7.10 Expenses. The Company shall bear expenses and legal fees
incurred with respect to this Agreement and the transactions contemplated
hereby. The Company agrees to pay the fees, expenses and disbursements of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, special counsel
to the Purchaser, incurred in connection with the transactions contemplated
hereby and by the Stock Purchase Agreement of even date herewith; provided that
the Company shall not be obligated to pay any fees, expenses or disbursements in
excess of $100,000. At the closing the Company shall pay an amount estimated by
Christensen, Miller, Fink, Jacobs, Glaser, Weil, & Shapiro, LLP to have been
incurred by it in connection with the transaction contemplated hereby.
Thereafter, the Company, upon receipt of supplemental statements, shall pay any
additional fees, expenses and disbursements of Christensen, Miller, Fink,
Jacobs, Glaser, Weil, & Shapiro, LLP, provided that the aggregate amount paid to
Christensen, Miller, Fink, Jacobs, Glaser, Weil, & Shapiro, LLP shall not exceed
$100,000.
7.11 Descriptive Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meanings of terms contained herein.
7.12 Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto or hereunder may be executed any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
7.13 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to the Purchaser, upon any breach or default of
the Company under this Agreement, shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
remedies, either under this Agreement, or by law or otherwise afforded to the
Purchaser, shall be cumulative and not alternative.
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"COMPANY"
YOU BET INTERNATIONAL, INC.
By:____________________________________
Its:___________________________________
By:____________________________________
Its:___________________________________
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<PAGE> 19
PURCHASER'S COUNTERPART SIGNATURE PAGE
YOU BET INTERNATIONAL SECURITIES PURCHASE AGREEMENT
June __, 1998
ROBERT M. FELL LIVING TRUST
- -----------------------------------------------
Robert M. Fell
Trustee
Address of Purchaser
10550 Wilshire Boulevard
Suite 1105
Los Angeles, California 90024
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<PAGE> 1
EXHIBIT 99.3
No. 1
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE APPLICABLE SECURITIES UNDER
THE ACT AND ANY STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION.
YOU BET INTERNATIONAL, INC.
WARRANT TO PURCHASE COMMON STOCK
June 29, 1998
YOU BET INTERNATIONAL, INC., a Delaware corporation (the "Company"),
hereby certifies that for value received ROBERT M. FELL LIVING TRUST (the
"Holder"), or its assigns is entitled to purchase from the Company at any time
(subject to Section 1 hereof) but prior to 5:00 p.m. Los Angeles time on June
29, 2008, or if such date is a day on which banking institutions in the State of
California are authorized to close, the next succeeding day which shall not be
such a day (the "Termination Date"), One Million Two Hundred Thousand
(1,200,000) shares of Common Stock, $.001 par value per share (the "Common
Stock"), of the Company for the price set forth in Section 6.1 hereof (subject
to adjustment as provided herein), all on the terms and conditions set forth
herein. The shares of Common Stock which may be purchased upon the exercise of
the Warrant are sometimes referred to herein as the "Warrant Shares."
Section 1. Exercisability of Warrants. The Warrants shall become
exercisable as follows:
(a) On and after the date hereof Holder shall be entitled to
purchase 200,000 Warrant Shares.
(b) On and after the six month anniversary of the date hereof,
Holder shall be entitled to purchase an additional 200,000 Warrant
Shares.
(c) On and after the 12 month anniversary of the date hereof,
Holder shall be entitled to purchase an additional 200,000 Warrant
Shares.
<PAGE> 2
(d) On and after the 18 month anniversary of the date hereof,
Holder shall be entitled to purchase an additional 200,000 Warrant
Shares.
(e) On and after the 24 month anniversary of the date hereof,
Holder shall be entitled to purchase an additional 200,000 Warrant
Shares.
(f) On and after the 30 month anniversary of the date hereof,
Holder shall be entitled to purchase an additional 200,000 Warrant
Shares.
Notwithstanding the foregoing, immediately prior to (i) any merger involving the
Company in which the Company is not the surviving corporation, (ii) the
consummation of a tender offer or reorganization, (iii) the sale of all or
substantially all the assets of the Company, or (iv) any dissolution or
liquidation of the Company, Holder shall be entitled to purchase all Warrant
Shares which have not been purchased. The number of shares of Common Stock
issuable upon exercise of this Warrant as provided in paragraphs (a) through (f)
above and the Exercise Price thereof shall be subject to adjustment as provided
in Section 6 hereof.
Section 2. Transfer or Exchange of Warrant.
2.1 Warrant Register. This Warrant shall be numbered and shall
be registered in a warrant register. The Company shall be entitled to treat the
registered owner of this Warrant as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in this Warrant on the part of any other person.
2.2 Transfer. Subject to the terms hereof, this Warrant shall be
transferable only on the books of the Company, maintained at its principal
office, upon delivery of this Warrant duly endorsed by the Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon each registration of
transfer, the Company shall deliver a new Warrant of like tenor to the person
entitled thereto.
Section 3. Exercise of Warrant.
3.1 Method of Exercise.
(a) Subject to compliance by the Company and Holder of all
applicable federal and state securities laws, this Warrant shall be
exercised by surrender to the Company, at its principal offices, of (i)
this Warrant, (ii) the purchase form attached hereto duly completed and
signed, (iii) the investment representations set forth on Exhibit A
hereto, and (iv) payment of the Exercise Price (as defined herein) for
the portion of the Warrant to be exercised. Payment of the Exercise
Price, shall be made in cash or by certified bank check.
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<PAGE> 3
In addition, at the election of the Holder, in lieu of paying the
Exercise Price in cash or by certified bank check, this Warrant may be
exercised by reducing the number of Warrant Shares received upon such
exercise (a "Cashless Exercise"). The number of Warrant Shares delivered
upon a Cashless Exercise shall be determined based on the formula:
N = E
---
FMV
where:
N = the number of Warrant Shares which would otherwise have been
received but are not to be received upon a Cashless Exercise.
E = the aggregate Exercise Price for the number of Warrant Shares
being exercised that would have been paid without the Cashless
Exercise.
FMV = the average closing price of the Common Stock on the principal
market or the facilities of NASDAQ National Market for the ten
trading days prior to the date of the Notice of Exercise (or
if the Common Stock is not listed on an exchange or on the
facilities of NASDAQ National Market, the average of the
closing bid and cash prices for the ten trading days prior to
the date of the Notice of Exercise).
For example, if the Holder is exercising the Warrant with respect to
100,000 Warrant Shares with an Exercise Price of $2.50 per share
through a Cashless Exercise when the fair market value of the Common
Stock is $20.00 per share, upon such Cashless Exercise the Holder will
receive 87,500 Warrant Shares rather than 100,000.
(b) In the event that this Warrant is exercised in respect
of fewer than all of the Warrant Shares purchasable on such exercise, a
new Warrant evidencing a right to purchase the remainder of the Warrant
Shares will be issued with the same Termination Date, and otherwise of
like tenor as this Warrant.
(c) The Company shall not be required to issue fractions of
shares of Common Stock upon exercise of this Warrant. If any fraction
of a share would, but for this restriction, be issuable upon the
exercise of this Warrant, in lieu of delivering such fractional share,
the Company shall pay to the holder of this Warrant an amount in cash
equal to the same fraction times the fair market value (determined in
accordance with Section 3.1(a) above) immediately prior to the exercise
of this Warrant.
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<PAGE> 4
3.2 Issuance of Warrant Shares. Upon surrender of this Warrant
and payment of the Exercise Price as aforesaid and delivery of the required
investment representations to the Company in accordance with Section 3.1 hereof,
and within ten (10) days thereof, the Company shall issue and cause to be
delivered to the Holder exercising this Warrant, a certificate or certificates
for the number of Warrant Shares so purchased upon the exercise of the Warrants,
together with a new Warrant representing the portion of this Warrant not
exercised, if any. The Warrant shall be deemed to have been exercised and such
share certificate or certificates shall be deemed to have been issued, and the
Holder shall be deemed for all purposes to have become holder of record of
shares of Common Stock, as of the date this Warrant is surrendered for exercise.
All Warrant Shares will, upon issuance, be fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issuance thereof.
Each such certificate representing the Warrant Shares shall bear the following
legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION."
The certificates shall also contain such legends as may be
required by applicable state securities laws and other
applicable laws.
Section 4. Mutilated or Missing Warrant Certificate. In the event this
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall, at the
request of the Holder, issue and deliver, in exchange and substitution for this
Warrant, a new Warrant of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction of such Warrant and reasonable and customary
indemnity, if requested, also satisfactory to the Company. An applicant for such
a substitute Warrant shall also comply with such other reasonable regulations
and pay such other reasonable charges as the Company may prescribe.
Section 5. Certain Covenants
5.1 Reservation of Common Stock. The Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), of the Company
provides, and shall at all times provide so long as this Warrant remain
outstanding, for the issuance of Common Stock sufficient to provide for the
exercise of the rights represented by this Warrant.
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<PAGE> 5
The Company shall reserve for issuance a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.
5.2 No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other agreement or voluntary act, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company which is inconsistent with the rights granted to the
Holder in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of stock receivable on the exercise of this
Warrant above the Exercise Price, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of stock upon the exercise of this Warrant
from time to time, (c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding up, unless the rights of the
holder thereof shall be limited to a fixed sum or percentage of par value in
respect of participation in dividends or in any such distribution of assets
(provided that the foregoing shall not prohibit issuance of up to 400,000 shares
of Series A Preferred Stock which may be issued by the Company as contemplated
by the Private Placement Memorandum dated May 18, 1998), and (d) will not
consolidate with or merge into any other person or permit any such person to
consolidate with or merge in the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of this Warrant.
Section 6. Exercise Price; Anti-Dilution Provisions.
6.1 Exercise Price. The Warrant Shares shall be purchasable upon
exercise of the Warrant at an initial exercise price equal to $2.50 per share
(the "Exercise Price").
6.2 Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time, the holders of
Common Stock (or other securities which the holder of this Warrant shall be
entitled to receive upon exercise of this Warrant (the "Other Securities"))
shall have received, or (on or after the record date fixed for the determination
of shareholders eligible to receive) shall have become entitled to receive,
without payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
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<PAGE> 6
(c)other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock split (adjustments in respect of which are provided
for in Section 6.4 hereof), then and in each such case the Holder, on the
exercise hereof shall be entitled to receive the amount of stock and other
securities and property (including cash in the cases referred to in subdivisions
(b) and (c) of this Section 6.2) which the Holder would hold on the date of such
exercise if on the date hereof the Holder had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 6.2) receivable by the Holder as
aforesaid during such period, giving effect to all adjustments called for during
such period by this Section 6.
