<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1999
REGISTRATION NO. 333-85675
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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YOUBET.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4627253
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1950 SAWTELLE BOULEVARD, SUITE 180
LOS ANGELES, CALIFORNIA 90025
(310) 444-3300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
ROBERT M. FELL
CHIEF EXECUTIVE OFFICER
1950 SAWTELLE BLVD., SUITE 180
LOS ANGELES, CALIFORNIA 90025
(310) 444-3300
(Name, address, including zip code, and telephone number, including
area code, of agent of service)
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Copies to:
GARY N. JACOBS, ESQ.
CHRISTENSEN, MILLER, FINK, JACOBS,
GLASER, WEIL & SHAPIRO, LLP
2121 AVENUE OF THE STARS, 18TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 553-3000
<PAGE>
Approximate date of commencement of proposed sale to the public: From
time to time after the later of: the date this registration statement becomes
effective and December 11, 1999, as determined by market conditions and other
factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than the securities offered only in connection
with dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number on the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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Calculation of Registration Fees
<TABLE>
<CAPTION>
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Proposed Proposed maximum
Title of each class of Amount to maximum offering aggregate offering Amount of
securities to be registered be registered (1) price per unit (2) price (2) registration fee (3)
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share. 7,834,179 shares $7.25 $56,797,797 $15,869.72
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</TABLE>
(1) Includes 4,550,000 shares issuable upon conversion of the 11% Senior
Convertible Discount Notes at the conversion price of $10 per shares as
of April 5, 2001, 1,479,729 shares issuable upon exercise of
outstanding warrants and 1,804,450 shares of common stock.
(2) Estimated solely for purposes of calculating the registration fee on
the basis of the average high and low sale price of the common stock on
the Nasdaq National Market on September 27, 1999.
(3) Includes $9,351.23 previously paid by the registrant in connection
with the registration of 4,600,000 shares of common stock at a
proposed maximum offering price per unit of $7.3125 pursuant to the
Registration Statement filed on August 20, 1999 and $6,518.49 paid in
connection with the registration of an additional 3,234,179 shares
of common stock at a proposed maximum offering price per unit of
$7.25 registered pursuant to this Amendment No. 1 to the
Registration Statement.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1999
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.
YOUBET.COM, INC.
7,834,179 SHARES
COMMON STOCK
Certain selling stockholders are offering up to 4,550,000 shares of
common stock issuable on the conversion of the principal amount and interest
on our 11% Senior Convertible Discount Notes due in 2004. In addition,
certain other selling stockholders are offering up to 1,479,729 shares of
common stock on the exercise of outstanding stock purchase warrants. Certain
other selling shareholders are offering outstanding shares of common stock.
Youbet.com will not receive any proceeds from the offering. However, to the
extent selling stockholders convert their 11% Senior Convertible Discount
Notes to common stock or exercise stock purchase warrants, Youbet.com will be
released from obligations under such notes or may receive proceeds from the
exercise of warrants, except in such cases where the warrants have "cashless"
exercise features and such features are invoked.
Youbet.com's common stock is currently traded on the Nasdaq National
Market under the symbol "UBET." The closing sale price for Youbet.com's
common stock on September 27, 1999 on the Nasdaq National Market was $6.8125
per share.
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INVESTING IN YOUBET.COM'S COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS SEPTEMBER __, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.......................................................................................................... 2
Risk Factors................................................................................................................ 4
Use of Proceeds............................................................................................................. 13
Selling Stockholders........................................................................................................ 13
Plan of Distribution........................................................................................................ 13
Legal Matters............................................................................................................... 15
Experts..................................................................................................................... 15
Indemnification............................................................................................................. 15
Incorporation of Documents by Reference..................................................................................... 16
Available Information....................................................................................................... 16
</TABLE>
PROSPECTUS SUMMARY
BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING
"RISK FACTORS" AND THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS
AND THE RELATED NOTES WHICH ARE INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
YOUBET.COM
Youbet.com intends to establish itself as the leading global brand name
for online live event wagering. Wagering on live events such as horse track
racing, car racing, soccer, football, etc., is a large industry. Youbet.com has
focused its efforts primarily on the United States horse track racing industry
and believes that its principal product, the You Bet Network, is currently the
only legal system available for online wagering in the United States. Youbet.com
intends to pursue an aggressive marketing program to build a horse track racing
subscriber base and brand awareness in the United States. At the same time,
Youbet.com plans to pursue the much larger opportunities for live event wagering
offered in international markets.
Youbet.com believes that online communication is an ideal medium for
live event wagering. First, online communication allows bettors instant access
to vast amounts of historical performance data used in assessing potential
wagers. Second, online communication offers the ability to sort and analyze such
data in ways and at speeds that are unachievable manually. Third, online
communications technology allows wagers to be placed from virtually any location
within a jurisdiction where wagering is legal, thus freeing bettors from
traditional site-specific wagering locations. In addition, the speed of
electronic communications allows wagers to be placed and acknowledged in
seconds. This represents a dramatic improvement over alternative methods such as
standing in line at an event venue or waiting on the telephone for a voice
transaction. This shortening of response time is critically important in
wagering, since it allows bettors to place their wager seconds before the
closing of the wagering pool. Finally, online technologies such as streaming
audio and video allow an event to be displayed in real time on a user's PC as it
is actually occurring, thereby allowing the user to experience the event without
actually attending in person. For these reasons, Youbet.com believes that the
online-capable PC is the ideal appliance for wagering.
Youbet.com has chosen to focus initially on horse track racing in the
United States because it is the most widely permitted form of live event
wagering. General sports wagering is legal only in Nevada and to persons
physically located in Nevada. Such wagers may not be taken (by phone or
otherwise) from any bettor outside Nevada. In contrast, 42 states permit
pari-mutuel wagering on horse track racing. Furthermore, certain states provide
for "account wagering" where wagers on horse races are taken from out-of-state
bettors, with wins and losses settled in an
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account maintained for the bettor by a licensed wagering entity located in the
host state. It is this account wagering activity which forms the core of
Youbet.com's United States business.
Youbet.com's initial product, the You Bet Network, is a PC-based system
which utilizes the communications backbone of the Internet and a closed-loop
private network with Internet access to provide up-to-the minute detailed
information on races taking place at horse tracks nationwide and at selected
international venues. Youbet.com also delivers a live simulcast of selected
horse races directly to the subscriber's computer. In addition, subscribers can
use the You Bet Network to fill out an electronic wagering ticket with a brief
series of mouse-clicks and transmit this information electronically to an
account wagering entity. Youbet.com currently has an account wagering agreement
with Mountain Laurel Racing, Inc., and Washington Trotting Association, Inc.,
both of which are subsidiaries of Ladbroke USA (collectively "Ladbroke").
Ladbroke accepts and processes wagers into the particular horse track pari-
mutuel pool from its hub in Pennsylvania. Youbet.com transmits electronic
information related to wagers to Ladbroke from the 40 states where Ladbroke
currently accepts telephone wagers. After processing the wager, Ladbroke sends
an electronic confirmation to the bettor through the You Bet Network. The time
for the entire process from information submission to acknowledgment is usually
less than three seconds.
Youbet.com does not actually accept or place any wagers. Wagers are
accepted and placed only by a state licensed wagering facility, currently
Ladbroke. Youbet.com's role in the wagering process is limited to transmitting
information related to the wagers to and from the licensed wagering facility.
Youbet.com is not aware of any United States based competitor
currently offering another online or Internet-based wagering product for
horse track racing, and the only competitor of which it is aware has launched
a cable TV product on a C-band cable network. This competitor allows for
phone wagering in three states and has announced plans for a PC based product
late in 1999. Youbet.com believes that it has a lead time advantage in the
United States horse track racing market. Youbet.com intends to significantly
increase its marketing expenditures in order to further develop the
"Youbet.com" brand name and increase its subscriber base before any
competitor has an opportunity to establish a rival product.
Youbet.com currently derives revenue from the You Bet Network in three
ways. First, it charges a monthly subscription fee, currently $5.95 per month.
Second, it receives a fee from Ladbroke equal to fifty percent (50%) of the net
commissions to Ladbroke derived from wagers placed by Youbet.com subscribers.
Third, it receives revenue from the sale of handicapping information.
Youbet.com believes its opportunities internationally are dramatically
larger and less restricted than in the United States. Youbet.com believes that
sports wagering on live events is legal in most parts of Europe, Asia, Australia
and Latin America and that wagering on horse track racing is also legal in most
jurisdictions. In many of these jurisdictions, such as Hong Kong and Japan, the
annual amount wagered on horse track racing per capita is several times larger
than is wagered in the United States. Youbet.com also believes that it has a
significant opportunity overseas because overseas markets have embraced Internet
gaming to a greater degree than the United States. While there are significantly
more wagering competitors overseas, Youbet.com believes that the market is large
enough to support many competitors profitably.
Youbet.com's goal is to be the dominant global brand for online live
event wagering. Youbet.com believes that it must significantly increase
expenditures on marketing in order to maximize consumer awareness and increase
the size of its subscriber base before its competitors can respond. To fund this
marketing program, Youbet.com has recently raised significant new capital, and
will use such capital primarily for marketing. In addition, Youbet.com intends
to establish strategic relationships with important partners, including content,
Internet and telecommunications providers.
Youbet.com's executive offices are located at 1950 Sawtelle Boulevard,
Suite 180, Los Angeles, CA 90025. Youbet.com's telephone number is (310)
444-3300 and its World Wide Web site is http://www.youbet.com. INFORMATION
CONTAINED IN YOUBET.COM'S WEB SITE SHOULD NOT BE CONSIDERED A PART OF THIS
PROSPECTUS.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock outstanding(1)................................... 19,121,288 shares
Common Stock offered.......................................... 7,834,179 shares
Common Stock to be outstanding after the offering(2).......... 24,511,394 shares
Common Stock fully diluted after the offering(3).............. 32,350,550 shares
Use of Proceeds............................................... Youbet.com will not receive any of the proceeds from the
offering. However, to the extent selling stockholders convert
their 11% Senior Convertible Discount Notes to common
stock or exercise stock purchase warrants, Youbet.com will
be released from obligations under such notes or may receive
proceeds from the exercise of warrants, except in such cases
where the warrants have "cashless" exercise features and such
features are invoked. See "Use of Proceeds."
Market Symbol................................................. UBET
</TABLE>
(1) As of August 31, 1999
(2) Assumes that the selling stockholders convert all of their 11% Senior
Convertible Discount Notes and exercise all of their warrants within 60
days of August 31, 1999.
(3) Assumes the conversion of all 11% Senior Convertible Discount Notes and the
exercise of all outstanding warrants and stock options within 60 days of
August 31, 1999.
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED BELOW BEFORE DECIDING WHETHER TO INVEST IN SHARES
OF COMMON STOCK OF YOUBET.COM. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THESE STATEMENTS REFER TO
FUTURE PLANS AND MAY USE WORDS SUCH AS "EXPECT," "INTEND," "ANTICIPATE" AND
"PLAN". ANY SUCH FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, AND
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF MANY UNCERTAINTIES AND OTHER FACTORS.
RISKS RELATED TO WAGERING STATUTES AND REGULATIONS
LEGAL ISSUES CONCERNING ONLINE WAGERING MAY ADVERSELY AFFECT YOUBET.COM
To the extent that Youbet.com's facilities are used by subscribers to
place intrastate or interstate wagers or Youbet.com receives commissions derived
from such wagers, various federal and state statutes and regulations could have
a direct and material adverse effect on Youbet.com's business and indirectly
could have a material adverse effect on the public's demand for Youbet.com's
services. Gaming activities are subject to extensive statutory and regulatory
regulation by both state and federal authorities, and are likely to be
significantly affected by any changes in the political climate and changes in
economic and regulatory policies. Such effects could be materially adverse to
Youbet.com.
All 50 states currently have statutes or regulations regarding gaming
activities, and three states have no gaming at all. In most states it is illegal
to place or accept a wager, with specific state-by-state statutory exceptions.
For example, pari-mutuel wagering of some kind is permitted in 42 states. Eight
of these 42 states have statutes which provide for account wagering, and five of
these eight states allow accounts for pari-mutuel wagers to be established from
bettors outside of their state. The adoption of laws or regulations affecting
pari-mutuel wagering or adoption of anti-pari-mutuel wagering policies by any
jurisdiction could have a material adverse effect on Youbet.com's business.
4
<PAGE>
The Federal Interstate Wire Act contains provisions which make it a
crime for anyone in the business of gaming to use a telephone line or other
wire communication facility in interstate or foreign commerce to transmit
information assisting in the placing of wagers, unless the wagering is legal
in the jurisdictions from which and into which the transmission is made.
Other federal laws impacting gaming activities include the Interstate Horse
Racing Act, the Interstate Wagering Paraphernalia Act, the Travel Act and the
Organized Crime Control Act. The National Gambling Impact Study Commission
released its final report and recommendations on June 18, 1999. Certain
recommendations in that report could form the basis for new anti-gaming
(including anti-online-gaming) laws or regulations that could have a material
adverse effect on Youbet.com's business. Other governmental and
quasi-governmental bodies are reviewing interstate and interactive wagering,
and may reach influential anti-gaming conclusions that could form the basis
for new laws, regulations, or enforcement policies that could have a material
adverse effect on Youbet.com's business.
Federal legislation has been proposed which could limit either the
intrastate or interstate activities Youbet.com engages in or the type of
activities associated with intrastate or interstate wagering. Any change in
either the substance or the enforcement of the applicable rules and
regulations in these areas could have an adverse effect on Youbet.com's
business and prospects.