6.3 Adjustment for Reorganization, Consolidation, Merger, etc.
(a) Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (i) effect a
reorganization, (ii) consolidate with or merge into any other person, or
(iii) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, as a condition to
the consummation of such a transaction, proper and adequate provision
shall be made by the Company whereby the Holder, on the exercise hereof
at any time after the consummation of such reorganization, consolidation
or merger or the effective date of such dissolution, as the case may be,
shall receive, in lieu of the Warrant Shares (or Other Securities)
issuable on such exercise prior to such consummation or such effective
date, the stock and other securities and property (including cash) to
which the Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if the Holder had
so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in this Section 6; provided
that if any such reorganization, consolidation or merger is part of a
series of transactions, then the Holder upon exercise of this Warrant
shall be entitled to receive the stock and other securities and property
(including cash) to which the Holder would have been entitled to receive
if Holder had so exercised this Warrant immediately prior to the first
transaction in such series.
(b) Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock
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<PAGE> 7
and other securities and property (including cash, where applicable)
receivable upon exercise of this Warrant after the effective date of
such dissolution pursuant to this Section 6.3 to a bank or trust company
having its principal office in Los Angeles, California, as trustee for
the holder of this Warrant.
(c) Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 6.3, this Warrant shall continue
in full force and effect and the terms hereof shall be applicable to the
shares of stock and Other Securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following
any such transfer, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of
any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant as provided in Section
5.2.
6.4 Extraordinary Events Regarding Common Stock. In the event
that the Company shall (a) issue additional shares of the Common Stock as a
dividend or other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock, or (c) combine its outstanding shares of the
Common Stock into a smaller number of shares of the Common Stock, then, in each
such event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described in this Section 6.4. The
number of Warrant Shares that the holder of this Warrant shall thereafter be
entitled to receive on the exercise hereof shall be increased to a number
determined by multiplying the number of Warrant Shares that would otherwise (but
for the provisions of this Section 6.4) be issuable on such exercise by a
fraction of which (a) the numerator is the Exercise Price that would otherwise
(but for the provisions of this Section 6.4) be in effect, and (b) the
denominator is the Exercise Price in effect on the date of such exercise.
6.5 Chief Financial Officer's Certificate as to Adjustments. In
each case of any adjustment or readjustment in the Warrant Shares (or Other
Securities) issuable on the exercise of this Warrant, the Company at its expense
will promptly cause its Chief Financial Officer to compute such adjustment or
readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares
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<PAGE> 8
of Common Stock (or Other Securities) issued or sold or deemed to have been
issued or sold, and (b) the Exercise Price and the number of Warrant Shares (or
Other Securities) to be received upon exercise of this Warrant, in effect
immediately prior to such issue or sale and as adjusted and readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to the holder of this Warrant and the Company will, on the written
request at any time of the holder of this Warrant, furnish to such holder a like
certificate setting forth the Exercise Price at the time in effect an showing
how it was calculated.
Section 7. Restrictions on Transfer of Warrant Shares. The Warrant
Shares shall not be transferred without the Company's consent until twelve (12)
months after the date the applicable Warrant Shares were first able to be
purchased pursuant to Section 1 of this Warrant; provided that the foregoing
restriction shall not apply to any transfer (i) in connection with any merger,
tender offer, reorganization, dissolution, liquidation or sale by the Company of
all or substantially all of its assets, or (ii) to a Permitted Transferee. As
used herein, "Permitted Transfer" shall mean any officer, director, shareholder,
member, partner or affiliate of the Holder or any family member of any of them.
Section 8. Holder Not a Shareholder. Holder, shall not be, and shall not
have any of the rights or privileges of a shareholder of the Company with
respect to the Warrant Shares unless and until the Warrant is surrendered for
exercise pursuant to Section 3 hereof. Notwithstanding the foregoing, the
Company will transmit to the Holder such information, documents and reports as
are generally delivered to the owners of Common Stock concurrently with the
distribution thereof to such owners.
Section 9. Notices. Any notices or other communications required or
permitted to be given hereunder shall be in writing and shall be either
delivered in person, sent by fax, Federal Express or other overnight delivery
service, or United States mail, registered or certified mail, postage prepaid,
return receipt requested, and addressed as follows:
To the Company: You Bet International, Inc.
1950 Sawtelle Boulevard
Suite 180
Los Angeles, CA 90025
Attention: Chief Executive Officer
Fax: (310) 444-3390
To Holder: Robert M. Fell Living Trust
10550 Wilshire Boulevard
Suite 1105
Los Angeles, CA 90024
Attention: Robert M. Fell, Trustee
Fax: (310) 475-3480
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<PAGE> 9
or such other fax number or address as either party may from time to time
specify in writing to the other in the manner aforesaid. If sent by fax, such
notices or other communications shall be deemed delivered upon electronic
confirmation of receipt. If personally delivered, such notices or other
communications shall be deemed delivered upon delivery. If sent by Federal
Express or overnight delivery, such notices or other communications shall be
deemed delivered on the business day following the date of delivery of such
notices or other communications to Federal Express or such other overnight
delivery service. If sent by United States mail, registered or certified mail,
postage prepaid, return receipt requested, such notices or other communications
shall be deemed delivered upon delivery or refusal to accept delivery as
indicated on the return receipt.
Section 10. Assignment. This Warrant shall be binding upon and shall
inure to the benefit of the parties hereto and their successors and assigns.
Section 11. Notices of Record Date, etc. In the event of
(a) any dividend or other distribution by the Company or any
taking by the Company of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property of the Company, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then and prior to each such event the Company will
mail or cause to be mailed to the holder of this Warrant a notice specifying (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right and the date on which the holders of Common
Stock will be entitled thereto, and (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common Stock (or
Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
-9-
<PAGE> 10
Section 12. Applicable Law. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of Delaware applicable to contracts made and performed in that
State.
Section 13. Benefits of this Warrant. Nothing in this Warrant shall be
construed to give to any person, corporation or other entity, other than the
Company and the Holder any legal or equitable right, remedy or claim under this
Warrant and this Warrant shall be for the sole and exclusive benefit of the
Company and the Holder.
Section 14. Entire Understanding. This Warrant contains the entire terms
of the Holders rights hereunder and supersedes all prior agreements,
understandings and arrangements with respect to the matters herein. This Warrant
cannot be modified except by a written instrument signed by the company and the
Holder.
Section 15. Attorneys' Fees. Should an action be instituted by either of
the parties hereto in any court of law or equity pertaining to the
interpretation or enforcement of any of the provisions of this Warrant, the
prevailing party shall be entitled to recover, in addition to any judgment or
decree rendered therein, all court costs and reasonable attorneys' fees and
expenses.
[Signature page follows]
-10-
<PAGE> 11
IN WITNESS WHEREOF, the Company has executed this Warrant or caused
this Warrant to be duly executed as of the day and year first above written.
YOU BET INTERNATIONAL, INC.
a Delaware corporation
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
-11-
<PAGE> 12
Purchase Form
____________________, 19__
To: You Bet International, Inc.
Reference is made to the Warrant to Purchase Common Stock dated April
__, 1998 (the "Warrant"), a copy of which is annexed hereto. Terms defined
therein are used herein as therein defined.
The undersigned, pursuant to the provisions set forth in the Warrant,
hereby irrevocably elects and agrees to purchase _______ shares of Common Stock,
and
______ makes payment herewith in full therefor at the Exercise Price
(initial if of $___________ or
applicable)
______ elects to have a Cashless Exercise.
(initial if
applicable)
If said number of shares is less than all of the shares purchasable hereunder,
the undersigned hereby requests that a new Warrant Certificate representing the
remaining balance of the shares be registered in the name of the undersigned,
whose address is set forth below.
[NAME OF WARRANT HOLDER]
By:____________________________________
Name:__________________________________
Title:_________________________________
[ADDRESS OF WARRANT HOLDER]
---------------------------------------
---------------------------------------
---------------------------------------
-12-
<PAGE> 13
EXHIBIT A
____________, 19__
YOU BET INTERNATIONAL, INC.
- ---------------------------
- ---------------------------
Re: Warrant Exercise
Gentlemen:
In connection with the exercise of that certain Warrant No. __ dated as
of ___________________ (the "Warrant") of You Bet International, Inc., a
Delaware corporation (the "Company"), by the undersigned on the date hereof, and
pursuant to Section 3.1 of the Warrant, the undersigned (the "Warrantholder"),
hereby represents and warrants to the Company as follows:
1. Restricted Securities. Warrantholder is acquiring the securities
issuable upon the exercise of the Warrant (the "Securities") for investment for
its own account and not with a view to or for resale in connection with, any
distribution thereof in violation of the Securities Act of 1933, as amended (the
"Act"). Warrantholder understands that the Securities have not been registered
under the Act or under any state securities laws by reason of an exemption from
the registration provisions of the Act and the applicable state securities laws
which exemption depends upon, among other things, the representations and
warranties of Warrantholder set forth herein. Accordingly, the Securities are
"restricted securities" under the Act and Warrantholder acknowledges that the
Securities must be held indefinitely unless they are subsequently registered
under the Act and all applicable state laws or an exemption from such
registration is available. Because the Company is presently under a limited
obligation to register the Securities under the Act and applicable state
securities laws, Warrantholder may be required to dispose of the Securities in
private transactions which are exempt from registration under the Act, in which
event the transferees will acquire "restricted securities" subject to the same
limitations as in the hands of the Warrantholder. Warrantholder has been advised
or is aware of the provisions of Rule 144 promulgated under the Act, which
permits limited resales of securities purchased in a "private placement" subject
to the satisfaction of certain conditions and that such Rule may cease to be
available for resale of the Securities.
-13-
<PAGE> 14
2. Legend. Warrantholder is aware that the Securities will bear the
following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION."
3. Access to Data. Warrantholder is familiar with, and has been given
access to, all information concerning the business and financial condition,
properties, operations and prospects of the Company that Warrantholder deems
relevant. Warrantholder acknowledges that it has had an opportunity to discuss
with representatives of the Company, the Company's business and financial
condition, properties, operations and prospects and such other matters as
Warrantholder deemed appropriate in connection with its investment in the
Securities. Warrantholder is aware of the Company's business affairs and
financial condition, and that any return on the Warrantholder's investment is
highly speculative.
4. Ability to Bear Risk. The Warrantholder is able to bear the economic
risk of an investment in the Securities including, without limiting the
generality of the foregoing, the risk of losing part of or all its investment
and possible inability to sell or transfer the Securities for an indefinite
period of time.
5. Accredited Investor. The Warrantholder is an accredited investor as
that term is defined under Rule 501(a) of Regulation D promulgated under the
Act. By reason of the Warrantholder's or the Warrantholder's offeree
representative's knowledge and experience in financial and business matters in
general, and investments of this type in particular, the Warrantholder is
capable of evaluating the merits and risks of making the investment in the
Securities.
6. No Advertising. Neither the Company nor any person acting on behalf
of the Company has offered or sold the Securities to Warrantholder by means of
any form of general solicitation or general advertising. Warrantholder has not
received, paid or given, directly or
-14-
<PAGE> 15
indirectly, any commission or remuneration for or on account of any sale, or the
solicitation of any sale, of the Securities and Warrantholder will not do so in
the future.
Very truly yours,
------------------------------------
-15-
<PAGE> 1
EXHIBIT 99.4
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT ("Agreement") is made and entered into as
of the 29th day of June, 1998, by and among You Bet International, Inc., a
Delaware corporation (the "Company"), and the other parties named on the
signature pages attached hereto (collectively, the "Stockholders").