Youbet.com believes that its activities are in compliance with all
applicable gaming laws and regulations as currently applied. Youbet.com has been
advised by counsel that a reasonable conclusion can be drawn that Youbet.com's
activities do not violate the gaming laws of the United States or the 40 states
(plus the District of Columbia) in which it operates. However, because there is
little clear statutory and case law authority, this conclusion is not free from
doubt. While it is possible to compare Youbet.com's activities to applicable
statutes, the wording of many such statutes is ambiguous. Furthermore, there is
little case law to rely upon for interpretation of these ambiguities. Thus, it
is possible that Youbet.com may be alleged to be in violation of an applicable
statute based on an interpretation of the statute which differs from
Youbet.com's and its counsel's or based on a future change of law or
interpretation or enforcement policy. Such allegations could result in either
civil or criminal proceedings brought by governmental or private litigants. As a
result of such proceedings, Youbet.com could incur substantial litigation
expense, fines, diversion of the attention of key Youbet.com employees, and
injunctions or other prohibitions preventing Youbet.com from engaging in various
anticipated business activities. Also, if it were finally determined that
Youbet.com did violate applicable law, then civil damages or criminal penalties
could be imposed and Youbet.com might be barred from pursuing that activity.
Such an outcome would have a material adverse effect on Youbet.com.
INCREASED GOVERNMENT REGULATION OF INTERNET COMMERCE AND GAMING MAY ADVERSELY
AFFECT YOUBET.COM
Various state legislatures, Congress, and federal and state executive
authorities have proposed laws and regulations directly applicable to online and
Internet gaming which could have a material adverse effect on Youbet.com. Most
prominently, in 1998, a bill sponsored by U.S. Senator Jon Kyl of Arizona and
adopted by a wide margin in the Senate (but ultimately not enacted) would have
prohibited online and Internet gaming, with specified exceptions, including
exceptions for certain horse race wagering and certain "closed-loop" online
systems. However, the latter exceptions were narrow and this 1998 bill, had it
been enacted, would have had a material adverse effect on Youbet.com's business.
Other online and Internet gaming bills have been considered in recent years in
both the Senate and the House of Representatives. Senator Kyl has reintroduced a
new version of his Internet Gambling Prohibition Act of 1999. This 1999 Kyl bill
(S. 692) contains more broadly drafted exceptions than the 1998 Kyl bill and, if
it were enacted in the form in which it was introduced on March 23, 1999 or in
the form approved by the Senate Judiciary Committee on June 17, 1999, Youbet.com
does not believe that the bill would have a material adverse effect on
Youbet.com's business. However, a proposal such as the 1998 Kyl bill could
emerge again in Congress; many states have considered and are considering
interactive and Internet gaming legislation and regulations which may or may not
be worded so as to permit Youbet.com's business to continue in such states; and
anti-gaming conclusions and recommendations of the National Gambling Impact
Study Commission or other governmental or quasi-governmental bodies could form
the basis for new laws, regulations, or enforcement policies that could have a
material adverse effect on Youbet.com's business.
5
<PAGE>
TAXES ON WAGERS MAY BE IMPOSED
If one or more governmental authorities successfully asserts that
Youbet.com should collect taxes on wagers it could adversely affect Youbet.com's
business. Youbet.com does not currently collect taxes for wagers, as all
wagering transactions by Youbet.com subscribers are currently processed by
Ladbroke at its facility in Pennsylvania. Ladbroke pays all applicable taxes to
the State of Pennsylvania. However, one or more local, state or foreign
jurisdictions may seek to tax online and Internet wagering when a subscriber is
physically within their jurisdiction at the time the wager is placed. Such taxes
if imposed might have a materially adverse effect on Youbet.com's business.
RISKS RELATED TO YOUBET.COM'S OPERATIONS
YOUBET.COM HAS A LIMITED OPERATING HISTORY
Youbet.com's limited operating experience may not form a sufficient
basis on which to predict future results. Youbet.com commenced development in
1995 of PC-based proprietary communications software for online entertainment.
Its first service, the You Bet Network, has only recently been introduced and it
is a new business in a rapidly changing field.
YOUBET.COM HAS A HISTORY OF LOSSES AND ANTICIPATES FUTURE LOSSES
Youbet.com has experienced significant losses since its inception and
has financed its operations from the sale of its securities and short-term debt.
Youbet.com incurred net losses of approximately $13.9 million and $6.5 million
for the fiscal year ended December 31, 1998 and the six months ended June 30,
1999, respectively. Youbet.com expects operating losses and negative cash flow
to continue at least through 1999 and possibly later. These losses are expected
to increase as Youbet.com increases its levels of spending to implement its
business plan and it is possible that such increases in spending may not
generate sufficient increases in revenue to permit profitable operations.
YOUBET.COM'S FUTURE OPERATING RESULTS ARE UNPREDICTABLE
Due to Youbet.com's short operating history, results are unpredictable
and may vary on a quarterly basis as a result of a variety of factors. Many of
these factors are outside of Youbet.com's control. These factors include:
- Youbet.com may not be able to attract and retain subscribers
to the You Bet Network;
- Youbet.com may not be successful in maintaining good relations
with horse tracks and other content and information suppliers;
- The introduction of competing wagering services from
interactive gaming or leisure companies may have an adverse
effect on Youbet.com's business;
- Youbet.com may not succeed in its brand-building and marketing
campaigns;
- Price competition from competing services may become more
intense;
- The level of use of online and Internet interactive services,
both domestically and internationally, may not grow as
expected;
- There may be a lack of consumer confidence in and acceptance
of online and interactive services for leisure and wagering;
6
<PAGE>
- Youbet.com may not experience the expected increases in
volume, size, timing and completion rates for wagers
transmitted through the You Bet Network;
- There may be technical difficulties or lengthy interruptions
in the You Bet Network;
- Youbet.com may not be able to adequately update and upgrade
the You Bet Network with technological innovations and
infrastructure to accommodate growth;
- Federal or local governmental controls and regulation may
change and become less favorable; and
- General economic conditions and economic conditions specific
to online and Internet interactive activity may be depressed.
YOUBET.COM MAY NEED ADDITIONAL CAPITAL
Youbet.com intends to establish Youbet.com as a brand name by
significantly increasing expenditures on marketing, advertising and product
development both domestically and internationally. To the extent that such
increases in expenditures are not followed by increases in revenues, Youbet.com
will be adversely affected financially. In the event additional capital is
required to fund operating losses or other capital needs, Youbet.com may not be
able to obtain such capital or such capital may be available on terms which are
unfavorable to Youbet.com or its stockholders.
YOUBET.COM FACES STRONG COMPETITION FROM THE TELEVISION GAMES NETWORK AND OTHERS
Youbet.com expects that competition from an interactive cable channel
known as the "Television Games Network" and others will become more intense and
that new companies will enter the market. The Television Games Network is owned
by TV Guide, Inc. and has access to substantial resources.
The Television Games Network has announced that it has launched a cable
TV product on a C-band cable network. The Television Games Network allows for
phone wagering in three states and has announced plans for a PC based product
late in 1999. The Television Games Network has also formed exclusive
relationships with a number of major United States horse tracks. Further
expansion of the Television Games Network's product and expansion of exclusive
relationships may make it difficult for Youbet.com to grow its subscriber base
and to obtain quality racing content to supply the You Bet Network.
Additionally, if exclusive relationships account for a significant number of
horse tracks, the Television Games Network may be able to secure additional
horse tracks at more favorable terms than Youbet.com.
Worldwide, numerous Internet and other interactive ventures have been
announced. Youbet.com expects to compete with these entities, as well as other
established companies which may enter the interactive, pari-mutuel gaming
market. Many of Youbet.com's other current and potential competitors have far
greater resources than Youbet.com.
YOUBET.COM CURRENTLY RELIES HEAVILY ON ITS RELATIONSHIP WITH LADBROKE
Youbet.com expects to obtain a majority of its future revenues from
fees derived as a percentage of Ladbroke's net commissions on amounts wagered
through the You Bet Network. Accordingly, Youbet.com is highly dependent on
maintaining its online connection with Ladbroke's wagering system. Any system
interruption or malfunction at Ladbroke which inhibits its ability to process
wagers from the You Bet Network may adversely affect Youbet.com's business.
Additionally, Ladbroke's termination of its agreement with Youbet.com, whether
due to an intentional breach or due to Ladbroke's inability to comply with its
terms, would also adversely affect Youbet.com's business.
7
<PAGE>
CREDIT CARD COMPANIES MAY REFUSE TO PROCESS YOUBET.COM ACCOUNTS OR WAGERING
ACCOUNTS
Due to perceived legal uncertainty surrounding online live event
wagering, credit card companies may as a policy refuse to process wagering
account transactions for Ladbroke or any other account wagering entities with
whom Youbet.com has a relationship. Additionally, although Youbet.com does not
actually accept or place any wagers, credit card companies may also be hesitant
to process fees and online transactions by Youbet.com subscribers for the You
Bet Network and other handicapping products. This would limit the methods of
payment available to Youbet.com subscribers, lowering the convenience of the You
Bet Network and may make competitive services more attractive. This may
adversely affect Youbet.com's business and its relationship with account
wagering entities.
YOUBET.COM RELIES ON CONTENT PROVIDERS
Youbet.com is largely dependent upon negotiating and maintaining
agreements with third party information providers and horse tracks for much of
the audio, video and other content presented on the You Bet Network. Youbet.com
does not have exclusive relationships with any content providers. Youbet.com and
Ladbroke may not be able to negotiate or renew acceptable agreements with such
third parties on a timely basis or under acceptable terms and conditions.
As of the date of this prospectus, Youbet.com and Ladbroke have
agreements which allow a subscriber to obtain simulcast audio and video signals
from 31 horse tracks. These horse tracks may terminate the agreements.
Youbet.com strives to improve its content and may not be able to obtain such
agreements for such additional content from other providers or may lose
providers, especially in light of the efforts of competitors, such as the
Television Games Network, to enter into exclusive contracts with such providers.
YOUBET.COM MAY HAVE DIFFICULTY MAINTAINING ITS TECHNOLOGICAL POSITION
Youbet.com's performance depends on its ability to develop, license or
acquire new technologies to enhance its existing services in a time effective
manner. Youbet.com may not be able to maintain its competitive technological
position against current and potential competitors, especially those with
greater financial resources. Youbet.com relies on its software technology to
give it a competitive advantage. This software operates the You Bet Network and
runs on subscribers' PCs. Although Youbet.com is exploring the possibility of
additional intellectual property protection, its software is not currently
protected by patents or copyrights. Youbet.com's main technological advantage
versus potential competitors is its software lead-time in the market and
Youbet.com's experience in operating a wagering network. Therefore, if
competitors introduce new products and services which are based on the You Bet
Network, Youbet.com may have little recourse and its business could be adversely
affected.
INTERNATIONAL EXPANSION EFFORTS MAY NOT SUCCEED
Youbet.com is exploring international relationships and joint ventures
to facilitate the international deployment of sports wagering networks similar
to the United States launch of the You Bet Network. However, there are many
risks in doing business on an international basis, including:
- Potential online live wagering networks, offered by
competitors with greater resources;
- Satisfying different and possibly conflicting regulatory
requirements;
- Foreign currency exchange rate fluctuations;
- Legal uncertainty regarding liability;
- Tariffs, and other trade barriers;
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- Difficulties in staffing and managing foreign operations;
- Longer payment cycles and problems in collecting account
receivables;
- Different accounting practices;
- Political instability;
- Seasonal reductions in business activity; and
- Potentially adverse tax consequences.
Any of these risks could affect the success of Youbet.com's international
expansion. Also, Youbet.com may not be able to successfully establish itself
internationally.
SYSTEM DAMAGE OR FAILURE MAY ADVERSELY AFFECT YOUBET.COM
Youbet.com's systems are vulnerable to damage from earthquake, fire,
floods, power loss, telecommunications failures, break-ins and other unforseen
events. Youbet.com's business is dependent upon its communications hardware and
computer hardware, substantially all of which are located at a leased facility
in Los Angeles, California. Youbet.com has built in certain redundancies in its
systems in case of a system failure or damage, but does not have duplicate
geographic locations for its site of operations. A substantial interruption in
its systems would adversely affect Youbet.com's business.
Youbet.com has property and business interruption insurance covering
damage or interruption of Youbet.com's systems. However, this insurance may not
compensate Youbet.com for all losses that may occur.
YOUBET.COM IS SUBJECT TO ONLINE SECURITY RISKS
If Youbet.com's systems and controls are unable to handle online
security risks, its business will be adversely affected. Youbet.com uses packet
filters, fire walls, and proxy servers which are all designed to control and
filter the data allowed to enter Youbet.com's data center. However, advances in
computer capabilities, new discoveries in the field of cryptography, or other
events or developments may make it easier for someone to compromise or breach
the technology used by Youbet.com to protect subscribers' transaction data. If
such a breach of security were to occur, it could cause interruptions in service
and loss of data or cessation in service to subscribers of Youbet.com. This may
also allow someone to introduce a "virus," or other harmful component to the You
Bet Network causing an interruption or malfunction.
To the extent that activities of Youbet.com involve the storage and
transmission of information such as credit card numbers, security breaches could
damage Youbet.com's reputation and expose Youbet.com to a risk of loss or
litigation and possible liability. Youbet.com's insurance policies may not be
adequate to reimburse Youbet.com for losses caused by such security breaches.
YOUBET.COM DEPENDS ON THE COMMUNICATIONS INFRASTRUCTURE OF THE INTERNET FOR
TRANSMITTING WAGERING INFORMATION
Youbet.com utilizes electronic communications and the Internet
infrastructure to send and receive information to and from subscribers, Ladbroke
and other suppliers. Youbet.com's future success will depend, in significant
part, upon the maintenance and growth of this infrastructure and any failure or
interruption may have a material adverse effect on Youbet.com's business. This
infrastructure is necessary to economically transmit the large amounts of audio
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and video data which comprise a broadcast of a horse track racing event. To the
extent that this infrastructure continues to experience increased numbers of
users, increased frequency of use or increased bandwidth requirements of users,
Youbet.com cannot be certain that this infrastructure will be able to support
the demands placed on it or that the performance or reliability of this
infrastructure will not be adversely affected.
Outages and delays in sending or receiving data as a result of damage
to portions of this infrastructure could also affect Youbet.com's subscribers
ability to transmit wagering information or Ladbroke's ability to process such
information. This will also have an adverse effect on Youbet.com's business.
YOUBET.COM MAY FACE LIABILITY FOR CONTENT AND INFORMATION TRANSMITTED ON THE YOU
BET NETWORK
Youbet.com may face potential direct and indirect liability for
negligence, copyright, patent or trademark infringement, and other claims based
upon the content and data which Youbet.com makes available or sells to
subscribers. If Youbet.com were to be found liable, it would have an adverse
effect on Youbet.com's business. For example, by distributing an incorrect past
performance report, a subscriber may claim he relied on such information and
suffered a monetary loss. Computer failures may also result in incorrect data
being distributed. In these and other instances, Youbet.com may be required to
engage in long and expensive litigation, which could have the effect of
diverting management's attention and require the expenditure of significant sums
of money. Youbet.com's liability insurance may not cover all of these claims or
may not be adequate to protect against all liability that may be imposed. Any
such claims or resulting litigation could have a material adverse effect on
Youbet.com's business.
YOUBET.COM MAY EXPERIENCE PROBLEMS WITH RAPID GROWTH
In order to grow the You Bet Network, Youbet.com will be required to
improve existing transaction processing and operational systems and to train and
grow its number of employees. Youbet.com's current and planned management
systems and controls may not be adequate to support such growth. Additionally,
Youbet.com's management may not succeed in expanding and exploiting existing and
potential strategic relationships and market opportunities. The failure of
Youbet.com to expand effectively could have a material adverse effect on
Youbet.com's business, results of operations and financial condition.
YEAR 2000 RISKS MAY ADVERSELY AFFECT YOUBET.COM
System failure or miscalculations resulting from the year 2000 risk
could disrupt Youbet.com's operations, resulting in, among other things, a
temporary inability to process transactions, send wagering confirmations or
engage in similar normal business activities. The year 2000 risk is the result
of computer programs being written using two digits rather than four digits to
define the applicable year. Computer programs that have sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
Based on an internal assessment, Youbet.com believes that its software
programs, both those developed internally and purchased from outside vendors,
are already year 2000 compliant or will be by December 31, 1999. However, any
failure of Youbet.com's software to properly process dates for the year 2000
could require Youbet.com to incur unanticipated expenses. This could have an
adverse effect on Youbet.com's business. Also, Youbet.com may suffer a system
failure if any third party supplier of content or software, such as Ladbroke, is
not fully year 2000 compliant.
YOUBET.COM DEPENDS ON KEY PERSONNEL
Youbet.com depends on the services of its senior management, which if
not available might have a material adverse effect on Youbet.com. While certain
members of senior management are parties to employment or services agreements
with Youbet.com, none of these agreements are long-term, and none prohibit an
employee from terminating such an agreement. Additionally, Youbet.com has not
yet filled certain key positions in its management
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team, which management believes are crucial to Youbet.com's development.
Youbet.com's future success depends on its ability to identify, attract, hire,
train, retain and motivate highly skilled technical, managerial, marketing and
customer service personnel. Competition for such personnel is intense and
Youbet.com may not be able to retain and attract such employees. Also, at the
present time Youbet.com does not carry any key personnel life insurance.
RISKS RELATED TO THE OFFERING
YOUBET.COM HAS A SIGNIFICANT AMOUNT OF DEBT
Youbet.com has a significant amount of debt outstanding consisting
primarily of $45.5 million principal amount of 11% Senior Convertible Discount
Notes and has approximately $37.7 million of stockholders' equity as of June 30,
1999. The degree to which Youbet.com is leveraged could have important
consequences to the stockholders, including the following:
- Youbet.com's ability to obtain additional financings for
working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired;
- Commencing in October 2001, Youbet.com must pay interest on
its notes leaving less funds for other purposes;
- Youbet.com may be at a competitive disadvantage to its less
leveraged competitors; and
- Youbet.com may be more vulnerable to a downturn in general
economic conditions.
If Youbet.com were to be in default under the notes for any reason, there can be
no assurance that any assets will remain for Youbet.com's stockholders after
payment of amounts owed to the noteholders.
WARRANTHOLDERS MAY ASSERT CLAIMS REGARDING THEIR REGISTRATION RIGHTS
Certain of the warrantholders have or may have registration rights
with respect to their warrants and/or shares of common stock underlying such
warrants and may assert claims against Youbet.com in connection with such
rights. Specifically, on June 4, 1999 a holder of 400,000 warrants filed a
complaint against Youbet.com alleging Youbet.com breached its obligation to
register the 400,000 shares underlying such warrants. Youbet.com filed its
answer on July 15, 1999. On August 19, 1999 this warrantholder filed a motion
for summary judgment. The court has not set a briefing or hearing date for
this motion. As the litigation is in its initial stage, Youbet.com cannot
predict its outcome, although if the claim is determined adversely to
Youbet.com it could have a material adverse effect on Youbet.com.
Additionally, on August 12, 1999 a holder of 15,000 warrants gave notice to
Youbet.com of his intent to pursue a claim alleging Youbet.com's breach of
its obligation to register the 15,000 shares underlying such warrants. As no
claim has been filed, Youbet.com cannot predict the outcome of such a claim.
YOUBET.COM'S OFFICERS AND DIRECTORS EXERCISE VOTING CONTROL OVER YOUBET.COM
In June, 1998 the Robert M. Fell Living Trust, David Marshall, Russell
Fine and other stockholders, entered into a stockholders agreement, whereby they
collectively exercise voting control over Youbet.com in the election of
directors. Under the agreement, the parties agreed to vote all shares of
Youbet.com's Series A Convertible Preferred Stock (which has since been
converted to common stock as of June 18, 1999) and common stock owned by them
for the election to the board of directors of four persons designated by Mr.
Fell and three persons designated by Messrs. Marshall and Fine. As a result of
the ability to designate four directors as provided in the stockholders
agreement, Robert M. Fell may be deemed to control Youbet.com. This stockholders
agreement terminates in June, 2000. As of the date of this prospectus, the
officers and directors of Youbet.com as a group control, either directly or by
reason of the stockholders agreement, approximately 22.6% of the voting power
of Youbet.com.
YOUBET.COM DOES NOT INTEND TO PAY DIVIDENDS
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Youbet.com does not anticipate paying any cash dividends on its common
stock to its stockholders for the foreseeable future. Youbet.com intends to
retain future earnings, if any, for use in the operation and expansion of its
business. In addition, the 11% Senior Convertible Discount Notes contain, and it
is probable that any debt financing agreements entered into by Youbet.com in the
future will contain, restrictions on Youbet.com's ability to declare dividends.
YOUBET.COM'S COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS
The stock markets in general, the Nasdaq National Market and the market
for Internet/online companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. The trading prices of many technology
companies' stocks are at or near historical highs and reflect valuations
substantially above historical levels. These trading prices and valuations may
not be sustainable. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Such litigation, if instituted against
Youbet.com, could result in substantial costs which would have a material
adverse effect on Youbet.com's business.
SHARES ELIGIBLE FOR FUTURE SALE MAY NEGATIVELY AFFECT TRADING PRICE
Sales of Youbet.com's common stock in the public market (including on
the exercise of stock options and warrants), may negatively affect the market
price of the common stock. This could also lessen Youbet.com's ability to sell
equity or equity related securities at a future time.
As of August 31, 1999, Youbet.com has outstanding 19,121,288
shares of common stock. Of these shares of common stock, approximately
1,125,000 restricted shares of common stock will become eligible for sale in
the public markets under Rule 144 within the next six months. Youbet.com's
officers and directors have agreed until January 10, 2000 not to offer to
sell, contract to sell, or to otherwise dispose of any shares of common
stock, options or warrants to purchase such shares owned as of June 14, 1999,
the effective date of Youbet.com's underwritten public offering, without the
prior written consent of the underwriters of such offering. Additionally,
none of the selling stockholders may sell shares registered pursuant to this
prospectus until December 11, 1999 without the prior written consent of the
underwriters. After such lock-up periods have expired, such shares may be
sold in the public market.
Warrantholders representing 4,519,140 shares of common stock are
subject to a letter agreement dated March 11, 1999 with Youbet.com. Pursuant
to the letter agreement, such warrantholders previously sold 654,275 shares
underlying warrants in the June 14, 1999 underwritten offering. Youbet.com
has agreed with the warrantholders who were parties to the letter agreement
to register the shares underlying such warrants not sold in the June 14, 1999
offering by no later than June 18, 2000. Such shares may be sold when
registered provided the warrantholders limit their sales during any three
month period to 25% of the shares of common stock underlying such remaining
warrants.
As of August 31, 1999, Youbet.com also has outstanding 2,426,146
stock options granted pursuant to Youbet.com's stock option plans. Youbet.com
intends to register the common stock underlying such plans.
Delaware law provisions which are not opted out of by Youbet.com's
Certificate of Incorporation and Bylaws could make it more difficult for a third
party to acquire Youbet.com, even if doing so would be beneficial to
Youbet.com's stockholders. Additionally, Youbet.com's Certificate of
Incorporation authorizes the board of directors to issue up to 1,000,000 shares
of preferred stock, in one or more series and permits the board of directors to
fix the rights, preferences, powers and designations of such series without a
stockholders vote. Depending on the terms of any such series, such preferred
stock may discourage attempts to acquire Youbet.com.
The holders of the 11% Senior Convertible Discount Notes may call the
notes due and payable upon a "change in control" of Youbet.com. "Change in
control" includes a sale of substantially all of Youbet.com's assets, an
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acquisition of 20% or more of the voting power of Youbet.com by a "group" of
affiliated persons within the meaning of Section 13(d) of the Securities and
Exchange Act of 1934, as amended, the acquisition by Youbet.com of more than 30%
of its capital stock outstanding immediately prior to such acquisition, the
payment of a dividend or other distribution to Youbet.com's stockholders in an
amount that is 30% or more of the fair market value of Youbet.com's outstanding
capital stock immediately prior to such distribution or dividend, or the
acquisition by a person or affiliated group of the power to elect or appoint the
majority of Youbet.com's board of directors.
USE OF PROCEEDS
The shares of common stock being offered are solely for the accounts of
the selling stockholders. Youbet.com will not receive any proceeds from the sale
of the common stock. However, to the extent selling stockholders convert their
11% Senior Convertible Discount Notes to common stock or exercise stock purchase
warrants, Youbet.com will be released from obligations under such notes or may
receive proceeds from the exercise of warrants, except in such cases where the
warrants have "cashless" exercise features and such features are invoked.
SELLING STOCKHOLDERS
Youbet.com issued the 11% Senior Convertible Discount Notes on April 5,
1999 pursuant to a series of Note Purchase Agreements. These agreements require
Youbet.com to file a registration statement covering the common stock issuable
upon conversion of such notes. This prospectus is a part of such registration
statement.
Additionally, the holders of 3,284,179 shares of common stock
(including 1,479,729 shares issuable on exercise of stock purchase warrants) are
registering such shares for resale under this prospectus.
The table in Appendix I hereto, sets forth information about the
selling stockholders and the number of shares of common stock beneficially
owned by them including upon conversion of the 11% Senior Convertible
Discount Notes or exercise of the warrants. Except as disclosed in this
prospectus, none of the selling stockholders, has, or within the past three
years has had, any position, office or other material relationship with
Youbet.com or any of its predecessors. The selling stockholders listed in the
table may have sold or transferred, in transactions exempt from the
registration requirements of the Securities Act, some or all of their 11%
Senior Convertible Discount Notes, warrants and common stock since the date
on which the information in the table is presented, therefore affecting the
number of shares offered by them. Information about the selling stockholders
may change over time. Youbet.com cannot estimate the amount of common stock
that will be held by the selling stockholders upon the termination of the
offering since it is possible that selling shareholders may not sell such
shares or may acquire or dispose of shares of common stock not included in
this registration statement. See "Plan of Distribution."
Youbet.com prepared the table in Appendix I based on the information
supplied to Youbet.com by the selling stockholders named in the table.
PLAN OF DISTRIBUTION
Youbet.com is registering 7,834,179 shares of common stock on behalf
of the selling stockholders. Youbet.com has agreed to maintain the
effectiveness of this prospectus for the amount of time required pursuant to
the terms of the Note Purchase Agreements dated April 5, 1999, the
Registration Rights Agreement entered into in connection with Youbet.com's
sale of series A preferred stock, dated June 29, 1998 and the various
warrants whose underlying shares are being registered hereunder.
None of the selling stockholders may sell shares of common stock
registered hereunder prior to December 11, 1999, unless they receive written
consent from the underwriters of Youbet.com's underwritten public offering
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completed on June 18, 1999. The selling stockholders may sell the shares of
common stock covered by this prospectus from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The selling stockholders may offer their shares
for sale in one or more of the following types of transactions:
- on the Nasdaq National Market;
- through the facilities of any national securities exchange or
U.S. automated inter-dealer quotation system of a registered
national securities association on which any of the shares of
common stock are then listed, admitted to unlisted trading
privileges or included for quotation; and
- through negotiated transactions, block transactions, special
offerings, exchange distributions and/or secondary
distributions, in settlement of short sales of common stock;
or
- through a combination of such methods of sale.
The selling stockholders also may sell all or a portion of the shares
covered by this prospectus in open market transactions in reliance on Rule 144
under the Securities Act, provided that the selling stockholders meet the
criteria and conform to the requirements of such rule.
The selling stockholders may from time to time pledge the common stock
owned by them to secure margin or other loans made to one or more of the selling
stockholders. Thus, the person or entity receiving the pledge of any of the
shares of common stock may sell them, in a foreclosure sale or otherwise, in the
same manner as described above for a selling stockholder.
Youbet.com has not been advised of any selling arrangement at the date
of this prospectus between any selling stockholder and any broker-dealer or
agent. Youbet.com will not receive any of the proceeds from the sale of the
shares by the selling stockholders. However, to the extent selling stockholders
convert their 11% Senior Convertible Discount Notes to common stock or exercise
warrants, Youbet.com will be released from obligations under such Notes or may
receive proceeds from the exercise of the warrants, except in such cases where
the warrants have "cashless" exercise features and such features are invoked.