Recitals
WHEREAS, the Stockholders are holders of the Company's Series A
Convertible Preferred Stock, par value $.001 per share (the "Preferred Shares"),
or Common Stock, par value $.001 per share (the "Common Shares" ).
WHEREAS, each of the parties hereto believes that it is in their best
interest to enter into this Agreement to facilitate the management and operation
of the Company and to reflect various agreements among the parties.
Agreement
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other valuable consideration, the receipt
and adequacy of which are hereby acknowledged the parties hereto agree as
follows:
Article 1
Corporate Governance
1.1 Composition of the Board. The Stockholders agree to vote or to cause
to be voted (or, if applicable, to give their consent with respect to), all
Preferred Shares or Common Shares owned by them (the "Voting Shares"), including
any shares acquired after the date hereof as a result of the exercise of options
or warrants or the conversion of Preferred Shares, all Voting Shares owned by
them in order to achieve the following results:
(a) Until such time as the Company shall retain a Chief
Executive Officer (other than on an interim basis), the Board of Directors of
the Company (the "Board") shall consist of seven (7) persons. The initial
members of the Board shall be Robert M. Fell, David Marshall, Russell Fine, Jess
Rifkind and three persons selected by Fell & Company, Inc. ("FCI") from the
those persons set forth on Schedule 1.1 hereto (which Schedule may be amended
with the approval of FCI, David Marshall and Russell Fine, such approval not to
be unreasonably withheld).
(b) At such time as the Company shall retain a Chief Executive
Officer (other than on an interim basis) the number of directors constituting
the Board shall be increased to
<PAGE> 2
eight (8) persons and the Chief Executive Officer shall be elected to the Board
(with the Chairman of the Board being entitled to a tie breaking vote in the
event of any deadlock).
1.2 Removal. The Stockholders agree that if, at any time, they are then
entitled to vote for the removal of directors of the Company, they will not vote
in favor of the removal of any director, unless such removal shall be for cause
or the person entitled to designate or nominate such director shall have
consented to the removal in writing. As used herein, removal for cause shall
mean the removal of a director because of such director's (a) malfeasance in
office, (b) gross misconduct or neglect, (c) willful conversion of corporate
funds, (d) incompetency (e) gross inefficiency, or (f) moral turpitude.
1.3 Vacancies. If as a result of death, disability, retirement,
resignation, removal (with or without cause) or otherwise, there shall exist or
occur any vacancy on the Board, such vacancy shall be filled as follows:
(a) If Jess Rifkin, David Marshall or Russell Fine or any person
selected in accordance with this Agreement to replace him ceases to be a member
of the Board, David Marshall and Russell Fine, acting jointly, shall designate a
replacement director from the list of persons set forth on Schedule 1.1 hereto;
(b) If any member of the Board other than Jess Rifkin, David
Marshall or Russell Fine shall cease to be a member of the Board, FCI shall
designate a replacement director from the list of persons set forth on Schedule
1.1 hereto.
(c) Each Stockholder shall cause his or her Voting Shares to be
voted in favor of (or consent to) the election of persons the Board selected in
accordance with this Section 1.3.
1.4 Executive Committee. The Company represents and warrants that the
Board has duly adopted amendments to the Company's Bylaws and otherwise taken
action to establish an Executive Committee on the following terms:
(a) Until such time as the Company shall retain a Chief
Executive Officer (other than on a interim basis), the Executive Committee shall
consist of Robert M. Fell, David Marshall and Russell Fine. Robert Fell shall
serve as the Chairman of the Executive Committee;
(b) At such time the Company shall retain a Chief Executive
Officer (other than on a interim basis), the Executive Committee shall consist
of Robert M. Fell, David Marshall, Russell Fine and the Chief Executive Officer.
Robert M. Fell shall serve as the Chairman of the Executive Committee and shall
have the tie breaking vote in the event of any deadlock;
-2-
<PAGE> 3
(c) The Executive Committee shall be empowered to take all
action which may be taken by the full Board, other than action which is required
by law to be taken by the full Board; and
(d) The Executive Committee shall be required report its actions
to the Board at each meeting of the Board.
1.5 Compensation of Board Members. Members of the Board who are salaried
employees of the Company shall not receive any additional compensation for
serving on the Board. All other members of the Board shall receive such
compensation as the Board may from time to time determine.
Article 2
Termination
2.1 Automatic Termination. This Agreement shall automatically terminate
upon the occurrence of any of the following events:
(a) The second anniversary of the date hereof;
(b) The bankruptcy, receivership or dissolution of the Company;
or
(c) The written agreement of all of the then Stockholders.
Article 3
Miscellaneous
3.1 Transfers of Voting Shares. Nothing in this Agreement shall restrict
any Stockholder's ability to transfer Voting Shares; provided that any such
transfer shall be in accordance with all applicable state and federal securities
laws; provided further that any transferee acquiring Voting Shares in a private
transaction shall agree to become a party to this Agreement. A transferee
acquiring Voting Shares in the open market shall not be obligated to become a
party to this Agreement.
3.2 Legend. Each Stockholder shall surrender to the Company all
certificates representing Voting Shares owned by them and any certificates
representing any additional Voting Shares, if any, which may hereafter be issued
by the Company to such Stockholder, with the request that such certificates be
endorsed with the following words:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF A STOCKHOLDERS
-3-
<PAGE> 4
AGREEMENT BETWEEN YOU BET INTERNATIONAL, INC. AND THE
HOLDERS THAT ARE SIGNATORIES THERETO. THE SHARES
REPRESENTED BY THIS CERTIFICATE MUST BE VOTED IN
ACCORDANCE WITH SUCH AGREEMENT. EXCEPT AS SET FORTH IN
SUCH AGREEMENT, ANY TRANSFEREE TAKES SUBJECT TO THE
TERMS OF SUCH AGREEMENT, A COPY OF WHICH MAY BE OBTAINED
AT THE PRINCIPAL OFFICE OF THE ISSUER."
A copy of this Agreement shall be delivered to the Secretary of the Company and
shall be shown by him to any person making a proper and relevant inquiry
concerning it.
3.3 Notices. All notices and other communications provided for hereunder
shall be in writing and shall be sent by first class mail, telex, telecopy or
hand delivery:
If to the Company, to:
YOU BET INTERNATIONAL, INC.
1950 Sawtelle Boulevard
Suite 180
Los Angeles, CA 90025
Attention: Chief Executive Officer
Telecopy No.: (310) 444-3390
If to any Holder, to the address of such Holder as shown on the
signature pages hereto, or to such other address as any of the above shall have
designated in writing.
All such notices and communications shall be deemed to have been given or made
(a) when delivered by hand, (b) five business days after being deposited in the
mail, postage prepaid, (c) when telexed, answer-back received or (d) when
telecopied, receipt acknowledged.
3.4 Binding Effect. This Agreement shall bind and inure to the benefit
of the successors and assigns of the Company and the personal representatives,
heirs and, except as provided in Section 4.1 hereof, assigns of each of the
Stockholders.
3.5 Descriptive Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
3.6 Further Acts. Each of the Stockholders agrees to perform any further
acts and execute and deliver any documents and procedure any court orders which
may reasonably be necessary to carry out the provisions of this Agreement and to
comply with the legend condition.
-4-
<PAGE> 5
3.7 Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto with respect to the subject matter
dealt with herein, and supersedes all prior written or oral agreements and
understandings, including but not limited to, the Memorandum of Understanding
dated as of April 1, 1998 among the Company and FCI.
3.8 Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto or hereunder may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, but such counterparts shall together constitute but one and the same
instrument. This Agreement shall become effective upon the execution and
delivery of a counterpart hereof by each of the parties hereto.
3.9 Attorneys' Fees. Should any party hereto or any person bound by the
provisions of this Agreement institute any legal action against any other such
person(s) and/or party to enforce the provisions hereof, the prevailing party in
such action shall be entitled to receive from the losing party such amount as
the court may adjudge to be reasonable attorneys' fees and court costs.
3.10 Construction; Headings. The titles of the sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement. The language of this Agreement shall be construed as
to its fair meaning and not strictly for or against any party.
3.11 Severability. In the event that any one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word clause, phrase or sentence
in every other respect and of the remaining provisions, paragraphs, words,
clauses, phrases or sentences hereof shall not be in any way impaired, it being
intended that all rights, powers and privileges of the parties shall be
enforceable to the fullest extent of the law.
3.12 Specific Enforcement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, it is agreed that they shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they may be entitled at law or in equity.
3.13 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without
regard to conflicts of law principles.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
YOU BET INTERNATIONAL, INC. a
Delaware corporation
By: ________________________________
Name: ______________________________
Title: _____________________________
By: ________________________________
Name: ______________________________
Title: _____________________________
-6-
<PAGE> 7
STOCKHOLDER'S COUNTERPART SIGNATURE
PAGE TO STOCKHOLDERS AGREEMENT
If Stockholder is an entity:
Name of entity: ____________________________
By: ______________________________
Name:
Title:
If Stockholder is an individual:
Name: ____________________________
- ----------------------------------
(Signed Name)
Address of Stockholder:
- ----------------------------------
- ----------------------------------
- ----------------------------------
-7-
<PAGE> 1
EXHIBIT 99.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of the 29th day of June, 1998 by and among YOU BET
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and the other
parties listed on the signature pages thereto.
Recitals
WHEREAS, certain of the parties hereto have agreed to purchase Preferred
Shares and Warrants to purchase Common Stock.
WHEREAS, the execution and delivery of this Agreement by the Company and
the parties hereto are conditions precedent to the consummation of such
purchases of Preferred Shares and Warrants.
Agreement
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
capitalized terms shall have the following meanings:
"AGREEMENT" shall have the meaning set forth in the preamble to
this Agreement.
"COMMON STOCK" - shall mean the Common Stock of the Company,
$.001 par value per share, and any capital stock into which such Common Stock
may thereafter be changed and any class of capital stock of the Company
(regardless of how denominated) which is not preferred as to dividends or assets
over any other class and which is not subject to redemption.
"COMPANY" - shall have the meaning set forth in the preamble to
this Agreement.
"EXCHANGE ACT" - shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time,
corresponding to such act.
"FELL" - shall mean the Robert M. Fell Living Trust and its
successors who agree in writing to be bound by the provisions of this Agreement.
"HOLDER" shall mean any holder of Registrable Securities.
"HOLDER INFORMATION" shall have the meaning set forth in Section
6 hereof.
<PAGE> 2
"PERSON" - shall mean any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
organization or government or any department or agency thereof.
"PURCHASE AGREEMENT" - shall mean that certain Stock Purchase
Agreement of even date herewith among the Company and the other parties thereto
pursuant to which the Company agreed to issue up to 400,000 Preferred Shares.
"REGISTRABLE SECURITIES" - shall mean (i) the Common Stock
issuable upon conversion of the Preferred Shares, (ii) the Warrant Shares, (iii)
Common Stock owned by David Marshall or Russell Fine, and (iv) any securities
into which such shares are converted.