The selling stockholders and any dealer acting in connection with the
offering or any broker executing a sell order on behalf of a selling stockholder
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any profit on the sale of shares by a selling stockholder and any
commissions or discounts received by any the broker or dealer may be deemed to
be underwriting compensation under the Securities Act. In addition, the broker
or dealer may be required to deliver a copy of this prospectus to any person who
purchases any of the shares from or though the broker or dealer.
Under the Note Purchase Agreements dated April 5, 1999, Youbet.com
agreed, among other things, to use its best efforts to have the registration
statement declared effective by the Securities and Exchange Commission and
maintain the effectiveness of the registration statement through and until the
date which is the earliest of the date on which all shares of common stock
underlying the 11% Senior Convertible Discount Notes are sold via the
registration statement, or are freely saleable for all selling stockholders
without limits as to volume or otherwise under Rule 144(k) of the Securities
Act, or April 5, 2004. Such date will be extended 1.5 days for each day after
the effectiveness of the registration statement on which any selling stockholder
is unable to sell registrable shares because of any suspension, delisting,
blackout or other similar event, provided that after April 5, 2004, such
effective date need only be extended for shares of common stock which are not
freely tradable under Rule 144(k).
Under the Registration Rights Agreement dated June 29, 1998, Youbet.com
granted piggy-back registration rights to certain holders of common stock
(including holders of Series A Convertible Preferred Stock which has since
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been converted to common stock) and agreed, among other things, to use its best
efforts to have the registration statement declared effective by the Securities
and Exchange Commission and maintain the effectiveness of the registration
statement through the period of distribution. Youbet.com also agreed to file the
reports required to be field by Youbet.com under the Securities Act and the
Exchange Act in a timely manner and to take such further action as any holder of
securities covered by the registration rights agreements reasonably requests to
enable the holder to sell his securities without registration, including making
publicly available the information necessary to permit sales of the securities
pursuant to Rules 144 under the Securities Act.
The registration statement also registers shares of common stock
underlying certain stock purchase warrants issued by Youbet.com. The holders of
such warrants were granted certain registration rights in connection with the
issuance of such warrants.
Youbet.com is bearing all fees and expenses incurred in connection with
the registration of the shares of common stock which may be sold under the
prospectus other than attorneys' fees incurred by selling stockholders
registering shares pursuant to the Registration Rights Agreement and the various
warrants.
Youbet.com has agreed to indemnify certain of the selling stockholders
against certain liabilities which may arise in connection with this offering and
such selling stockholders have severally and not jointly agreed to indemnify
Youbet.com against certain other liabilities which may arise in connection with
this offering.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Youbet.com by Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP.
As of the date of this prospectus, Gary N. Jacobs, a senior partner of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP who serves as
Youbet.com's Secretary, beneficially owns 46,767 shares of common stock,
including shares which may be acquired pursuant to stock options exercisable
within 60 days from August 31, 1999. Another attorney having an "of counsel"
relationship with Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro,
LLP owns 20,000 shares of common stock.
EXPERTS
The financial statements of Youbet.com Inc. as of December 31, 1998
and 1997 and for each of the years in the two year period ended December 31,
1998 on Form 10-KSB are incorporated by reference in this Prospectus and have
been audited by BDO Seidman, LLP, independent certified public accountants,
to the extent and for the periods set forth in their report incorporated
herein by reference, and are incorporated herein in reliance upon such report
given upon the authority of said firm as experts in auditing and accounting.
INDEMNIFICATION
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation shall have the power, and in some cases is required,
to indemnify an agent, including an officer or director, who was or is a party
or is threatened to be made a party to any proceedings, against certain
expenses, judgments, fines, settlements and other amounts under certain
circumstances. Youbet.com's Bylaws provide that (1) Youbet.com is required to
indemnify its directors and officers to the maximum extent permitted by the
Delaware General Corporate Law, subject to certain very limited exceptions, (2)
Youbet.com may indemnify its other employees and agents to the maximum extent
permitted by the Delaware General Corporate Law, (3) Youbet.com is required to
advance expenses, as incurred, to its directors and officers in connection with
a legal proceeding, subject to certain very limited exceptions and (4) the
rights conferred in the Bylaws are not exclusive. Youbet.com also maintains
insurance covering certain liabilities of the directors and officers of the
small business issuer and its subsidiaries.
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Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Youbet.com pursuant to the foregoing provisions, or otherwise, Youbet.com has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows Youbet.com to
"incorporate by reference" the information Youbet.com files with it, which means
that Youbet.com can disclose important information to prospective investors by
referring prospective investors to those documents. The information incorporated
by reference is considered to be part of this prospectus, and later information
that Youbet.com files with the Securities and Exchange Commission will
automatically update and supersede this information. Youbet.com incorporates by
reference the following:
- Form 10-KSB for the year ended December 31, 1998;
- Form 10-QSB for the first quarter ended March 31, 1999;
- Form 10-QSB for the second quarter ended June 30, 1999;
- Forms 8-K filed on January 26, 1999 and June 10, 1999;
- The description of Youbet.com's common stock contained in the
registration statement on Form 8-A filed under Section 12(g)
of the Exchange Act on June 10, 1999; and
- Proxy Statement for the Annual Meeting of Stockholders
held on September 23, 1999.
- Any other filings made with the Securities and Exchange
Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after December 31 1998 until
this offering is terminated.
Youbet.com will provide without charge to each person, including any
beneficial owner, to whom this prospectus is delivered, upon the written or
oral request of such person, a copy of any or all of the documents referred
to above which have been incorporated by reference, other than exhibits to
such documents. Written requests for such copies should be addressed to:
Youbet.com, Inc., 1950 Sawtelle Boulevard, Suite 180, Los Angeles, CA 90025,
Attention: Phillip Hermann. Youbet.com's telephone number is (310) 444-3300.
AVAILABLE INFORMATION
Youbet.com has filed with the Securities and Exchange Commission a
registration statement (of which this prospectus is a part) on Form S-3 under
the Securities Act, with respect to the common stock offered hereby. This
prospectus does not contain all the information set forth in the registration
statement and the exhibits and schedules thereto. Statements contained in this
prospectus as to the content of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto.
Youbet.com is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended and in accordance therewith files
reports and other information with the commission. The registration statement,
including the exhibits and schedules thereto, as well as any other information
filed by Youbet.com may be inspected and copied at the public reference rooms
maintained by the commission at its principal office located at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, the New York Regional
Office located at 7 World Trade Center, New York, New York 10048, and the
Chicago Regional Office located at Northwest Atrium Center, 500 West
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Madison Street, Room 1204, Chicago, Illinois 60661-2511. Please call the
commission at 1-800-SEC-0330 for further information on the public reference
rooms.
Electronics filings made by Youbet.com through the commission's
Electronic Data Gathering, Analysis and Retrieval System are publicly available
through the commission's World Wide Web site (http://www.sec.gov), which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the commission.
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APPENDIX I
SELLING STOCKHOLDERS
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM
BENEFICIAL OWNERSHIP OF PERCENTAGE OF NUMBER
COMMON STOCK BEFORE THE OFFERING COMMON STOCK OF SHARES OF
----------------------------------- BENEFICIALLY COMMON STOCK
COMMON OWNED BEFORE THAT MAY BE
SELLING STOCKHOLDERS STOCK NOTES(1) WARRANTS THE OFFERING(2) OFFERED(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Bancorp Libra, a Division of U.S. Bancorp Investments, Inc. 138,367 20,000(4) * 181,000
Orna Wolens & Keenan Wolens As Successor Co-Trustees
FBO Ravich Children Permanent Trust Dated May 11, 1995 53,714 * 62,500
Rand Ravich 8,594 * 10,000
Andrew Africk 22,107 12,891 7,053 * 22,053
Value Partners, Ltd. 429,712 2.20% 500,000
Robert Scott Fritz 10,743 * 12,500
JMG Convertible Investments, L.P. 36,096 * 42,000
Triton Capital Investments Ltd. 36,096 * 42,000
Ravich Revocable Trust of 1989 62,000 257,827 10,000(5) 1.70% 310,000
Charles A. Yamarone 1,000 4,297 1,250(5) * 6,250
Robert G. Morrish 4,297 3,750(5) * 8,750
Upchurch Living Trust U/A/D 12/14/90 12,891 5,000(5) * 20,000
Gregory Bousquette 4,297 * 5,000
Ravich Family Foundation 21,486 * 25,000
Everest Capital Master Fund, L.P. 161,000 1,246,164 6.91% 1,450,000
Quantum Emerging Growth Partners, C.V. 47,000 687,539 3.71% 800,000
Continental Casualty Company 429,712 2.20% 500,000
Dickstein & Co., L.P. 197,667 1.02% 230,000
Dickstein International Limited 42,971 * 50,000
Dickstein Focus Fund, L.P. 17,188 * 20,000
Robert Okun 5,000(5) * 5,000
Jeffrey Benjamin 5,000(5) * 5,000
TCW Shared Opportunity Fund II, L.P. 85,942 * 100,000
TCW Leveraged Income Trust, L.P. 85,942 * 100,000
TCW Leveraged Income Trust II, L.P. 85,942 * 100,000
Robert M. Fell Trustee FBO Robert M. Fell Living Trust(6) 204,450 1,200,000 6.91% 1,404,450
David M. Marshall, Inc.(7) 2,042,737 40,342 10.87% 20,171
Russell M. Fine(8) 1,928,549 55,878 10.35% 27,939
Banque Multi Commerciale "Clients Account" 100,000 * 100,000
Thomas J. Volpe Trustee The Interpublic Group of Companies, Inc.
Benefit Protection Trust 360,000 1.88% 360,000
Barry R. Devorzon 100,000 * 100,000
Howard Arvey, Trustee of the Howard Arvey Trust dated 11/26/79 35,000 * 35,000
Sanford R. Climan 17,500 * 17,500
Sanford R. Climan C/F Joseph Todd Climan UTMA CA 4,000 * 4,000
Sanford R. Climan C/F Matthew David Climan UTMA CA 4,000 * 4,000
A. Sheikh 20,000 * 20,000
Rameshchandra M. Patel 60,000 * 60,000
Leonard R. Meyers 4,400 * 4,000
Edward Duke Vincent Trustee FBO Edward Duke Vincent Trust 40,000 * 40,000
Ed Lieberman 2,000 * 2,000
Ira Brodsky 4,000 * 4,000
Melvin Simon 100,000 * 100,000
Steve and Charlene Ustin 79,667 44,333 * 20,000
Edwin L. Fields 9,500 * 9,500
Monte M. Lemann 10,000 * 10,000
John Landsberger 20,000 * 20,000
John Landsberger Trustee FBO Landsberger Family Trust 20,000 * 20,000
Establissement Finital 278,000 100,000 1.97% 200,000
Paul C. Rivello 50,000 * 50,000
Robert & Ellen Deutschman 13,261 17,667 * 17,667
Deutschman Family Trust 10,000 20,000 * 30,000
Excalibur Investment Limited 38,833 70,667 * 30,667
Henry Wilf 20,000 * 20,000
Colin McHugo 5,800 5,000 * 5,000
Nicholas M. Strelchuk 10,000 * 10,000
Mainstreet Limited 70,000 * 70,000
Park Ave Securites 20,000 * 20,000
United Estates Limited 120,000 * 120,000
Merrill Lynch Trust Company of New York Trustee FBO Autotote
Corporation Key Executives 100,000 * 100,000
Summerdene Corporation 50,000 * 50,000
Daniel Fegan 15,900 * 6,900
Timothy Douglas Quartly-Watson 5,000 * 5,000
Cowen & Company (Custodian for Edward Gerald Ruhland IRA) 20,000 20,000 * 10,000
Edward Gerald Ruhland 7,500 30,000 * 5,000
Lorne A. Goldberg 91,999 * 61,332
Elizabeth Edlich 19,499 * 13,000
The Gary and Robin Jacobs Family Trust dated 5/25/96(9) 20,000 * 20,000
----------------------------------------------------------------
TOTAL 6,292,304 3,910,377 1,793,338 48.32% 7,834,179
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>
* Less than 1.0%
(1) Calculated using shares of common stock beneficially owned as of August
31, 1999 and such shares beneficially owned upon conversion of the 11%
Senior Convertible Discount Notes or exercise of warrants within 60
days of August 31, 1999. Beneficial ownership includes $691,873 of
estimated interest for the period from August 31, 1999 to October 31,
1999, which is convertible into 69,187 shares of common stock.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using
19,121,288 shares of common stock outstanding as of August 31, 1999. In
calculating this amount, Youbet.com treated as outstanding the number
of shares of common stock and the number of shares issuable upon
conversion or exercise of that particular selling stockholder's 11%
Senior Convertible Discount Notes and warrants. However, Youbet.com did
not assume the conversion or exercise of any other selling
stockholder's 11% Senior Convertible Discount Notes and/or warrants.
(3) Assumes conversion of all selling stockholder's 11% Senior Convertible
Discount Notes at a conversion price of $10 per share of common stock
as of April 5, 2001.
(4) U.S. Bancorp Libra, a division of U.S. Bancorp Investments, Inc. acted
as placement agent in the issuance by Youbet.com of the 11% Senior
Convertible Discount Notes on April 5, 1999. Warrants exercisable into
an aggregate of 50,000 shares of common stock were issued to U.S.
Bancorp Libra for services as placement agent. U.S. Bancorp Libra
transferred warrants convertible into an aggregate of 30,000 shares of
common stock to certain of its employees or trusts for their benefit.
(5) Represents warrants transferred by U.S. Bancorp Libra.
(6) Mr. Robert M. Fell is President, Chief Executive Officer and
Chairman of the Board of Youbet.com.
(7) Mr. David M. Marshall is Vice-Chairman of the Board of Youbet.com and
served as Chief Executive Officer of Youbet.com until June, 1998.
(8) Mr. Russell M. Fine is Executive Vice President, Chief Technology
Officer and a Director of Youbet.com.
(9) Mr. Gary N. Jacobs is Secretary of Youbet.com.
19
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission filing Fee............................................................... $15,869.72
Printing and engraving fees and expenses.................................................................... $ 15,000
Legal fees and expenses..................................................................................... $ 50,000
Accounting fees and expenses................................................................................ $ 5,000
----------
Total.............................................................................................. $85,869.72
----------
----------
</TABLE>
Youbet.com will bear all the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation shall have the power, and in some cases is required,
to indemnify an agent, including an officer or director, who was or is a party
or is threatened to be made a party to any proceedings, against certain
expenses, judgments, fines, settlements and other amounts under certain
circumstances. Article XI of Youbet.com's Bylaws requires indemnification of
Youbet.com's officers and directors to the maximum extent permitted by the
Delaware General Corporation Law, and Youbet.com maintains insurance covering
certain liabilities of the directors and officers of Youbet.com and its
subsidiaries.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
2.1 Acquisition Agreement between PC Totes, Inc. and Embassy
Acquisition, Inc. dated as of December 6, 1995. (Incorporated
herein by reference to Youbet.com's Form 10-K for the year
ended December 31, 1995.)
*4.1 Form of Note Purchase Agreement by and among Youbet.com and
the Purchasers as defined therein, dated April 5, 1999.
*4.2 Form of Warrant to purchase Youbet.com common stock, issued in
connection with the Note Purchase Agreement dated April 5,
1999.
4.3 Registration Rights Agreement by and among Youbet.com
(formerly You Bet International, Inc.) and the other parties
listed therein, dated June 29, 1998. (Incorporated herein by
reference to Youbet.com's Form 8-K dated June 29, 1998.)
**4.4 Form of Series A Warrant to purchase Youbet.com common stock.
**4.5 Form of Series B Warrant to purchase Youbet.com common stock.
**4.6 Form of Series C Warrant to purchase Youbet.com common stock.
**4.7 Form of Series D Warrant to purchase Youbet.com common stock.
**4.8 Form of Series E Warrant to purchase Youbet.com common stock.
**4.9 Form of Series M Warrant to purchase Youbet.com common
stock at $3.125 per share.
**4.10 Form of Series M Warrant to purchase Youbet.com common
stock at $5.25 per share.
4.11 Warrant to purchase Youbet.com common stock issued to
Robert M. Fell, dated June 29, 2998. (Incorporated herein
by reference to Youbet.com's Form 8-K dated June 29, 1998.)
**4.12 Form of warrant to purchase Youbet.com common stock at
$2.50 per share, issued to Lorne Goldberg and Elizabeth
Edlich dated August 24, 1999.
**5.1 Opinion of Christensen, Miller, Fink, Jacobs, Glaser, Weil &
Shapiro, LLP
**23.1 Consent of Christensen, Miller, Fink, Jacobs, Glaser, Weil &
Shapiro, LLP (included in Exhibit 5.1)
**23.2 Consent of BDO Seidman, LLP
*24 Power of Attorney
</TABLE>
- -------------
* Filed Previously
** Filed Herewith
20
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act
(b) To reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement.
(c) To include any additional or changed material
information on the plan of distribution;
provided, however, that clauses (a) and (b) do not apply if the
information required to be included in a post-effective amendment by
such clauses is incorporated by reference from periodic reports filed
by the issuer under the Exchange Act.
(2) That, for determining liability under the Securities Act, each
such post-effective amendment shall be deemed a new
registration statement of the securities offered, and the
offering of such securities at that time to be the initial
bona fide offering.
(3) To remove from registration any of the securities being
registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
21
<PAGE>
The undersigned small business issuer undertakes that it will:
(1) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by small business
issuer under Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of
the securities at the time as the initial BONA FIDE offering
of these securities.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the small
business issuer certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on September 29, 1999.
YOUBET.COM, INC.
By: /s/ Robert M. Fell
-------------------------------------
Robert M. Fell
Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Robert M. Fell Chairman of the Board of Directors September 29, 1999
- ---------------------- President and Chief Executive Officer
Robert M. Fell
*/s/ David M. Marshall Vice Chairman of the Board September 29, 1999
- ---------------------- of Directors
David M. Marshall
*/s/ Russell M. Fine Executive Vice President September 29, 1999
- ---------------------- Chief Technology Officer
Russell M. Fine and Director
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Phillip C. Hermann Executive Vice President September 29, 1999
- ----------------------- and Chief Financial Officer
Phillip C. Hermann
*/s/ Caesar P. Kimmel Director September 29, 1999
- -----------------------
Caesar P. Kimmel
*/s/ Alan W. Landsburg Director September 29, 1999
- -----------------------
Alan W. Landsburg
Director September __, 1999
- --------------------------
Charles D. Peebler, Jr.
Director September __, 1999
- -----------------------
William H. Roedy
</TABLE>
* By /s/ Phillip C. Hermann
---------------------------
Phillip C. Hermann
Attorney-in-fact
24
<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY
BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION
FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
YOUBET.COM, INC.
Incorporated Under the Laws of the State of Delaware
NO. ____________ _________COMMON STOCK
PURCHASE WARRANTS
CERTIFICATE FOR COMMON STOCK
PURCHASE WARRANTS -- SERIES 'A'
1. WARRANTS. This Warrant Certificate certifies that ___________________
_______________________ or registered assigns (the indicated number of Warrants
expiring on the Expiration Date, as hereinafter defined. One (1) Warrant
entitles the Registered Holder to purchase one (1) share of the $.001 par value
common stock (a "share") of Youbet.com, Inc., a Delaware corporation (the
"Company"), from the Company at a purchase price of Two Dollars and Fifty Cents
($2.50) (the "Exercise Price") at any time during the Exercise Period, as
hereinafter defined, upon surrender at the principal office of the Company of
this Warrant Certificate with the exercise form appended hereto duly completed
and executed and accompanied by payment of the Exercise Price.
Upon due presentment for transfer or exchange of this Warrant Certificate
at the principal office of the Company, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate, subject to
the limitations provided herein, upon payment of any tax or governmental charge
imposed in connection with such transfer. Subject to the terms hereof, the
Company shall deliver Warrant Certificates in required whole number
denominations to Registered Holders in connection with any transfer or exchange
permitted hereunder.
2. RESTRICTIVE LEGEND. Each Warrant Certificate and each certificate
representing Shares issued upon exercise of a Warrant, unless such Shares are
then registered under the Securities Act of 1933, as amended (the "Act"), shall
bear a legend in substantially the following form:
"THE [SECURITES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITES ACT OF 1933 OR
1
<PAGE>
THE SECURITES OR BLUE SKY LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY
IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF FEDERAL AND
STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION
OR QUALIFICATION IS APPLICABLE."
3. EXERCISE. Subject to the terms hereof, the Warrants evidenced by this
Warrant Certificate may be exercised at the Exercise Price in whole or in part
at any time during the period (the "Exercise Period") commencing on the first
anniversary of the date hereof and terminating at the close of business on that
day (the "Expiration Date") which is the second anniversary of the later of (i)
the date on which a registration statement filed pursuant to the Act and
covering the Shares to be issued upon exercise of the Warrants represented by
this Warrant Certificate is declared effective and (ii) the last date on which a
warrant having terms (including without limitation Exercise Price, Exercise
Period, method of exercise and transferability) substantially identical to the
terms of the Warrants represented by this Warrant Certificate (the "Series A
Warrants") is issued, provided that the Exercise Period shall be extended and
the Expiration Date delayed by one business day for each business day subsequent
to the effectiveness of such registration statement on which a prospectus
meeting the prospectus delivery requirements of the Art and covering the
issuance of such Shares to and, if appropriate, the resale of such Share by the
Registered Holder hereof or the successors in interest to such Registered Holder
is not available. The Exercise Period may also be extended by the Company's
Board of Directors. Upon the initial determination thereof and each subsequent
modification thereof, the Company shall promptly notify each holder of Series A
Warrants of the Expiration Date, as it may be determined from time to time.
In the event the Shares issuable upon exercise of the Warrants represented
by this Warrant Certificate have not yet been registered under the Act or are
not then covered by a current prospectus meeting the requirements of the Act,
the right of a holder of such Warrants to exercise such Warrants shall be
conditioned upon such holder providing the Company with an opinion of counsel,
in form and substance reasonably acceptable to the Company, to be effect that
the issuance of Shares upon exercise of such Warrants is exempt from the
registration requirements of the Act.
A Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date (the "Exercise Date") of the surrender to the
Company at its principal offices of this Warrant Certificate with the exercise
form attached hereto completed and executed by the Registered Holder and
accompanied by payment to the Company, in cash or by check (which shall be
accepted subject to collection), of an amount equal to the aggregate Exercise
Price, in lawful money of the United States of America.
The person entitled to receive the Shares issuable upon exercise of a
Warrant or Warrants ("Warrant Shares") shall be treated for all purposes as the
holder of such Warrant Shares as of the close of business on the Exercise Date.
The Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable or
2
<PAGE>
deliverable on the exercise of any Warrant or scrip or cash with respect
thereto, and such right to a fractional share shall be of no value
whatsoever. If more than one Warrant shall be exercised at one time by the
same Registered Holder, the number of full Shares which shall be issuable on
exercise thereof shall be computed on the basis of the aggregate number of
full shares issuable on such exercise.
Promptly, and in any event within ten business days after the Exercise
Date, the Company shall cause to be issued and delivered to the person or
persons entitled to receive the same, a certificate or certificates for the
number of Warrant Shares deliverable on such exercise.
The Company may deem and treat the Registered Holder of the Warrants at any
time as the absolute owner thereof for all purposes, and the Company shall not
be affected by any notice to the contrary. The Warrants shall not entitle the
Registered Holder thereof to any of the rights of shareholders or to any
dividend declared on the Shares unless the Registered Holder shall have
exercised the Warrants and thereby purchased the Warrant Shares prior to the
record date for the determination of holders of Shares entitled to such dividend
or other right.
4. RESERVATION OF SHARES AND PAYMENT OF TAXES. The Company
covenants that it will at all times reserve and have available from its
authorized Common Stock such number of Shares as shall then be issuable on the
exercise of outstanding Series A Warrants. The Company covenants that all
Warrant Shares which shall be so issuable shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges with
respect to the issue thereof.
The Registered Holder shall pay all documentary, stamp or similar taxes and
other government charges that may be imposed with respect to the issuance,
transfer or delivery of any Warrant Shares on exercise of the Warrants. In the
event the Warrant Shares are to be delivered in a name other than the name of
the Registered Holder of the Warrant Certificate, no such delivery shall be made
unless the person requesting the same has paid the amount of any such taxes or
charges incident thereof.
5. REGISTRATION OF TRANSFER. The Warrant Certificates may be
transferred in whole or in part, provided any such transfer complies with all
applicable federal and state securities laws and, if requested by the Company,
the Registered Holder delivers to the Company an opinion of counsel to that
effect, in form and substance reasonably acceptable to the Company. Warrant
Certificates to be transferred shall be surrendered to the Company at its
principal office. The Company shall execute, issue and deliver in exchange
therefor the Warrant Certificate or certificates, which the Registered Holder
making the transfer shall be, entitled to receive.
The Company shall keep transfer books at its principal office, which shall
register Warrant Certificates and the transfer thereof. On due presentment of
any Warrant Certificate for registration of transfer at such office, the Company
shall execute, issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates
3
<PAGE>
representing an equal aggregate number of Warrants. All Warrant Certificates
presented for registration of transfer or exercise shall be duly endorsed or
be accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company. The Company may require payment of a sum
sufficient to cover any tax or other government change that may be imposed in
connection therewith.
All Warrant Certificates so surrendered, or surrendered for exercise, or
for exchange in case of mutilated Warrant Certificates, shall be promptly
canceled by the Company and thereafter retained by the Company until the
Expiration Date. Prior to due presentment for registration of transfer thereof,
the Company may treat the Registered Holder of any Warrant Certificate as the
absolute owner thereof (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company), and the Company shall not be
affected by any notice to the contrary.
6. LOSS OR MUTILATION. On receipt by the Company of evidence satisfactory
as to the ownership of and the loss, theft, destruction or mutilation of this
Warrant Certificate, the company shall execute and deliver, in lieu thereof, a
new Warrant Certificate representing an equal aggregate number of Warrants. In
the case of loss, theft or destruction of any Warrant Certificate, the
individual requesting issuance of a new Warrant Certificate shall be required to
indemnify the Company in a form and amount satisfactory to the Company. In the
event a Warrant Certificate is mutilated, such Certificate shall be surrendered
and canceled by the Company prior to delivery of a new Warrant Certificate.
Applicants for a new Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may prescribe.
7. CALL OPTION. Provided (i) the closing bid price or last trade in the
principal market in which, or on the principal exchange on which, the Shares
then trade exceeds Seven Dollars and Fifty Cents ($7.50) for the twenty (20)
consecutive trading days preceding but not including the date of such call, (ii)
a prospectus meeting the requirements of the Act is then available with respect
to the issuance of Shares to the Registered Holder hereof or the successors in
interest to such Registered Holder, and (iii) the Company then reasonably
believes that such a prospectus will continue to be available through the
Redemption Date (as hereinafter defined), the Company shall on and after March
6, 1997 have the right and option, upon no less than thirty (30) trading days'
written notice to the Registered Holder, to call, and thereinafter to redeem and
acquire all of the Warrants remaining outstanding and unexercised at the date
fixed for such redemption in such notice (the "Redemption Date"), which
Redemption Date shall be at least 30 trading days after the date of such notice,
for an amount equal to One-Tenth of One Cent ($.001) per Warrant; provided,
however, that the Registered Holder shall have the right during the period
between the date of such notice and the Redemption Date to exercise the Warrants
in accordance with the provisions of Section 3 hereof. Said notice of
redemption shall require the Registered Holder to surrender to the Company, on
the Redemption Date, at the principal executive offices of the Company, his
certificate or certificates representing the Warrants to be redeemed.