"REGISTRATION EXPENSES" - shall have the meaning set forth in
Section 7 hereof.
"SECURITIES ACT" - shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time, corresponding
to such act.
"SEC" - shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act or the
Exchange Act.
"WARRANTS" - shall mean the Warrants to purchase 1,200,000 shares
of the Company's Common Stock at an exercise price of $2.50 per share issued to
Fell on the date hereof.
"WARRANT SHARES" shall mean the Common Stock issuable upon
exercise of the Warrants.
2. Piggyback Registrations.
(a) If at any time the Company proposes to register any of its
securities under the Securities Act for sale to the public, whether for its own
account or for the account of other security holders or both (except with
respect to registration statements on Forms S-4, S-8 or another form not
available for registering Common Stock for sale to the public), each such time
the Company will give at least fifteen (15) business days' prior written notice
to the Holders of its intention so to do. Upon the written request of a Holder,
received by the Company within ten (10) business days after the giving of any
such notice by the Company, to register any of the Registrable Securities, the
Company will cause such Registrable Securities, as to which registration shall
have been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of such Registrable Securities,
as the case may be, by the Holder thereof. In the event that any registration
pursuant to this Agreement shall be, in whole or in part, an underwritten public
offering of securities, then (i) if all other holders of securities to be
included in such offering, other than the Company, agree at the request of the
underwriter to refrain from selling securities of the Company for a reasonable
period of time following the effective date of the applicable registration
statement of the Company under
2
<PAGE> 3
the Securities Act, the Holders shall agree to refrain therefrom during such
reasonable time period, provided that such time period shall not exceed one
hundred and eighty (180) days, and (ii) subject to Section 2(b) hereof, the
number of shares of Registrable Securities to be included in such an
underwriting may be reduced if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would materially adversely affect
the marketing of the securities to be sold therein.
(b) In the event that the managing underwriter shall notify the Company
in writing that it is of the opinion that the inclusion of all Registrable
Securities proposed to be registered would materially adversely affect the
marketing of the securities to be sold therein, the Company shall notify all
persons desiring to include securities in such registration. In any registration
in which persons other than the Company are permitted to include securities,
other than a registration pursuant to Section 4 hereof, no Holder shall be
entitled to include any Registrable Securities in any offering unless David
Marshall and Russell Fine shall have been permitted to include in such offering
the lesser of (i) two hundred thousand (200,000) shares of the Registrable
Securities each, (ii) an aggregate of 50% of the total number shares of
Registrable Securities which may be sold by all of the selling shareholders in
such offering (including Registrable Securities to be sold by Messrs. Marshall
and Fine), and (iii) the number of shares desired to be sold by Messrs. Marshall
and Fine; provided, however, that the foregoing priority will no longer be
applicable to Mr. Marshall or Mr. Fine, as the case may be, at such time as Mr.
Marshall or Mr. Fine, as the case may be, has sold an aggregate of 200,000
shares of Registrable Securities pursuant to this Section 2. Thereafter, the
Holders, together with other selling shareholders participating in such
offering, shall have the right to sell the remaining shares which may be sold by
selling shareholders in such offering such shares to be on a pro rata basis in
accordance with the number of shares the securities owned by such Persons.
(c) Notwithstanding the foregoing provisions, the Company may withdraw
any registration statement referred to in this Agreement without thereby
incurring any liability to the Holder pursuant to this Section 2.
3. Form S-3 Demand Registrations.
(a) Request by Holders. At any time from and after the date that
the Company shall be eligible to use Form S-3 (or a successor form) (but in no
event prior to nine months after the date hereof), any Holder may by notice to
the Company request that the Company effect the registration under the
Securities Act of all or part of such Holder's Registrable Securities. Such
notice shall specify the intended method of disposition of the Registrable
Securities for which registration is requested (which may not include an
underwritten public offering). Thereafter the Company will promptly give written
notice of such requested registration to all other Holders, and thereupon will,
as expeditiously as possible, use commercially reasonable efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such Holder; and
3
<PAGE> 4
(ii) all other shares of Registrable Securities which
the Company has been requested to register by any other Holder
by written request given to the Company within ten (10) business
days after the giving of such written notice by the Company, so
as to permit the disposition of the Registrable Securities so to
be registered; provided, however, that the Company may delay
filing any registration statements for up to ninety (90) days if
the Board of Directors of the Company determines that the filing
of the registration statement would be materially detrimental to
the Company; provided further that the Company may not make such
determination more than once in any 12 month period.
(b) Limitation on Demand Rights.
(i) The Company shall not be obligated pursuant to this
Section 3 to register any Registrable Securities held by any
Holder unless the number of Registrable Securities proposed to
be sold by such Holder is greater than the greater of (i) 2% of
the number of shares of Common Stock outstanding on the date of
Holder's notice to the Company, or (ii) two times the average
weekly reported trading volume of the Common Stock on all
national securities exchanges and/or reported through NASDAQ
during the four calendar weeks preceding the date of Invertor's
notice to the Company;
(ii) The Company shall not be obligated to register any
Registrable Securities pursuant to this Section 3 after the
second anniversary of the date hereof.
4. Underwritten Demand Registrations.
(a) Request by Holders. At any time from and after the earlier of
(i) the first anniversary of the date hereof, and (ii) the date the Company
shall be eligible to use Form S-3 (or a successor form) (but in no event prior
to nine months after the date hereof), one or more Holders seeking to sell at
least an aggregate of 1,500,000 shares of Common Stock in an underwritten public
offering may by notice to the Company request that the Company effect the
registration under the Securities Act of at least 1,500,000 shares of
Registrable Securities for sale in an underwritten public offering. Thereafter
the Company will promptly give written notice of such requested registration to
all other Holders, and thereupon will, as expeditiously as possible, use
commercially reasonable efforts to effect the registration under the Securities
Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such Holder(s); and
(ii) all other shares of Registrable Securities which
the Company has been requested to register by any other Holder
thereof by written request given to the Company within ten (10)
business days after the giving of such written notice by the
Company so as to permit the disposition of the Registrable
Securities so to be registered; provided, however, that the
Company may delay filing any registration statements for up to
ninety (90) days if the Board of Directors of the Company
4
<PAGE> 5
determines that the filing of the registration statement would
be materially detrimental to the Company; provided further that
the Company may not make such determination more than once in
any 12 moth period.
(b) Limitation on Underwritten Demand Registration Rights.
(i) The Company shall not be obligated to register any
Registrable Securities pursuant to this Section 4 after the
fifth (5th) anniversary of the date hereof.
(ii) The Company shall not be obligated to effect more
than three (3) registrations pursuant to this Section 4.
(c) Selection of Underwriters. The Holders holding a majority of
the shares of Registrable Securities shall have the right to select the
underwriter or underwriters of nationally recognized standing to administer the
underwritten public made pursuant to this Section 4, which underwriter or
underwriters shall be reasonably acceptable to the Company.
(d) Priority in Underwritten Demand Registrations.
Notwithstanding Section 2 hereof, if the managing underwriter advises the
Company in writing that, in its opinion, the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering, the number of shares of Registrable Securities to be included in such
registration shall be allocated pro rata among all requesting Holders on the
basis of the relative number of shares of Registrable Securities then held by
each such Holder (provided that any shares thereby allocated to any such Holder
that exceed such Holder's request shall be reallocated among the remaining
requesting Holders in like manner). In the event that the number of shares of
Registrable Securities requested to be included in such registration is less
than the number which, in the opinion of the managing underwriter, can be sold
the Company or other shareholders may include securities of the Company up to
the number of securities that, in the opinion of the underwriter, can be sold.
5. Registration of the Warrant Shares. The holders of the Warrant
Shares shall have the right to require the Company to register the Warrant
Shares to the extent set forth in Section 3 hereof, provided that the
limitations contained in Section 3(b) shall not be applicable; provided that the
Company shall not be obligated to register any Warrant Shares pursuant to this
Section 5 after the 12th anniversary of the date hereof.
6. Registration Procedures. If and whenever the Company proposes to
register any of its securities under the Securities Act for sale to the public,
the Company will, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such securities and use commercially reasonable efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as set forth herein); provided
however, that prior to filing a registration statement or any amendment or
supplement thereto, the Company shall provide the special counsel to the Holders
with copies of all
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<PAGE> 6
registration statements, amendments and supplements proposed to be filed and
provide such special counsel with a reasonable opportunity to provide comments
thereto.
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period of the distribution contemplated thereby and comply with the
provisions of the Securities Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance with
the intended method of disposition set forth in such registration statement for
such period;
(c) furnish to the Holder, and to each underwriter such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or other disposition of the securities
covered by such registration statement;
(d) use commercially reasonable efforts to register or qualify
the Holder's Registrable Securities covered by such registration statement under
the securities or "blue sky" laws of such jurisdictions as the Holder or, in the
case of an underwritten public offering, the managing underwriter reasonably
shall request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction when it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use commercially reasonable efforts to cause the Registrable
Securities covered by such registration statement to be listed on any securities
exchange or accepted for quotation on any facility of the National Association
of Securities Dealers, Inc. or stock exchange on which the Company's Common
Stock is then quoted or listed as the case may be;
(f) immediately notify the Holder and each underwriter under
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the issuance of a "stop
order" by the SEC or of the happening of any event of which the Company has
knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statement therein not misleading in light of the circumstances then
existing and use reasonable efforts to promptly cause any "stop order" to be
terminated and any prospectus to be amended or supplemented so as not to include
any untrue statements of material fact or omit to state material facts required
to be stated therein or necessary to make the statement therein not misleading
in light of the circumstances then existing.
(g) if the offering is underwritten and at the request of the
Holder, furnish on the date that the Registrable Securities are delivered to the
underwriters for sale pursuant to such registration: (i) an opinion dated such
date of counsel(s) representing the Company for the purposes of such
registration, addressed to the underwriters and to the Holder, stating that such
registration statement has become effective under the Securities Act and that
(A) to the knowledge of such counsel, no stop order suspending the effectiveness
thereof has been issued and no proceedings for
6
<PAGE> 7
that purpose have been instituted or are pending or contemplated under the
Securities Act, (B) the registration statement, the related prospectus and each
amendment or supplement thereof comply as to form in all material respects with
the requirements of the Securities Act (except that such counsel need not
express any opinion as to financial statements or regulatory matters contained
therein), (C) such counsel has participated in conferences with officers and
other representatives of the Company, and representatives of the independent
certified public accountants of the Company, at which the contents of the
registration statement and any amendment thereof or supplement thereto and
related matters were discussed and, although such counsel has not independently
verified and is not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the registration
statement and prospectus included therein, and noting that they have relied as
to materiality upon the statements of directors, officers and other
representatives of the Company, nothing has come to such counsel's attention
that has caused such counsel to believe that the registration statement, on the
effective date thereof, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading, or that the prospectus on
the date thereof or on the date of such opinion, contained or contains an untrue
statement of material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel will express no view with respect to the financial statements contained
therein) and (D) to such other matters as reasonably may be requested by counsel
for the underwriters or by the Holder or its counsel and (ii) if requested by
the Holder, a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters and to the Holder,
stating that they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of the Company included in the registration statement or the
prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters or Holder reasonably may request;
(h) provide to the special counsel to the Holders copies of all
correspondence with the SEC relating to the registration statement; and
(i) make available for inspection by the Holder, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Holder or underwriter,
during business hours upon reasonable notice, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney, accountant or agent in
connection with such registration statement.
For purposes of this Agreement, the period of distribution of
securities in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of securities in any other
7
<PAGE> 8
registration shall be deemed to extend until the earlier of the sale of all
securities covered thereby and one hundred and twenty (120) days after the
effective date thereof.
In connection with each registration hereunder, the Holder will furnish
to the Company in writing such information regarding such Holder as the Company
may reasonably require in connection with the preparation of a registration
statement which includes the Registrable Securities (the "Holder Information")
of such Holder. In connection with a shelf registration hereunder, if the Holder
shall distribute a prospectus of the Company in compliance with applicable
securities laws and if the Company provides the Holder with a written prospectus
for distribution in connection with such registration and thereafter the Company
delivers a written notice to the Holder requesting that the Holder refrain from
further distribution of such prospectus because such prospectus contains an
untrue statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statement therein not misleading,
then the Holder will not thereafter further distribute such prospectus.
In connection with each registration pursuant to this Agreement
covering an underwritten public offering, the Company and each Holder agree, to
the extent requested by the managing underwriter, to enter into a written
agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
7. Registration Expenses. All expenses incurred in connection with a
registration hereunder or otherwise incurred by the Company in complying with
this Agreement, including, without limitation, all registration and filing fees,
listing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, reasonable fees and expenses of one counsel for all selling
Holders (such counsel to be selected by the holders of a majority of the Holders
of the Registrable Securities included in such registration statement), fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars and costs of insurance if any, but excluding
underwriting discounts and selling commissions applicable to the sale of the
Registrable Securities (collectively the "Registration Expenses"). The Company
will pay all Registration Expenses in connection with each registration
statement under this Agreement.
8. Indemnification.
(a) In the event of a registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless each Holder, its affiliates, officers, directors, partners,
employees, advisors and agents, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, to which such Holder, underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any violation or alleged violation of the Securities Act or
Exchange Act, including claims based upon any untrue statement or alleged untrue
statement of
8
<PAGE> 9
any material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act pursuant to this
Agreement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
will reimburse such Holder, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Company will not be liable in any such case
if and only to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or omission made in reliance upon
and in conformity with the Holder Information or information provided by the
underwriter in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, each Holder will indemnify
and hold harmless the Company, each person, if any, who controls the Company
within the meaning of the Securities Act, each officer of the Company who signs
the registration statement, each director of the Company, each underwriter of
such Registrable Securities and each person, if any, who controls any
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities to which the Company or such officer, director,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, directors,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss
claim, damage, liability or action, provided however, that a Holder will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
omission made in reliance upon and in conformity with the Holder Information
pertaining to such Holder, as such, furnished in writing to the Company by the
Holder specifically for use in such registration statement or prospectus;
provided further that in no event shall the liability of any Holder be greater
than the amount received (net of commissions and expenses) by such Holder from
the sale of the Registrable Securities giving rise to the claim for
indemnification.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve the indemnifying party from any
liability which it may have to such indemnified party other than as provided in
this Section 8(c) and shall only relieve the indemnifying party from any
liability which it may have to such indemnified party under this Section 8(c) if
and to the extent the indemnifying party is materially prejudiced by
9
<PAGE> 10
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall so desire, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 8(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, provided, however, that,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to the indemnified party which
are different from or in addition to those available to the indemnifying party
or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
Holder exercising rights under this Section 8, or any controlling person of any
such Holder, makes a claim for indemnification pursuant to this Section 8 but it
is judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 8 provides for indemnification
in such case, or (ii) contribution under the Securities Act may be required on
the part of any such Holder or any such controlling person in circumstances for
which indemnification is provided under this Section 8; then, and in each such
case, the Company and such Holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such Holder is responsible for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, and the Company
is responsible for the remaining portion; provided, however, that, in any such
case, (A) no such Holder will be required to contribute any amount in excess of
the net proceeds received by such Holder from the sale of all such Registrable
Securities sold by it pursuant to such registration statement; and (B) no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
9. Rule 144. The Company shall file all reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and shall take such further action as
any Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the Securities Act in accordance with Rule 144 promulgated under the Securities
Act, as such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Holder the
Company shall deliver to such Holder a written statement as to whether the
Company has complied with such information and requirements.
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<PAGE> 11
10. Inconsistent Registration Rights. The rights granted to the
Holders hereunder are not inconsistent with rights granted to any other person.
11. Miscellaneous.
(a) Amendments and Waivers. This Agreement 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 shall have obtained
the written consent to such amendment, action or omission to act, of the Holders
of a two-thirds of the Registrable Securities then outstanding. Each Holder of
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 9(a), whether or not such Registrable
Securities shall have been marked to indicate such consent. No waiver of any of
the conditions, restrictions, or options contained in this Agreement shall be,
or for any purpose be deemed to be, a waiver by the Company or the Holders to
insist upon and to enforce strict compliance with the provisions hereof as to
any matter subsequent to such waiver.
(b) Successors, Assigns and Transferees. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent Holder of any shares of Registrable
Securities, subject to the provisions contained herein.
(c) Notices. All notices and other communications provided for
hereunder shall be in writing and shall be sent by first class mail, telex,
telecopy or hand delivery:
(i) if to the Company, to:
YOU BET INTERNATIONAL, INC.
1950 Sawtelle Boulevard
Suite 180
Los Angeles, CA 90025
Attention: Chief Executive Officer
Telecopy No.: (310) 444-3390
(ii) if to any Holder, to the address of such Holder set forth on the
applicable signature page hereto, or to such other address as any of the above
shall have designated in writing.
All such notices and communications shall be deemed to have been given or made
(a) when delivered by hand, (b) five business days after being deposited in the
mail, postage prepaid, (c) when telexed, answer-back received or (d) when
telecopied, receipt acknowledged.
(d) Descriptive Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
11
<PAGE> 12
(e) Attorneys' Fees. Should any party hereto or any person bound
by the provisions of this Agreement institute any legal action against any other
person(s) and/or party to enforce the provisions hereof, the prevailing party in
such action shall be entitled to receive from the losing party, in addition to
any other relief to which the prevailing party may be entitled, such amount as
the court may adjudge to be reasonable attorneys' fees and court costs.
(f) Severability. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired, it
being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
(g) Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto or hereunder may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument. This Agreement shall become effective upon the execution and
delivery of a counterpart hereof by each of the parties hereto.
(h) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance, with the laws of the State of California,
without regard to conflicts of laws principles.
(i) Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, it is agreed that they shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they may be entitled at law or in equity.
(j) Time of Essence. Time is of the essence in the performance
of this Agreement.
(k) Persons Deemed Owners. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name any
Registrable Shares are registered as the owner and Holder thereof for all
purposes, and the Company shall not be affected by notice to the contrary.
(l) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
matters dealt with herein and supersedes all prior written or oral agreements
and understandings with respect to such matters, including but not limited to,
the Memorandum of Understanding dated as of April 1, 1998 between the Company
and Fell & Company, Inc.
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<PAGE> 13
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
or caused this Agreement to be executed on its behalf as of the date first
written above.
YOU BET INTERNATIONAL, INC.
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
13
<PAGE> 14
HOLDER'S COUNTERPART SIGNATURE PAGES TO
REGISTRATION RIGHTS AGREEMENT
If Holder is an entity:
Name of entity: ________________________
By: ______________________________
Name:
Title:
If Holder is an individual:
Name: _______________________________
-------------------------------------
(Signed Name)
Address of Holder:
--------------------------
--------------------------
--------------------------
14
<PAGE> 1
EXHIBIT 699.6
SERVICES AGREEMENT
This SERVICES AGREEMENT ("Agreement") is made as of June 29, 1998 by
and between YOU BET INTERNATIONAL, INC., a Delaware corporation (the "Company"),
and FELL & COMPANY, INC., a California corporation ("FCI").
WHEREAS, the Company desires to retain the services of Robert M. Fell
("Fell") and FCI desires to make such services available.
In consideration of the mutual covenants and agreements herein set
forth, the parties hereto agree as follows:
1. ENGAGEMENT AND ACCEPTANCE; TERM. FCI hereby agrees to make
available to the Company the services of Fell for a term commencing on the date
hereof and continuing for a period of three (3) years (the "Term").
2. DUTIES.
A. Services. During the Term, Fell shall serve as Chairman of
the Board of the Company and shall, subject to the provisions of this Agreement,
perform such duties and responsibilities as shall be assigned to Fell by the
Board of Directors. In addition, subject to Section 2.C hereof, until such time
as the Company shall employ a Chief Executive Officer, Fell shall also serve as
interim Chief Executive Officer.
B. Time Commitment. Fell shall devote approximately 70% of his
business time, labor, skill and energy to the business and affairs of the
Company and to the duties and responsibilities set forth herein. The parties
acknowledge that Fell's services will be provided on a non-exclusive basis,
provided that Fell shall not engage in any activities which are competitive with
the business of the Company. In addition, for so long as Fell shall serve as
Chief Executive Officer, Fell shall not engage in any new projects. Schedule
2.B. hereto sets forth a list of Fell's current activities. Schedule 2.B. may be
supplemented by Fell from time to time with the approval of the Company.
C. Selection of Chief Executive Officer; Office of the Chief
Executive. At any time after the date hereof, Fell may, or at the request of the
Board of Directors Fell shall, select a person to become Chief Executive
Officer. Any such selection shall be subject to the approval of (i) either David
Marshall and Russell Fine (such approval not to be unreasonably withheld), and
(ii) the Board of Directors; provided that if neither Marshall nor Fine approve
of Fell's first two selections of a person to serve as Chief Executive Officer,
then neither Marshall nor Fine shall have any further right to approve or
disapprove persons selected to be Chief Executive Officer with respect to the
then open position (other than in their capacity as directors). In the event
that the Company does not enter into an employment agreement with a new Chief
Executive Officer
<PAGE> 2
within six months of the date hereof or new aChief Executive Officer does not
commence employment within eight months from the date hereof, then until such
new Chief Executive Officer commences employment, the position of Chief
Executive Officer shall become the Office of the Chief Executive, which shall be
staffed by Fell, Marshall and Fine.
3. COMPENSATION.
A. Fees. The Company shall, during the continuance of this
Agreement, pay to FCI, and FCI agrees to accept, in consideration of making
Fell's services available to the Company the sum of (i) $150,000 per each
twelve-month period during the Term and (ii) the amount of payroll and other
taxes that the Company would be required to pay if Fell were employed by the
Company at a salary equal to the amount payable under clause (i) of this Section
3.A. (the "Base Fee"). The Base Fee shall be payable in semi-monthly
installments. The amount set forth in clause (i) of this Section 3.A. shall be
adjusted upward (but not downward) annually on each anniversary of the date
hereof for changes in the Consumer Price Index ("CPI") governing the statistical
area in which Los Angeles, California is located for purposes of calculating the
CPI.