Notwithstanding the fact that any Warrants called for redemption have not been
surrendered for redemption and
4
<PAGE>
cancellation on the Redemption Date, after the Redemption Date such Warrants
shall be deemed to be expired and all rights of the Registered Holder of such
unsurrendered Warrants shall cease and terminate, other than the right to
receive the redemption price of $.001 per Warrant for such Warrants, without
interest.
In connection with any call hereunder, the Company shall be obliged to call
all other Series A Warrants, but shall have no obligation to call any other
stock purchase warrant or warrants. No call made pursuant to any stock purchase
warrant not having substantially similar terms shall obligate the Company to
exercise its right and option to make a call hereunder.
8. ADJUSTMENT OF SHARES. The number and kind of securities
issuable upon exercise of a Warrant shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
(a) STOCK SPLITS, STOCK COMBINATIONS AND CERTAIN STOCK DIVIDENDS. If the
Company shall at any time subdivide or combine its outstanding Shares,
or declare a dividend in Shares or other securities of the Company
convertible into or exchangeable for Shares, a Warrant for the same
Exercise Price shall, after such subdivision or combination or after
the record date for such dividend, be exercisable for that number of
Shares and other securities of the Company that the Registered Holder
would have owned immediately after such event with respect to the
Shares and other securities for which a Warrant may have been
exercised immediately before such event had the Warrant been exercised
immediately before such event. Any adjustment under this Section 8
(a) shall become effective at the close of business on the date the
subdivision, combination or dividend becomes effective.
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER. In case of any
reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable upon exercise of
a Warrant) or in case the Company (or any such other corporation)
shall merge into or with or consolidate with another corporation or
convey all or substantially all of its assets to another corporation
or enter into a business combination of any form as a result of which
the Shares or other securities receivable upon exercise of a Warrant
are converted into other stock or securities of the same or another
corporation, then and in each such case, the Registered Holder of a
Warrant, upon exercise of the purchase right at any time after the
consummation of such reorganization, consolidation, merger, conveyance
or combination, shall for the same Exercise Price be entitled to
receive, in lieu of the Shares or other securities to which such
Registered Holder would have been entitled had he exercised the
purchase right immediately prior
5
<PAGE>
thereto, such stock and securities which such Registered Holder would
have owned immediately after such event with respect to the Shares and
other securities for which a Warrant may have been exercised
immediately before such event had the Warrant been exercised
immediately prior to such event.
In each case of an adjustment in the Shares or other securities
receivable upon the exercise of a Warrant, the Company shall promptly
notify the Registered Holder of such adjustment. Such notice shall
set forth the facts upon which such adjustment is based.
9. REDUCTION IN EXERCISE PRICE AT COMPANY'S OPTION. The Company's Board
of Directors may, at its sole discretion, reduce the Exercise Price of the
Warrants in effect at any time either for the remaining life of the Warrants or
any shorter period of time determined by the Company's Board of Directors. The
Company shall promptly notify the Registered Holders of any such reduction in
the Exercise Price.
10. REGISTRATION RIGHTS.
(a) CERTAIN DEFINITIONS. As used in this Section 10, the following
definitions shall apply:
"COMMISSION" Means the Securities and Exchange Commission or any
other federal agency at the time administering the Act.
"HOLDER" means any holder of a Warrant or outstanding Registerable
Securities.
"REGISTERABLE SECURITIES" means the Warrant Shares issued or issuable
upon the exercise of a Warrant, provided, however, that Registerable
Securities shall not include any Shares and other securities which
have previously been registered and sold to the public.
"REGISTRATION EXPENSES" means all expenses incurred by the Company in
complying with Section 10(b) hereof including, without limitation, all
registration, qualification and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or
required in connection with any such registration. Registration
Expenses shall not include selling commissions, discounts or other
compensation paid to underwriters or other agents or brokers to effect
the sale of any Registerable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement
in compliance with the Act (and any post-effective amendments filed in
connection
6
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therewith), and the declaration of the effectiveness of such
registration statement.
(b) REGISTRATION. The Company shall:
(i) Within ten (10) months of the initial issuance of Series A
Warrants, file with the Commission a registration statement on an
appropriate form, including the Registerable Securites among the securities
being registered pursuant to such registration statement. The Company
shall thereafter diligently prosecute such registration statement to
effectiveness. Such registration statement shall cover the issuance of
Warrant Shares upon exercise of this Warrant and, to the extent
appropriate, the resale of such Warrant Shares by the Holder. The Company
will promptly notify the Holder regarding (i) the filing of such
registration statement and all amendments thereto, (ii) the effectiveness
of such registration statement and any post-effective amendments thereto,
(iii) the occurrence of any event or condition that causes the prospectus
that is part of such registration statement no longer to comply with the
requirements of the Act, and (iv) any request by the Commission for any
amendment or supplement to such registration statement or any prospectus
relating thereto;
(ii) Prepare and file with the Commission 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 and current and to comply with the provisions of the
Act with respect to the issuance, sale or resale of the Registerable
Securities, including such amendments and supplements as may be necessary
to reflect the intended method of disposition of the Holder, but for no
longer than (i) if the Registerable Securities were registered only for
issuance and sale, the earlier of the Expiration Date and the Redemption
Date, or (ii) if the Registerable Securities were registered for resale,
then one hundred eighty (180) days subsequent to the earlier of the
Expiration Date and the Redemption Date;
(iii) Furnish to each Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the
Registerable Securities by such Holder;
(iv) Use its best efforts to register or qualify the Registerable
Securities under such securities or blue sky laws of any state as a Holder
may reasonably request, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to dispose of
Registerable Securities in such jurisdictions;
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(v) Use its best efforts to comply with all applicable rules and
regulations of the Commission, including without limitation the rules and
regulations relating to the periodic reporting requirements under the
Securities Exchange Act of 1934, as amended; and
(vi) Make available for inspection by the Holder or by any
underwriter, attorney, accountant or other agent acting for such Holder in
connection with the disposition of Registerable Securities, in each case
upon receipt of an appropriate confidentiality agreement, all corporate
records, documents and properties as may be reasonably requested.
(c) EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with the registration, qualification or compliance pursuant
to Section 10(b) hereof shall be borne by the Company.
(d) INDEMNIFICATION. In the event any of the Registerable Securities are
included in a registration statement under this Section 10:
(i) The Company will indemnify each Holder, each of its officers and
directors and partners and each person controlling such Holder within the
meaning of Section 15 of the Act, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by
the Company of any rule or regulation promulgated under the Act applicable
to the Company in connection with any such registration, qualification or
compliance, and the Company will reimburse the Holder, each of its officers
and directors and partners and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises
out of or is based on any untrue statement or omission or alleged
untrue statement
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<PAGE>
or omission, made in reliance upon and in conformity with written
information furnished to the Company by such Holder or underwriter for
use therein.
(ii) In order to include Registerable Securities in a registration
statement under this Section 10, a Holder, upon the written request of the
Company, will be required to agree to indemnify the Company, each of its
directors and officers, its legal counsel and independent accountants, each
underwriter, if any, of the Company's securities covered by such
registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Act, and each other
selling shareholder, each of its officers and directors and partners and
each person controlling such selling shareholder within the meaning of
Section 15 of the Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
such registration statement, prospectus, offering circular or other
document, or any 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 to reimburse the Company, such holders, such
directors, officers, counsel, accountants, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by the Holder for use therein.
Such agreement shall be in such form, conforming to the terms of this
Section 10 (d) (ii), as the Company may reasonably request.
(iii) Each party entitled to indemnification under this Section or the
agreement referred to in the preceding paragraph (ii) (the "Indemnified
Party") shall give notice to the party required to provide indemnification
(the "Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (which approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such Indemnified Party's expense. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent
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<PAGE>
of each Indemnified Party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
(iv) If the indemnification provided for in this Section is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying the
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified party with respect to such loss, liability, claim, damage or
expense in the proportion that is appropriate to reflect the relative fault
of the Indemnifying Party and the Indemnified Party in connection with the
statements or omissions that resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and the Indemnified party
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of material fact or the omissions to state a
material fact relates to information supplied by the Indemnifying Party or
by the Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.
(e) INFORMATION BY HOLDER. Each Holder of Registerable Securities
included in any registration shall furnish to the Company such
information regarding such Holder, such securities and the
distribution proposed by such Holder as the Company may request in
writing.
11. NOTICES. All notices, demands, elections, or requests (however
characterized or described) required or authorized hereunder shall be
deemed given sufficiently if in writing and sent by registered or
certified mail, return receipt requested and postage prepaid, or by
facsimile or telegram to the Company, at its principal executive
office, and to the Registered Holder, at the address of such holder as
set forth on the books maintained by the Company.
12. GENERAL PROVISIONS. This Warrant Certificate shall be constructed
and enforced in accordance with, and governed by, the laws of the
State of Delaware. Except as otherwise expressly stated herein, time
is of the essence in performing hereunder. The headings of this
Warrant Certificate are for convenience in reference only and shall
not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed as of this ____ day of ___________, ______.
YOUBET.COM, INC.
By: _________________________
David M. Marshall
Vice Chairman
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YOUBET.COM, INC.
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties _______Custodian ________
JR TEN - as joint tenants with right (Cust) (Minor)
of survivorship and not as under Uniform Gifts
tenants in common to Minors Act _______
(State)
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
(To be executed by the Registered Holder if He Desires to Assign Warrants
Evidenced by the Within Warrant Certificate)
FOR VALUE RECEIVED _____________________________ hereby sells, assigns and
transfers unto _________________________ (____) Warrants, evidenced by the
within Warrant Certificate, and does hereby irrevocably constitute and
appoint ________________________ Attorney to transfer the said Warrants
evidenced by the within Warrant Certificates on the books of the Company,
with full power of substitution.
Dated: ___________________ ________________________
Signature
Notice: The above signature must correspond with the name as written upon the
face of the Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Signature Guaranteed: ___________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF THE
FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK
EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
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<PAGE>
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if he Desires to Exercise Warrants Evidenced by
the Warrant Certificate)
To Youbet.com, Inc.
The undersigned hereby irrevocably elects to exercise ____________________
(____) Warrants, evidenced by the within Warrant Certificate for, and to
purchase thereunder, ___________________ (___) full shares of Common Stock
issuable upon exercise of said Warrants and delivery of $ ________ and any
applicable taxes.
The undersigned requests that certificate for such shares by issued in the
name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
____________________________________ ____________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
If said number of Warrants shall not be all the Warrants evidenced by the
within Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised by issued in the name of
and delivered to:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
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Dated: _______________________ Signature: _________________________
NOTICE: The above signature must correspond with the name as written upon the
face of the within Warrant Certificate in every particular, without alteration
or enlargement or any change whatsoever, or if signed by any other person the
From of Assignment hereon must be duly executed and if the certificate
representing the shares or any Warrant Certificate representing Warrants not
exercised is to be registered in a name other than that in which the within
Warrant Certificate is registered, the signature of the holder hereof must be
guaranteed.
Signature Guaranteed: _________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF THE
FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK
EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
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<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND
MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
YOUBET.COM
Incorporated Under the Laws of the State of Delaware
No. B_________ ______ Common Stock
Purchase Warrants
CERTIFICATE FOR COMMON STOCK
PURCHASE WARRANTS
1. WARRANT. This Warrant Certificate certifies
_______________________, or registered assigns (the "Registered Holder"), is
the registered owner of the above indicated number of Warrants expiring on
the Expiration Date, as hereinafter defined. One (1) Warrant entitles the
Registered Holder to purchase one (1) share of the $.001 par value common
stock (a "Share") of Youbet.com, a Delaware Corporation (the "Company"), from
the Company at a purchase price of Three Dollars and Twelve and One-Half
Cents ($3.125) (the "Exercise Price") at any time during the Exercise Period,
as hereinafter defined, upon surrender at the principal office of the Company
of this Warrant Certificate with the exercise form appended hereto duly
completed and executed and accompanied by payment of the Exercise Price.
Upon due presentment for transfer or exchange of this Warrant
Certificate at the principal office of the Company, a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued in exchange for this Warrant Certificate,
subject to the limitations provided herein, upon payment of any tax or
governmental changes imposed in connection with such transfer. Subject to
the terms hereof, the Company shall deliver Warrant Certificates in required
whole number denominations to Registered Holders in connection with any
transfer or exchange permitted hereunder.
2. RESTRICTIVE LEGEND. Each Warrant Certificate and each certificate
representing Shares issued upon exercise of a Warrant, unless such Shares are
then registered under the Securities Act of 1933, as amended (the "Act"),
shall bear a legend in substantially the following form:
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"THE [SECURITIES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS
OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED
PURSUANT TO RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY
LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS
APPLICABLE."
3. EXERCISE. Subject to the terms hereof, the Warrants evidenced by this
Warrant Certificate may be exercised at the Exercise Price in whole or in
part at any time during the period (the "Exercise Period") commencing on the
first anniversary of the date hereof and terminating at the close of business
__________________. The Exercise Period may also be extended by the
Company's Board of Directors.
In the event the Shares issuable upon exercise of the Warrants
represented by this Warrant Certificate have not yet been registered under
the Act or are not then covered by a current prospectus meeting the
requirements of the Act, the right of a holder of such Warrants to exercise
such Warrants shall be conditioned upon such holder providing the Company
with an opinion of counsel, in form and substance reasonably acceptable to
the Company, to be effect that the issuance of Shares upon exercise of such
Warrants is exempt from the registration requirements of the Act.
A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date (the "Exercise Date") of the surrender to
the Company at its principal offices of this Warrant Certificate with the
exercise form attached hereto completed and executed by the Registered Holder
and accompanied by payment to the Company, in cash or by check (which shall
be accepted subject to collection), of an amount equal to the aggregate
Exercise Price, in lawful money of the United States of America.