B. Incentive Compensation. FCI and Fell shall be entitled to
receive annual bonuses or other incentive compensation at the discretion of the
Board based upon the contributions made by FCI and Fell to the development of
the Company. Any Common Stock of the Company delivered to FCI or Fell as a bonus
or incentive compensation shall be registered on Form S-8 if the Company shall
be eligible to use such form.
C. Staff. The Company shall provide Fell with such secretarial
and other administrative support as he may reasonably require in connection with
the performance of the duties to be performed by him.
D. Additional Benefits. During the Term, the Company shall
provide Fell (or reimburse FCI to the extent it provides Fell) the following
benefits:
(i) a monthly automobile allowance in the amount of $750;
(ii) reimbursement of all business-related operating
expenses of Fell's automobile, including without limitation, registration, gas,
oil and repairs;
(iii) reimbursement of the expenses of an automobile
liability insurance policy on Fell's automobile, with coverage including Fell in
the minimum amount of $1,000,000 combined single limit;
(iv) all benefits and perquisites under any and all formal
or informal benefit plans, understandings, arrangements or programs including,
but not limited to, cash bonus and incentive plans, pension and profit sharing
plans, stock or warrant plans, group insurance,
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<PAGE> 3
hospitalization, medical, dental, health and accident and disability plans,
supplemental health care plans and plans providing for life insurance coverage
(inclusive of insurance related to accidental death or dismemberment) which are
available to the Company's senior executive officers;
(v) reimbursement of Fell's cellular phone and long
distance phone expenses for calls related to the business of the Company;
(vi) an annual vacation of twenty (20) days, which need
not be taken in consecutive periods. If Fell does not take all such vacation
time in any given calendar year, such unused time shall carry forward into the
next calender year; and
(vii) all paid holidays provided by the Company to its
senior executive employees.
E. Deductions. The Company shall not deduct from the Base Fee
or any other amounts payable to FCI by the Company any social security taxes,
federal, state or municipal taxes or any other charges and deductions which are
required to be made from wages of employees. FCI shall indemnify and hold the
Company harmless from and against any damages or penalties incurred by the
Company by reason of its not withholding such amounts from amounts payable to
FCI hereunder.
4. REIMBURSEMENT OF CERTAIN EXPENSES. The Company shall promptly
reimburse FCI and Fell for reasonable out-of-pocket expenses incurred in
connection with the Company's business, including, without limitation, travel
expenses, food, lodging while away form home, telephone expenses, and automobile
expenses, subject to such policies as the Company may from time to time
reasonably establish.
5. CERTAIN OTHER PROVISIONS. Fell shall comply with all policies,
procedures and practices of the Company from time to time in effect.
6. CONFIDENTIAL INFORMATION. FCI and Fell shall not during the Term
or at any time thereafter (i) disclose to any person not employed by the Company
or person, firm or corporation engaged to render services to the Company except
during the Term for the benefit of the Company, or (ii) use for the benefit of
either of them, or others, any confidential information of the Company obtained
by FCI or Fell prior to the date hereof, during the Term or any time thereafter,
including, without limitation, "know-how," trade secrets, details of supplier's,
manufacturer's or distributor's contracts, pricing policies, financial data,
operational methods, marketing and sales information or strategies, product
development techniques or plans or any strategies relating thereto, technical
processes, designs and design projects, and other proprietary information of the
Company provided however, that this provision shall not preclude FCI or Fell
from (x) upon advice of counsel and after reasonable notice to the Company,
making any disclosure required by any applicable law, or (y) using or disclosing
information known generally
-3-
<PAGE> 4
to the public (other than information known generally to the public as a result
of any violation of this Section 6 by or on behalf of FCI or Fell).
7. TERMINATION.
A. Termination Events. This Agreement may be terminated prior to
the expiration of the Term in accordance with the following:
(a) Death. This Agreement shall terminate upon Fell's
death.
(b) Disability. If, as a result of Fell's incapacity due
to physical or mental illness, Fell shall have been unable to perform the
duties, functions and responsibilities required hereunder for ninety (90)
consecutive days or shorter periods aggregating to one hundred twenty (120) days
in any twelve (12) months, the Company may terminate this Agreement. During any
period that Fell fails to perform his duties hereunder as a result of incapacity
or due to physical or mental illness, he shall continue to receive full
compensation and other benefits called for hereunder until such time as this
Agreement is terminated pursuant to this Section 7.A.(b) hereof.
(c) Cause. This Agreement shall be subject to termination
by the Board of Directors of the Company (the "Board") for cause, which for
purposes of this Agreement shall mean a termination on the grounds of (i) a
breach by FCI or Fell of any material term of this Agreement, which breach shall
not have been cured within thirty (30) days after receipt by FCI of written
notice thereof from the Board, (ii) the reasonable belief by the Board, after
conducting an appropriate investigation, of the commission by FCI or Fell of any
act of fraud, theft or criminal dishonesty or (iii) the conviction of FCI or
Fell of any felony. For purposes of this Agreement, this Agreement shall not be
deemed to have been terminated for cause unless and until there shall have been
delivered to FCI a copy of a resolution, duly adopted by the affirmative vote of
a majority of the entire membership of the Board at a meeting called and held
for this purpose after reasonable notice to FCI and an opportunity for it,
together with its counsel, to be heard by the Board, finding that, in the good
faith opinion f the Board, FCI or Fell is guilty of misconduct of the type
described in this Section 7.A.(c) hereof and specifying the particulars thereof
in detail.
B. Compensation and Benefits Payable by Company Upon Termination.
Compensation and benefits shall be payable by Company upon a termination of this
Agreement in accordance with the following:
(a) In the event of termination of this Agreement under
Section 7.A.(a) hereof, FCI shall continue to receive the compensation and
benefits specified in Sections 3.A. and 3.D. hereof, to the extent applicable,
for a period of twelve (12) months, notwithstanding such termination.
(b) In the event of a termination of this Agreement under
Section 7.A.(b), Fell or his duly appointed personal representatives, shall
continue to receive the compensation and
-4-
<PAGE> 5
benefits specified in Sections 3.A. and 3.B. herein, to the extent applicable,
for a period of twelve (12) months, notwithstanding such termination; provided
that such amounts shall be reduced by any disability insurance payments received
by FCI or Fell from insurance purchased by the Company.
C. Cooperation after Termination of Agreement. Following
termination of this Agreement, regardless of the reason for such termination,
FCI and Fell shall cooperate with the Company in the prosecution of any claims,
controversies, suits, arbitrations or proceedings involving events occurring
prior to the termination of this Agreement. FCI and Fell acknowledge that Fell
may be required to give testimony at trial or deposition or give declarations.
If Fell shall be required to spend a material amount of time, the Company shall
compensate FCI at a per diem rate equal to the per diem amount of the Base Fee
in effect at the time of the termination. The Company shall use its best efforts
to provide Fell with reasonable prior notice of any actions required of him.
8. SEVERANCE. In the event that upon the expiration of the Term the
Company shall not renew this Agreement (and provided that FCI is willing to do
so), the Company shall, within ten days of the expiration of the Term, pay FCI
an amount equal to the Base Fee payable to FCI in the 12 months immediately
preceding the expiration of the Term.
9. NON COMPETE.
A. The Company, FCI and Fell acknowledge that this Services
Agreement is being entered into in furtherance of the transactions contemplated
by that certain Stock Purchase Agreement dated June 29, 1998, among the Company
and the other parties thereto. FCI and Fell, during the Term and for a period of
twenty-four (24) months thereafter, shall not solicit or entice any employee of
the Company to leave the Company to work for anyone in competition with the
Company. During the Term and for a period of twenty-four (24) months thereafter,
within any county or similar political subdivision of the United States or any
other country in which the Company, or any divisions, subdivisions or affiliated
companies of the Company, has conducted business during the past two (2) years
or conducts business during the Term, FCI and Fell shall not, directly or
indirectly, whether as a partner, owner, employee, creditor, shareholder, or
otherwise, promote, participate, or engage, directly or indirectly, in the
development and sale of proprietary, interactive software which will provide
individual computer users with race handicapping or other sports oddsmaking
information or, the ability to place bets on horse racing and other sports
contests, as well as recreational games and contests related to such
information. FCI and Fell shall not be prohibited from investing in any
competitive company, so long as (i) the stock of such company is publicly
traded, (ii) the aggregate ownership by FCI and Fell is less than two percent
(2%) of the outstanding stock of such company, (iii) such stock is held for
investment purposes, and (iv) FCI and Fell do not participate or engage,
directly or indirectly, in the business of such competitor, as an employee,
consultant, spokesperson or otherwise.
-5-
<PAGE> 6
10. ASSIGNABILITY. This Agreement and the rights and obligations of
the parties hereunder may not be assigned by either party without the prior
written consent of the other party.
11. ARBITRATION. Any dispute, controversy or claim arising out of, or
relating to this Agreement, shall be settled by binding and final arbitration in
the County of Los Angeles, State of California, under the commercial arbitration
rules of the American Arbitration Association then existing and judgment on the
arbitration award may be entered in any court having jurisdiction of the subject
matter over the controversy.
12. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of California applicable to contracts
executed in and to be performed solely within the State of California.
13. ABILITY TO FULFILL OBLIGATIONS. Neither the Company, FCI nor the
Fell is a party to or bound by any agreement which would be violated by the
terms of this Agreement.
14. NOTICE. Any notice required or permitted to be given hereunder
shall be given in writing and may be given by telex, telegram, facsimile
transmission or similar method if confirmed by mail as herein provided and
addressed as follows:
To the Company: You Bet International, Inc.
1950 Sawtelle Boulevard
Suite 180
Los Angeles, California 90025
Attention: David Marshall
Fax: (310) 444-3310
If to FCI: Fell & Company, Inc.
10550 Wilshire Boulevard
Suite 1105
Los Angeles, California
Attention: Robert M. Fell
Fax: (310) 475-3480
by mail if sent postage prepaid by registered mail, return receipt requested; or
by hand delivery to any party at the address of the party first above set forth.
If notice, direction or instruction is given by telex, telegram or facsimile
transmission or similar method or by hand delivery, it shall be deemed to have
been given or made on the day on which it was given, and if mailed, shall be
deemed to have been given or made on the third business day following the day
after which it was mailed. Any party may, from time to time, by like notice give
notice of any change of address and in such event, the address of such party
shall be deemed to be changed accordingly.
-6-
<PAGE> 7
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior or contemporaneous oral and prior written agreements and
understandings, including that certain Memorandum of Understanding dated as of
April 1, 1998 between the Company and FCI. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof or in effect among the
parties. No custom or trade usage, nor course of conduct among the parties,
shall be relied upon to vary the terms hereof. This Agreement may not be
amended, and no provision hereof shall be waived, except by a writing signed by
all of the parties to this agreement which states that it is intended to amend
or waive a provision of this Agreement. Any waiver of any rights or failure to
act in a specific instance shall relate only to such instance and shall not be
construed as an agreement to waiver any rights or fail to act in any other
instance, whether or not similar.
16. SEVERABILITY. Should any provision of this Agreement be
unenforceable or prohibited by any applicable law, this Agreement shall be
considered divisible as to such provision which shall be inoperative, and the
remainder of this Agreement shall be valid and binding as though such provision
were not included herein and shall be construed in such a manner to maximize its
validity and enforceability.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original.
18. HEADINGS. All headings in this Agreement are for convenience only
and will not affect the meaning of any provision hereof.
19. SURVIVAL OF CERTAIN PROVISIONS. The provisions of Sections 3, 4,
6, 7, 8, 9, 11, 12 and 20 shall, to the extent applicable, continue in full
force and effect notwithstanding the expiration or earlier termination of this
Agreement or of Fell's services hereunder in accordance with the terms of this
Agreement.
20. ATTORNEYS' FEES. Except as otherwise provided herein, in the
event of arbitration with respect to the subject mater of this Agreement, the
prevailing party shall be entitled to all of its costs and expenses, including
the reasonable attorneys' fees and costs, incurred in resolving or settling the
dispute. These costs and expenses shall be in addition to any other damages to
which the prevailing party may be entitled.
21. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall inure to the benefit of, and be binding upon, the Company and
any corporation with which the Company merges or consolidates, and upon FCI and
the Executive and his executors, administrators, heirs and legal
representatives.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Executive has executed this Agreement and the
Company has caused this Agreement to be executed by a duly authorized officer as
of the day and year first above written.
YOU BET INTERNATIONAL, INC., a Delaware Corporation
By:_________________________________________________
Name:_______________________________________________
Title:______________________________________________
FELL & COMPANY, INC.
By:_________________________________________________
Name: Robert M. Fell
Title: President
The undersigned hereby agrees to (i) provide FCI the services required
of FCI hereunder, and (ii) comply with the provisions in the foregoing Services
Agreement which are applicable to me personally.
----------------------------------------------------
Robert M. Fell
-8-
<PAGE> 1
EXHIBIT 99.7
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is effective as of
__________, 1998 (the "Effective Date") by and between You Bet International,
Inc., a Delaware corporation ("Company"), and David Marshall ("Executive").
RECITALS
A. Company desires to retain the services of Executive on the terms and
conditions set forth below.
B. Executive desires to be in the employ of Company to perform services
for Company and is willing to do so upon the terms and conditions herein
contained. The employment of Executive by Company pursuant to this Agreement is
hereinafter sometimes referred to as "the Employment".
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
(1) a monthly automobile allowance in the amount of $750;
(2) reimbursement of all business-related operating expenses of
Executive's automobile, including without limitation registration, gas, oil and
repairs;
(3) reimbursement of the expenses of an automobile liability insurance
policy on Executive's automobile, with coverage including Executive in the
minimum amount of a $1,000,000 combined single limit;
(4) the receipt of benefits and perquisites under any and all formal or
informal employee benefit plans, understandings, arrangements or programs
including, but not limited to, cash bonus and incentive plans, pension and
profit sharing plans, stock or warrant plans, group insurance, hospitalization,
medical, dental, health and accident and disability plans, supplemental health
care plans and plans providing for life insurance coverage (inclusive of
insurance related to accidental death or dismemberment);
<PAGE> 2
(5) reimbursement of Executive's cellular phone and long distance phone
expenses for calls related to the business of Company;
(6) an annual vacation of twenty (20) days, which need not be taken in
consecutive periods. If Executive does not take all such vacation time in any
given calendar year, such unused time shall carry over to the next year during
the Employment; and
(7) all paid holidays provided by Company to its other senior executive
employees.
At no time during the term of this Agreement shall Executive receive benefits of
employment less than those received by any employee of Company, including the
Chairman of the Board of Company (other than the benefits of employment received
by the Chief Executive Officer of Company, not including the benefits received
by Robert Fell while he is the Chief Executive Officer of Company). Executive
acknowledges that Robert Fell will only devote approximately 70% of his time to
Company. Such time commitment shall not be a benefit for purposes of this
Section 5. If at any time Executive receives such lesser benefits of employment,
Executive's benefits shall automatically increase to the rate of such higher
benefits and/or include such additional benefits.
(a) Death. This Agreement shall terminate upon Executive's death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been unable to perform the
duties, functions and responsibilities required hereunder for ninety (90)
consecutive days or shorter periods aggregating to one hundred twenty (120) days
in any twelve (12) months, Company may terminate Executive's employment
hereunder. During any period that Executive fails to perform his duties
hereunder as a result of incapacity or due to physical or mental illness, he
shall continue to receive full compensation and other benefits called for
hereunder until such time as there is a date of termination pursuant to this
Section 8.1(b).
(c) Cause. This Agreement shall be subject to termination by the Board
for cause, which for purposes of this Agreement shall mean a termination on the
grounds of (i) Executive's breach of any material term of this Agreement, which
Executive shall have failed to cure within thirty (30) days after receiving
written notice thereof from
<PAGE> 3
the Board, (ii) the reasonable belief by the Board, after conducting an
appropriate investigation, of the commission by Executive of any act of fraud,
theft or criminal dishonesty against Company, or (iii) the conviction of
Executive of any felony. For purposes of this Agreement, Executive shall not be
deemed to have been terminated for cause unless and until there shall have been
delivered to Executive a copy of a resolution, duly adopted by the affirmative
vote of a majority of the entire membership of the Board at a meeting called and
held for this purpose after reasonable notice to Executive and an opportunity
for him, together with his counsel, to be heard by the Board, finding that, in
the good faith opinion of the Board, Executive is guilty of misconduct of the
type described in this Section 8.1(c), and specifying the particulars thereof in
detail.
(d) Notice by Executive. This Agreement may be terminated by
Executive upon thirty (30) days written notice.
(e) Notice by Company. This Agreement may be terminated at any
time by Company upon thirty (30) days written notice; provided, however, that,
during a period of physical or mental illness as described in Section 8.1(b)
hereof, Company shall not utilize this Section 8.1(e) to terminate Executive.
(f) Constructive Termination. This Agreement may be terminated by
Executive immediately upon written notice to Company if Executive has been
"constructively terminated" by Company. For the purposes of this Agreement,
"constructively terminated" shall mean any action by Company which results in a
material diminution in Executive's then position (including status, titles and
reporting requirements), authority, duties or responsibilities, but excluding,
for this purpose, an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by Company promptly after receipt of notice from
Executive.
(a) In the event of a termination of this Agreement under Section
8.1(a), the spouse, heirs or estate of Executive shall continue to receive the
compensation and benefits specified in Sections 4 and 5 herein, to the extent
applicable, for a period of twelve (12) months, notwithstanding such
termination.
(b) In the event of a termination of this Agreement under Section
8.1(b), Executive, or his duly appointed personal representatives, shall
continue to receive the compensation and benefits specified in Sections 4 and 5
herein, to the extent applicable, for a period of twelve (12) months,
notwithstanding such termination, reduced by any disability insurance payments
received by Executive from insurance purchased on
<PAGE> 4
Executive's behalf by Company.
(c) In the event of a termination of this Agreement under Section
8.1(c), Company's obligation to provide the compensation and benefits specified
in Sections 4 and 5 herein shall terminate as of the effective date of such
termination.
(d) In the event of a termination of this Agreement under Section
8.1(d):
(i) within the first eighteen (18) months of the term of
this Agreement, Company's obligation to provide the compensation and benefits
specified in Sections 4 and 5 shall end on the effective date of such
termination; or
(ii) after the first eighteen (18) months of the term of
this Agreement, Company's obligation to provide the compensation and benefits
specified in Sections 4 and 5 shall continue for the lesser of (x) two (2) years
from the effective date of such termination, or (y) the balance of the then
remaining term of this Agreement, but in no event for less than one (1) year.
(e) In the event of a termination of this Agreement under Section
8.1(e) or (f), Company's obligation to provide the compensation and benefits
specified in Sections 4 and 5 for the then remaining term of this Agreement
shall be paid to Executive in semi-monthly installments commencing within
fifteen (15) days following the effective date of such termination; provided,
however, that in no event shall such compensation and benefits be for less than
one (1) year.
Confidentiality. Executive shall not during the Term or at any time thereafter
(i) disclose to any person not employed by Company or person, firm or
corporation engaged to render services to Company except during the Term for the
benefit of Company, or (ii) use for the benefit of himself, or others, any
confidential information of Company obtained by Executive prior to the Effective
Date, during the Term or any time thereafter, including, without limitation,
"know-how" trade secrets, details of supplier's, manufacturer's, distributor's
contracts, pricing policies, financial data, operational methods, marketing and
sales information or strategies, product development techniques or plans or any
strategies relating thereto, technical processes, designs and design projects,
and other proprietary information of Company; provided, however, that this
provision shall not preclude Executive from (x) upon advice of counsel and after
reasonable notice to Company, making any disclosure required by any applicable
law or (y) using or disclosing information known generally to the
<PAGE> 5
public (other than information known generally to the public as a result of any
violation of this Section 9 by or on behalf of Executive).
Executed by the parties as of the Effective Date.
"Company"
"Executive"
YOU BET INTERNATIONAL, INC.,
a Delaware corporation
By _____________________________________
__________________________________
David Marshall
________________________________________
[Print Name and Title]
<PAGE> 1
EXHIBIT 99.8
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is effective as of
__________, 1998 (the "Effective Date") by and between You Bet International,
Inc., a Delaware corporation ("Company"), and Russell Fine ("Executive").
RECITALS
A. Company desires to retain the services of Executive on the terms and
conditions set forth below.
B. Executive desires to be in the employ of Company to perform services
for Company and is willing to do so upon the terms and conditions herein
contained. The employment of Executive by Company pursuant to this Agreement is
hereinafter sometimes referred to as "the Employment".
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
(1) a monthly automobile allowance in the amount of $750;
(2) reimbursement of all business-related operating expenses of
Executive's automobile, including without limitation registration, gas, oil and
repairs;
(3) reimbursement of the expenses of an automobile liability insurance
policy on Executive's automobile, with coverage including Executive in the
minimum amount of a $1,000,000 combined single limit;
(4) the receipt of benefits and perquisites under any and all formal or
informal employee benefit plans, understandings, arrangements or programs
including, but not limited to, cash bonus and incentive plans, pension and
profit sharing plans, stock or warrant plans, group insurance, hospitalization,
medical, dental, health and accident and disability plans, supplemental health
care plans and plans providing for life insurance coverage (inclusive of
<PAGE> 2
insurance related to accidental death or dismemberment);
(5) reimbursement of Executive's cellular phone and long distance phone
expenses for calls related to the business of Company;
(6) an annual vacation of twenty (20) days, which need not be taken in
consecutive periods. If Executive does not take all such vacation time in any
given calendar year, such unused time shall carry over to the next year during
the Employment; and
(7) all paid holidays provided by Company to its other senior executive
employees.