The person entitled to receive the Shares issuable upon exercise of a
Warrant or Warrants ("Warrant Shares") shall be treated for all purposes as
the holder of such Warrant Shares as of the close of business on the Exercise
Date. The Company shall not be obligated to issue any fractional share
interests in Warrant Shares issuable or deliverable on the exercise of any
Warrant or scrip or cash with respect thereto, and such right to a fractional
share shall be of no value whatsoever. If more than one Warrant shall be
exercised at one time by the same Registered Holder, the number of full
Shares which shall be issuable on exercise thereof shall be computed on the
basis of the aggregate number of full shares issuable on such exercise.
Promptly, and in any event within ten business days after the Exercise
Date, the Company shall cause to be issued and delivered to the person or
persons entitled to receive the same, a certificate or certificates for the
number of Warrant Shares deliverable on such exercise.
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<PAGE>
The Company may deem and treat the Registered Holder of the Warrants at
any time as the absolute owner thereof for all purposes, and the Company
shall not be affected by any notice to the contrary. The Warrants shall not
entitle the Registered Holder thereof to any of the rights of shareholders or
to any dividend declared on the Shares unless the Registered Holder shall
have exercised the Warrants and thereby purchases the Warrant Shares prior to
the record date for the determination of holders of Shares entitled to such
dividend or other right.
4. RESERVATION OF SHARES AND PAYMENT OF TAXES. The Company
covenants that it will at all times reserve and have available from its
authorized Common Stock such number of Shares as shall then be issuable on
the exercise of outstanding Series B Warrants. The Company covenants that
all Warrant Shares which shall be so issuable shall be duly and validly
issued, fully paid and non-assessable, and free from all taxes, liens and
charges with respect to the issue thereof.
The Registered Holder shall pay all documentary, stamp or similar taxes
and other government charges that may be imposed with respect to the
issuance, transfer or delivery of any Warrant Shares on exercise of the
Warrants. In the event the Warrant Shares are to be delivered in a name
other than the name of the Registered Holder of the Warrant Certificate, no
such delivery shall be made unless the person requesting the same has paid
the amount of any such taxes or charges incident thereto.
5. REGISTRATION OF TRANSFER. The Warrant Certificates may be
transferred in whole or in part, provided any such transfer complies with all
applicable federal and state securities laws and, if requested by the
Company, the registered Holder delivers to the Company an opinion of counsel
to that effect, in form and substance reasonably acceptable to the Company.
Warrant Certificates to be transferred shall be surrendered to the Company at
its principal office. The Company shall execute, issue and deliver in
exchange therefore the Warrant Certificate or Certificates that the
Registered Holder making the transfer shall be entitled to receive.
The Company shall keep transfer books at its principal office, which
shall register Warrant Certificates and the transfer thereof. On due
presentment of any Warrant Certificate for registration of transfer at such
office, the Company shall execute, issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants. All Warrants Certificates presented for
registration of transfer or exercise shall be duly endorsed or be accompanied
by a written instrument or instruments of transfer in form satisfactory to
the Company. The Company may require payment of a sum sufficient to cover
any tax or other government charge that may be imposed in connection
therewith.
All Warrant Certificates so surrendered, or surrendered for exercise, or
for exchange in case of mutilated Warrant Certificates, shall be promptly
canceled by the Company and thereafter retained by the Company until the
Expiration Date. Prior to due presentment for registration of transfer
thereof, the Company may treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof (notwithstanding any
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<PAGE>
notations of ownership or writing thereon made by anyone other than the
Company), and the Company shall not be affected by any notice to the contrary.
6. LOSS OR MUTILATION. On receipt by the Company of evidence
satisfactory as to the ownership of and the loss, theft, destruction or
mutilation of this Warrant Certificate, the Company shall execute and
deliver, in lieu thereof, a new Warrant Certificate representing an equal
aggregate number of Warrants. In the case of loss, theft or destruction of
any Warrant Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company in a form and amount
satisfactory to the Company. In the event a Warrant Certificate is
mutilated, such Certificate shall be surrendered and canceled by the Company
prior to delivery of a new Warrant Certificate. Applicants for a new
Warrant Certificate shall also comply with such other regulations and pay
such other reasonable charges as the Company may prescribe.
7. ADJUSTMENT OF SHARES. The number and kind of securities
issuable upon exercise of a Warrant shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) STOCK SPLITS, STOCK COMBINATIONS AND CERTAIN STOCK DIVIDENDS.
If the Company shall at any time subdivide or combine its
outstanding Shares, or declare a dividend in Shares or other
securities of the Company convertible into or exchangeable for
Shares, a Warrant for the same Exercise Price shall, after such
subdivision or combination or after the record date for such
dividend, be exercisable for that number of Shares and other
securities of the Company that the Registered Holder would have
owned immediately after such event with respect to the Shares
and other securities for which a Warrant may have been
exercised immediately before such event, had the Warrant been
exercised immediately before such event. Any adjustment under
this Section 7 (a) shall become effective at the close of
business on the date the subdivision, combination or dividend
becomes effective.
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER. In case
of any reorganization of the Company (or any other corporation
the stock or other securities of which are at the time
receivable upon exercise of a Warrant) or in case the Company
(or any such other corporation) shall merge into or with or
consolidate with another corporation or convey all or
substantially all of its assets to another corporation or enter
into a business combination of any form as a result of which
the Shares or other securities receivable upon exercise of a
Warrant are converted into other stock or securities of the
same or another corporation, then and in each such case, the
Registered Holder of a Warrant, upon exercise of the purchase
right at any time after the consummation of such
reorganization,
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<PAGE>
consolidation, merger, conveyance or combination, shall for the
same Exercise Price be entitled to receive, in lieu of the
Shares or other securities to which such Registered Holder
would have been entitled had he exercised the purchase right
immediately prior thereto, such stock and securities which such
Registered Holder would have owned immediately after such event
with respect to the Shares and other securities for which a
Warrant may have been exercised immediately before such event
had the Warrant been exercised immediately prior to such event.
In each case of an adjustment in the Shares or other securities
receivable upon the exercise of a Warrant, the Company shall promptly notify
the Registered Holder of such adjustment. Such notice shall set forth the
facts upon which such adjustment is based.
8. REDUCTION IN EXERCISE PRICE AT COMPANY'S OPTION. The Company's
Board of Directors may, at its sole discretion, reduce the Exercise Price of
the Warrants in effect at any time either for the remaining life of the
Warrants or any shorter period of time determined by the Company's Board of
Directors. The Company shall promptly notify the Registered Holders of any
such reduction in the Exercise Price.
9. REGISTRATION RIGHTS.
(a) CERTAIN DEFINITIONS. As used in this section 9, the following
definitions shall apply:
"COMMISSION" means the Securities and Exchange Commission or any
other federal agency at the time administering the Act.
"HOLDER" means any holder of a Warrant or outstanding Registerable
Securities.
"REGISTERABLE SECURITIES" means the Warrant Shares issued or
issuable upon the exercise of a Warrant, provided, however, that
Registerable Securities shall not include any Shares and other securities
which have previously been registered and sold to the public.
"REGISTRATION EXPENSES" means all expenses incurred by the Company
in complying with Section 9(b) hereof including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required in connection
with any such registration. Registration Expenses shall not include
selling commissions, discounts or other compensation paid to underwriters
or other agents or brokers to effect the sale of any Registerable
Securities.
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<PAGE>
The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and any post-effective amendments filed in
connection therewith), and the declaration of the effectiveness of such
registration statement.
(b) REGISTRATION. The Company shall:
(i) Within ten (10) months of the initial issuance of Series B
Warrants, file with the commission a registration statement
on an appropriate form, including the Registerable
Securities among the securities being registered pursuant to
such registration statement. The Company shall thereafter
diligently prosecute such registration statement to
effectiveness. Such registration statement shall cover the
issuance of Warrant Shares upon exercise of this Warrant
and, to the extent appropriate, the resale of such Warrant
Shares by the Holder. The Company will promptly notify the
Holder regarding (i) the filing of such registration
statement and all amendments thereto, (ii) the effectiveness
of such registration statement and any post-effective
amendments thereto, (iii) the occurrence of any event or
condition that causes the prospectus that is part of such
registration statement no longer to comply with the
requirements of the Act, and (iv) any request by the
Commission for any amendment or supplement to such
registration statement or any prospectus relating thereto;
(ii) Prepare and file with the Commission 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 and current
and to comply with the provisions of the Act with respect to
the issuance, sale or resale of the Registerable Securities,
including such amendments and supplements as may be
necessary to reflect the intended method of disposition of
the Holder, but for no longer than (i) if the Registerable
Securities were registered only for issuance and sale, the
earlier of the Expiration Date and the Redemption Date, or
(ii) if the Registerable Securities were registered for
resale, then one hundred eighty (180) days subsequent to the
earlier of the Expiration Date and the Redemption Date;
(iii) Furnish to each Holder such number of copies of a
prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other
documents as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the
Registerable Securities by such Holder;
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<PAGE>
(iv) Use its best efforts to register or qualify the Registerable
Securities under such securities or blue sky laws of any
state as a Holder may reasonably request, and do any and all
other acts which may be reasonably necessary or advisable to
enable such Holder to dispose of Registerable Securities in
such jurisdictions;
(v) Use its best efforts to comply with all applicable rules and
regulations of the Commission, including without limitation
the rules and regulations relating to the periodic reporting
requirements under the Securities Exchange Act of 1934, as
amended; and
(vi) Make available for inspection by the Holder or by any
underwriter, attorney, accountant or other agent acting for
such Holder in connection with the disposition of
Registerable Securities, in each case upon receipt of an
appropriate confidentiality agreement, all corporate
records, documents and properties as may be reasonably
requested.
(c) EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with the registration, qualification or compliance pursuant
to Section 9 (b) hereof shall be borne by the Company.
(d) INDEMNIFICATION. In the event any of the Registerable
Securities are included in a registration statement under this Section 9:
(i) The Company will indemnify each Holder, each of its officers
and directors and partners and each person controlling such
Holder within the meaning of Section 15 of the Act, and each
underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Act,
against all expenses, claims, losses, damages or liabilities
(or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any
untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, or
other document, or any amendment or supplement thereto,
incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission)
to state therein a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading, or any violation by the Company of any rule or
regulation promulgated under the Act applicable to the
Company in connection with any such registration,
qualification or compliance, and the Company will reimburse
the Holder, each of its officers and directors and partners
and each person controlling
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<PAGE>
such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based
on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in
conformity with written information furnished to the Company
by such Holder or underwriter for use therein.
(ii) In order to include Registerable Securities in a
registration statement under this Section 9, a Holder, upon
the written request of the Company, will be required to
agree to indemnify the Company, each of its directors and
officers, its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities
covered by such registration statement, each person who
controls the Company or such underwriter within the meaning
of Section 15 of the Act, and each other selling
shareholder, each of its officers and directors and partners
and each person controlling such selling shareholder within
the meaning of Section 15 of the Act, against all claims,
losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering
circular or other documents, or any 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 to reimburse the Company, such holders,
such directors, officers, counsel, accountants, persons,
underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or
other document in reliance upon and in conformity with
written information furnished to the Company by the Holder
for use therein. Such agreement shall be in such form,
conforming to the terms of this Section 9 (d) (ii), as the
Company may reasonably request.
(iii) Each party entitled to indemnification under this Section or
the agreement referred to in the preceding paragraph (ii)
(the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual
knowledge of any claim as to
8
<PAGE>
which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the
Indemnified Party (which approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense. No
Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(iv) If the indemnification provided for in this Section is held
by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability,
claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified
Party, shall contribute to the amount paid or payable by
such Indemnified Party with respect to such loss, liability,
claim, damage or expense in the proportion that is
appropriate to reflect the relative fault of the
Indemnifying Party and the Indemnified Party in connection
with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other
relevant equitable considerations. The relative fault of
the Indemnifying Party and the Indemnified Party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of material fact or the
omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified
Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such
statement or omission.
(e) INFORMATION BY HOLDER. Each Holder of Registerable
Securities included in any registration shall furnish to the Company
such information regarding such Holder, such securities and the
distribution proposed by such Holder as the Company may request in
writing.
10. NOTICES. All notices, demands, elections, or requests (however
characterized or described) required or authorized hereunder shall be deemed
given sufficiently if in writing and sent by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile or telegram to
the Company, at its principal executive office, and to the Registered Holder,
at the address of such holder as set forth on the books maintained by the
Company.
9
<PAGE>
11. GENERAL PROVISIONS. This Warrant Certificate shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware. Except as otherwise expressly stated herein, time is of
the essence in performing hereunder. The headings of this Warrant
Certificate are for convenience in reference only and shall not limit or
otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the ______ day of __________, ____.
YOUBET.COM, INC
By:
----------------------------------
David M. Marshall
Vice Chairman
10
<PAGE>
YOUBET.COM
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
JR TEN - as joint tenants with right ----------------------------
of survivorship and not as (Cust) (Minor)
tenants in common under Uniform Gifts
to Minors Act
---------------
(State)
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
(To be executed by the Registered Holder if He Desires to Assign Warrants
Evidenced by the Within Warrant Certificate)
FOR VALUE RECEIVED __________________________________ hereby sells, assigns
and transfers unto ____________________________________ (______) Warrants,
evidenced by the within Warrant Certificate, and does hereby irrevocably
constitute and appoint ________________________________ Attorney to transfer
the said Warrants evidenced by the within Warrant Certificates on the books
of the Company, with full power of substitution.
Dated:
------------------------------- -------------------------------------
Signature
Notice: The above signature must correspond with the name as written upon
the face of the Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Signature Guaranteed:
-------------------------------------
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF
THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK
EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
11
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if he Desires to Exercise Warrants
Evidenced by the Warrant Certificate)
To Youbet.com
The undersigned hereby irrevocably elects to exercise
____________________ (____) Warrants, evidenced by the within Warrant
Certificate for, and to purchase thereunder, _______________________ (____)
full shares of Common Stock issuable upon exercise of said Warrants and
delivery of $__________ and any applicable taxes.