At no time during the term of this Agreement shall Executive receive benefits of
employment less than those received by any employee of Company, including the
Chairman of the Board of Company (other than the benefits of employment received
by the Chief Executive Officer of Company, not including the benefits received
by Robert Fell while he is the Chief Executive Officer of Company). Executive
acknowledges that Robert Fell will only devote approximately 70% of his time to
Company. Such time commitment shall not be a benefit for purposes of this
Section 5. If at any time Executive receives such lesser benefits of employment,
Executive's benefits shall automatically increase to the rate of such higher
benefits and/or include such additional benefits.
(a) Death. This Agreement shall terminate upon Executive's death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been unable to perform the
duties, functions and responsibilities required hereunder for ninety (90)
consecutive days or shorter periods aggregating to one hundred twenty (120) days
in any twelve (12) months, Company may terminate Executive's employment
hereunder. During any period that Executive fails to perform his duties
hereunder as a result of incapacity or due to physical or mental illness, he
shall continue to receive full compensation and other benefits called for
hereunder until such time as there is a date of termination pursuant to this
Section 8.1(b).
(c) Cause. This Agreement shall be subject to termination by the Board
for cause, which for purposes of this Agreement shall mean a termination on the
grounds of (i) Executive's breach of any material term of this Agreement, which
Executive
<PAGE> 3
shall have failed to cure within thirty (30) days after receiving written notice
thereof from the Board, (ii) the reasonable belief by the Board, after
conducting an appropriate investigation, of the commission by Executive of any
act of fraud, theft or criminal dishonesty against Company, or (iii) the
conviction of Executive of any felony. For purposes of this Agreement, Executive
shall not be deemed to have been terminated for cause unless and until there
shall have been delivered to Executive a copy of a resolution, duly adopted by
the affirmative vote of a majority of the entire membership of the Board at a
meeting called and held for this purpose after reasonable notice to Executive
and an opportunity for him, together with his counsel, to be heard by the Board,
finding that, in the good faith opinion of the Board, Executive is guilty of
misconduct of the type described in this Section 8.1(c), and specifying the
particulars thereof in detail.
(d) Notice by Executive. This Agreement may be terminated by
Executive upon thirty (30) days written notice.
(e) Notice by Company. This Agreement may be terminated at any
time by Company upon thirty (30) days written notice; provided, however, that,
during a period of physical or mental illness as described in Section 8.1(b)
hereof, Company shall not utilize this Section 8.1(e) to terminate Executive.
(f) Constructive Termination. This Agreement may be terminated by
Executive immediately upon written notice to Company if Executive has been
"constructively terminated" by Company. For the purposes of this Agreement,
"constructively terminated" shall mean any action by Company which results in a
material diminution in Executive's then position (including status, titles and
reporting requirements), authority, duties or responsibilities, but excluding,
for this purpose, an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by Company promptly after receipt of notice from
Executive.
(a) In the event of a termination of this Agreement under Section
8.1(a), the spouse, heirs or estate of Executive shall continue to receive the
compensation and benefits specified in Sections 4 and 5 herein, to the extent
applicable, for a period of twelve (12) months, notwithstanding such
termination.
(b) In the event of a termination of this Agreement under Section
8.1(b), Executive, or his duly appointed personal representatives, shall
continue to receive the compensation and benefits specified in Sections 4 and 5
herein, to the extent applicable, for a period of twelve (12) months,
notwithstanding such termination, reduced by any
<PAGE> 4
disability insurance payments received by Executive from insurance purchased on
Executive's behalf by Company.
(c) In the event of a termination of this Agreement under Section
8.1(c), Company's obligation to provide the compensation and benefits specified
in Sections 4 and 5 herein shall terminate as of the effective date of such
termination.
(d) In the event of a termination of this Agreement under Section
8.1(d):
(i) within the first eighteen (18) months of the term of
this Agreement, Company's obligation to provide the compensation and benefits
specified in Sections 4 and 5 shall end on the effective date of such
termination; or
(ii) after the first eighteen (18) months of the term of
this Agreement, Company's obligation to provide the compensation and benefits
specified in Sections 4 and 5 shall continue for the lesser of (x) two (2) years
from the effective date of such termination, or (y) the balance of the then
remaining term of this Agreement, but in no event for less than one (1) year.
(e) In the event of a termination of this Agreement under Section
8.1(e) or (f), Company's obligation to provide the compensation and benefits
specified in Sections 4 and 5 for the then remaining term of this Agreement
shall be paid to Executive in semi-monthly installments commencing within
fifteen (15) days following the effective date of such termination; provided,
however, that in no event shall such compensation and benefits be for less than
one (1) year.
Confidentiality. Executive shall not during the Term or at any time thereafter
(i) disclose to any person not employed by Company or person, firm or
corporation engaged to render services to Company except during the Term for the
benefit of Company, or (ii) use for the benefit of himself, or others, any
confidential information of Company obtained by Executive prior to the Effective
Date, during the Term or any time thereafter, including, without limitation,
"know-how" trade secrets, details of supplier's, manufacturer's, distributor's
contracts, pricing policies, financial data, operational methods, marketing and
sales information or strategies, product development techniques or plans or any
strategies relating thereto, technical processes, designs and design projects,
and other proprietary information of Company; provided, however, that this
provision shall not preclude Executive from (x) upon advice of counsel and after
reasonable notice to Company, making any disclosure
<PAGE> 5
required by any applicable law or (y) using or disclosing information known
generally to the public (other than information known generally to the public as
a result of any violation of this Section 9 by or on behalf of Executive).
Executed by the parties as of the Effective Date.
"Company"
"Executive"
YOU BET INTERNATIONAL, INC.,
a Delaware corporation
By _____________________________________
__________________________________
Russell Fine
________________________________________
[Print Name and Title]
<PAGE> 1
EXHIBIT 99.9
[YOU BET LOGO & LETTERHEAD]
YOU BET RECEIVES $5.5 MILLION EQUITY
INVESTMENT;
NAMES CHAIRMAN OF THE BOARD AND CEO;
ADDS FOUR NEW BOARD MEMBERS
June 30, 1998
You Bet International, Inc. (0TCBB:UBET) said today that a group of private and
institutional investors led by Robert M. Fell has made a $5.5 million equity
investment in the company's preferred stock. Mr. Fell, founder and largest
shareholder of Silicon Gaming, Inc. (Nasdaq-NMS: SGIC), and former chairman and
chief executive officer of Archon Communications, Inc., (which recently sold
its major holding in Premiere Radio Networks, Inc. to Jacor Communications,
Inc. (Nasdaq-NMS: JCOR)), has accepted the position of chairman of the board
and chief executive officer of You Bet. The company also announced that William
H. Roedy, president of MTV Networks International; Caesar P. Kimmel, a founder
of Warner Communications and former president of Kinney System, and Alan
Landsburg, founder of The Landsburg Company, have joined the company's board of
directors.
"Today's announcement represents a solid vote of confidence in You Bet's
future, providing strength and stability as we move forward," said Mr. Fell.
"We are particularly proud of those who are investing in the company's future.
Among these investors are The Interpublic Group of Companies, Inc., one of the
largest advertising and marketing companies in the world, as well as the
partners of one of the largest investment banks in the U.S. In addition, a
number of very successful private investors, including the Simon family of
Indianapolis and each of the new directors, have become new shareholders in the
company."
David Marshall, Vice Chairman, President and Chief Operating Office of You Bet
International, Inc., said, "When Russell Fine and I founded You Bet, our plan
was to create a company with a new type of product, a proven technology, and a
clear market potential in order to attract industry leaders who could help
build You Bet into the leader in world wide interactive gaming. We couldn't
have done better than Bob Fell and the active investors and board members he
has brought to the Company. Russell and I are excited about the enormous
potential of our expanded board and new investors. We look forward to working
with this new group to expand our service to other applications and
international markets."
Mr. Fell stated, "The addition of Alan Landsburg, Bill Roedy and Caesar Kimmel
to the You Bet board of directors not only brings a wealth of knowledge and
experience at the highest levels in their respective endeavors, but each of
these individuals also believes in our company and its ultimate potential and
is committed to helping us achieve our strategic objectives.
"Alan Landsburg is one of the most respected names in television production.
Throughout his thirty-five years in broadcasting, he has distinguished himself
as an industry pioneer by evolving new entertainment forms and tackling
important issues. He is also active in California racing, including the
Thoroughbred Owners of California. Bill Roedy is known and acclaimed worldwide
for his creativity and vision. As president of MTV Networks International and
Chairman, MTV, Networks Europe, he is responsible for all of MTV's
<PAGE> 2
international channels. Under his stewardship MTV has become the most watched
cable and satellite network broadcast network in Europe. Caesar Kimmel not only
brings unparalleled business experience and acumen to our board as one of the
original founders of Warner Communications and the former president of Kinney
System, but for the past thirty years he has been one of the leaders in
thoroughbred racing, helping to guide the sport around the world," Mr. Fell
added.
"The expanded board adds priceless experience in marketing, finance, and
entertainment to the existing competence in technology, which will serve the
company well as it moves forward with deploying its products and services," said
Jess Rifkind current board member and previously the Manager of Advanced
Development for Xerox PARC.
"With this new board in place, and with the successful completion of the first
phase of our private placement offering, we believe that we are better
positioned than ever to take You Bet to the next level," said Russell Fine, You
Bet's Chief Technology Officer and board member.
In the private placement, the investors purchased $5.5 million of preferred
stock, convertible into 2.2 million shares of common stock. Although no
assurances can be given, the company may issue additional shares of preferred
stock to private and institutional investors on the same terms. Mr. Fell also
purchased warrants to acquire 1.2 million shares of common stock at $2.50 per
share, subject to certain restrictions on his ability to exercise the warrants
or dispose of the warrant shares.
You Bet International, Inc. is a Los Angeles-based interactive technology
company that facilitates online broadcasting of live events and is focused on
content development, network deployment and management services via a
cross-platform environment. The company's objective it to be the premiere
technology and service provider for interactive wagering worldwide, and to
create a widely accessible interactive race and sports environment, filled with
varied and exciting content. You Bet International, Inc. has developed and
deployed the world's first personal computer-based wagering platform and
transaction processing software. The company just launched its public release
in June 1998. For further information, visit http://www.youbet.com or contact
Jeff Lloyd/Tom Ekman at (310) 788-2850.
NOTE: This press release contains forward-looking statements which are made
pursuant to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. Expressions of future goals and similar expressions
reflecting something other than historical fact are intended to
identify forward-looking statements, but are not the exclusive means of
identifying such statements. These forward-looking statements involve a number
of risks and uncertainties, including the timely development and market
acceptance of products and technologies, the ability to secure additional
sources of financing, and other factors described in the Company's filings with
the Securities and Exchange Commission. The actual results that the Company
achieves may differ materially from any other forward-looking statements due to
such risks and uncertainties. The Company undertakes no obligations to revise
or update any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this release.
[youbet logo] Copyright (C) 1998 You Bet Racing Network. All rights reserved.
You Bet! is a trademark of You Bet!, Inc.