The undersigned requests that certificate for such shares by issued in
the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
- ------------------------------------ --------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If said number of Warrants shall not be all the Warrants evidenced by
the within Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised by issued in the name of
and delivered to:
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
12
<PAGE>
Dated: Signature:
-------------------------- -----------------------------
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever, or if signed by any other
person the Form of Assignment hereon must be duly executed and if the
certificate representing the shares or any Warrant Certificate representing
Warrants not exercised is to be registered in a name other than that in which
the within Warrant Certificate is registered, the signature of the holder
hereof must be guaranteed.
Signature Guaranteed:
---------------------------
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF
THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
13
<PAGE>
SERIES "C" WARRANT
NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON
THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
NO. _________ ______COMMON STOCK
PURCHASE WARRANT
YOUBET.COM
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CERTIFICATE FOR COMMON STOCK PURCHASE WARRANTS
EXERCISABLE AT $2.50
THIS CERTIFIES that, for value received, _______________________.
(together with all permitted assigns, the "Holder") is entitled to subscribe
for, and purchase from, YOUBET.COM, a Delaware corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from time to
time during the period commencing two days immediately following the
effective date earlier to occur of (i) the registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), relating to a sale
of the Company's securities, other than pursuant to a stock option plan
(which registration statement shall include either the first filing by the
Company of a registration statement on Form S-1 or SB-2, whether for its own
account or in respect of any selling shareholders) of the common stock,
without par value (the "Common Stock"), of the Company or (ii) May 21, 1999
(such date being referenced to as the Initial Exercise Date), and terminating
at 5:00 p.m., Los Angeles local time, on the fifth anniversary of the Initial
Exercise Date (the "Exercise Period"),
<PAGE>
[_______] shares of Common Stock. This Warrant is exercisable at an exercise
price per share equal to $2.50 per share; provided, however, that upon the
occurrence of any of the events specified in Section 5 hereof, the rights
granted by this Warrant, including the number of shares of Common Stock to be
received upon such exercise, shall be adjusted as therein specified.
Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a "Warrant Share".
SECTION 1 EXERCISE OF WARRANT.
This Warrant may be exercised during the Exercise Period, either in
whole or in part, by the surrender of this Warrant (with the election at the
end hereof duly executed) to the Company at its office at 1950 Sawtelle
Boulevard, Suite 180, Los Angeles, California 90025, or at such other place
as is designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
product of the Exercise Price and the number of Warrant Shares for which this
Warrant is being exercised.
SECTION 2 RIGHTS UPON EXERCISE; DELIVERY OF SECURITIES.
Upon each exercise of the Holder's rights to purchase Warrant
Shares, the Holder shall be deemed to be the holder of record of the Warrant
Shares, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing the Warrant Shares with respect to which
this Warrant was exercised shall not then have been actually delivered to the
Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates
representing the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised
in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a Warrant evidencing the right of the
Holder to purchase the balance of the aggregate number of Warrant Shares
purchasable hereunder as to which this Warrant has not been exercised or
assigned.
SECTION 3 REGISTRATION OF TRANSFER AND EXCHANGE.
Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to
treat the registered holder of any Warrant on the Warrant Register 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, such Warrant on the part of
any other person, and shall not be liable for any registration or transfer of
Warrants which are registered or to be registered in the name of a fiduciary
or the nominee of a fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be
transferable on the books of the Company only upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or
<PAGE>
representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his, her, or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants
to the person entitled thereto. This Warrant may be exchanged, at the option
of the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person if, in the opinion of counsel to the
Company, such transfer does not comply with the provisions of the Securities
Act and the rules and regulations thereunder.
SECTION 4 RESERVATION OF SHARES.
The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of providing
for the exercise of the Warrants, such number of shares of Common Stock as
shall, from time to time, be sufficient therefor. The Company represents
that all shares of Common Stock issuable upon exercise of this Warrant are
duly authorized and, upon receipt by the Company of the full payment for such
Warrant Shares, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof and will
not be issued in violation of any preemptive or similar rights of
stockholders.
SECTION 5 ANTIDILUTION.
(a) In the event that the Company shall at any time after the
Initial Exercise Date; (i) declare a dividend on the outstanding Common
Stock payable in shares of its capital stock, (ii) subdivide the outstanding
Common Stock; (iii) combine the outstanding Common Stock into a smaller
number of shares; or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Exercise Price per Warrant
Share in effect at the time of the record date for the determination of
stockholders entitled to receive such dividend or distribution or of the
effective date of such subdivision, combination, or reclassification shall be
adjusted so that it shall equal the price determined by multiplying such
Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action. Such adjustment shall be
made successively whenever any event listed above shall occur and shall
become effective at the close of business on such record date or at the close
of business on the date immediately preceding such effective date, as
applicable.
(b) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
<PAGE>
(c) In any case in which this Section 5 shall require that an
adjustment in the number of Warrant Shares be made effective as of a record
date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to the Holder, if the Holder exercised this
Warrant after such record date, the Warrant Shares, if any, issuable upon
such exercise over and above the number of Warrant Shares issuable upon such
exercise on the basis of the number of shares of Common Stock in effect prior
to such adjustment; provided, however, that the Company shall deliver to the
Holder a due bill or other appropriate instrument evidencing the Holder's
right to receive such additional shares of Common Stock upon the occurrence
of the event requiring such adjustment.
(d) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable and the Exercise Price thereof after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the
exercise of this Warrant. If any fraction of a share of Common Stock would
be issuable on the exercise of this Warrant (or specified portions thereof),
the Company shall purchase such fraction for an amount in cash equal to the
same fraction of the average closing sale price (or average of the closing
bid and asked prices, if closing sale price is not available) of Common Stock
for the 10 trading days ending on and including the date of exercise of this
Warrant.
(f) No adjustment in the Exercise Price per Warrant Share shall
be required if such adjustment is less than $0.25; provided, however, that
any adjustments which by reason of this Section 5 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(g) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subsection (a) above, the number of Warrant
Shares issuable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Warrant Shares theretofore issuable
upon exercise of this Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
SECTION 6 RECLASSIFICATION; REORGANIZATION; MERGER.
(a) In case of any capital reorganization, other than in the
cases referred to in Section 5(a) hereof, or the consolidation or merger of
the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of
<PAGE>
Common Stock or the conversion of such outstanding shares of Common Stock
into shares of other stock or other securities or property), or in the case
of any sale, lease, or conveyance to another corporation of the property and
assets of any nature of the Company as an entirety or substantially as an
entirety (such actions being hereinafter collectively referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of
this Warrant (in lieu of the number of Warrant Shares theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the respective number of Warrant Shares which would
otherwise have been deliverable upon the exercise of this Warrant would have
been entitled upon such Reorganization if this Warrant had been exercised in
full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
Board of Directors of the Company, shall be made in the application of the
provisions herein set forth with respect to the rights and interests of the
Holder so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other
property thereafter deliverable upon exercise of this Warrant. Any such
adjustment shall be made by, and set forth in, a supplemental agreement
between the Company, or any successor thereto, and the Holder, with respect
to this Warrant, and shall for all purposes hereof conclusively be deemed to
be an appropriate adjustment. The Company shall not effect any such
Reorganization unless, upon or prior to the consummation thereof, the
successor corporation, or f the Company shall be the surviving corporation in
any such Reorganization and is not the issuer of the shares of stock or other
securities or property to be delivered to holders of shares of the Common
Stock outstanding at the effective time thereof, then such issuer, shall
assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities, cash, or other property as such Holder shall be
entitled to purchase in accordance with the foregoing provisions. In the
event of sale, lease, or conveyance or other transfer of all or substantially
all of the assets of the Company as part of a plan for liquidation of the
Company, all rights to exercise this Warrant shall terminate 30 days after
the Company gives written notice to the Holder that such sale or conveyance
or other transfer has been consummated.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par
value or from a specified par value to no par value, or as a result of a
subdivision or combination, but including any change in the shares into two
or more classes or series of shares), or in case of any consolidation or
merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par
value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes
or series of shares), the Holder or holders of this Warrant shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of Warrant Shares for
which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments, which shall be as nearly equivalent
as practicable to the
<PAGE>
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
SECTION 7 NOTICE OF CERTAIN EVENTS.
In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease, or conveyance of
property, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
15 days prior to; (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution,
rights, warrants, or other securities are to be determined; (ii) the date on
which any such reclassification, change of outstanding shares of Common
Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution, or winding-up is expected to become effective and
the date as of which it is expected that holders of record of shares of
Common Stock shall be entitled to exchange their shares for securities or
other property, if any, deliverable upon such reclassification, change of
outstanding shares, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution, or winding-up; or (iii) the date of such
action which would require an adjustment to the Exercise Price per Warrant
Share.
SECTION 8 CHARGES AND TAXES.
<PAGE>
The issuance of any shares or other securities upon the exercise of
this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not
be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 9 PERIODIC REPORTS.
The Company agrees that following the Initial Exercise Date and
until all the Warrant Shares shall have been sold pursuant to Rule 144 under
the Securities Act, it shall use its best efforts to keep current in filing
all reports, statements, and other materials required to be filed with the
Commission to permit holders of the Warrant Shares to sell such securities
under Rule 144 under the Securities Act.
SECTION 10 LEGEND.
Until sold pursuant to the provisions of Rule 144 or otherwise
registered under the Securities Act, the Warrant Shares issued on exercise of
the Warrants shall be subject to a stop transfer order and the certificate or
certificates representing the Warrant Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THE
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
SECTION 11 LOSS; THEFT; DESTRUCTION; MUTILATION.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon receipt by the Company of reasonably
satisfactory indemnification, the Company shall
<PAGE>
execute and deliver to the Holder thereof a new Warrant of like date, tenor,
and denomination.
SECTION 12 STOCKHOLDER RIGHTS.
The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.
SECTION 13 GOVERNING LAW.
This Warrant shall be construed in accordance with the laws of the
State California applicable to contracts made and performed within such
State, without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed on the _____day of ________, ____.
YOUBET.COM, INC.
BY: __________________________
DAVID MARSHALL
VICE CHAIRMAN
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________ shares of
Common Stock, $.001 par value, of Youbet.com, a Delaware corporation (the
"Company"), and does hereby irrevocably constitute and appoint ___________
attorney to transfer such Warrant on the books of the Company, with full
power of substitution.
Dated: _________________
Signature___________________________
<PAGE>
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
<PAGE>
ELECTION TO EXERCISE
To: Youbet.com
1950 Sawtelle Boulevard, Suite 180
Los Angeles, California 90025
The undersigned hereby exercises his, her, or its rights to purchase shares
of Common Stock, $.001 par value ("the Common Stock"), of Youbet.com a Delaware
corporation (the "Company"), covered by the within Warrant and tenders payment
herewith in the amount of $_____ in accordance with the terms thereof, and
requests that certificates for the securities constituting such shares of Common
Stock be issued in the name of, and delivered to:
(Print Name, Address, and Social Security or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common Stock covered by the within Warrant, that a new Warrant for
the balance of the shares of Common Stock covered by the within Warrant shall
be registered in the name of, and delivered to, the undersigned at the
address stated below.
Dated: __________________ Name________________________
(Print)
ADDRESS:
________________________
(SIGNATURE)
<PAGE>
SERIES "D" WARRANT
THE SECURITIES OWNERSHIP REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY
STATE OR FOREIGN JURISDICTION SECURITIES LAWS AND ARE "RESTRICTED SECURITIES"
AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. SUCH SECURITIES OWNERSHIP
MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT (1)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE OR FOREIGN SECURITIES LAWS OR (2) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE OR FOREIGN
SECURITIES LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF COUNSEL TO THE COMPANY THAT THIS SECURITY MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
OR FOREIGN SECURITIES LAWS.
YOUBET.COM, INC
Incorporated under the laws of the State of Delaware
NO. _________ ______ COMMON STOCK
PURCHASE WARRANTS
CERTIFICATE FOR COMMON STOCK
PURCHASE WARRANTS, SERIES "D"
EXERCISABLE AT $5.25
1. WARRANT. This Warrant Certificate certifies that _____________________
or registered assigns (the "Registered Holder") is the registered owner of
the above indicated number of Warrants expiring on the Expiration Date, as
hereinafter defined. One (1) Warrant entitles the Registered Holder to
purchase one (1) share of the common stock, no par value per share (a
"Share"), of Youbet.com, Inc. a corporation incorporated under the laws of
the State of Delaware (the "Company"), from the Company at a purchase price
of $5.25 (U.S.) per share (the "Exercise Price") for a period of up to two
years from the date of issue, upon surrender of this Warrant Certificate with
the exercise form hereon duly completed and executed and accompanied by
payment of the Exercise Price at the office of the Company's Transfer and
Warrant Agent.
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Upon due presentment for transfer or exchange of this Warrant
Certificate at the office of the Company's Transfer Agent and Warrant Agent,
a new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be issued in
exchange for this Warrant Certificate, subject to the limitations provided
herein, upon payment of any tax or governmental charge imposed in connection
with such transfer. Subject to the terms hereof, the Company's Transfer
Agent and Warrant Agent shall deliver Warrant Certificates in required whole
number denominations to Registered Holders in connection with any transfer or
exchange permitted hereunder.
2. RESTRICTIVE LEGENDS. Until such time that the Company shall cause to
be registered for resale the warrants included in this Warrant Certificate, each
Warrant Certificate shall bear a legend substantially in the form of the legend
that appears at the beginning of this Warrant Certificate.
3. EXERCISE. Subject to the terms hereof, the Warrants evidenced by
the Warrant Certificate may be exercised in whole or in part at any time from
the date of the Warrant Certificate's issuance until the close of business at
the location of the principal executive offices of the Transfer Agent and
Warrant Agent on ___________________ (the "Expiration Date"). The Expiration
Date may, in the sole discretion of the Company's Board of Directors, be
extended.
A Warrant shall be deemed to have been exercised immediately prior to
the close of business with the Company's Transfer Agent and Warrant Agent on
the date (the "Exercise Date") of the surrender to Transfer Agent and Warrant
Agent of this Warrant Certificate with the exercise form attached hereto
executed by the Registered Holder and accompanied by payment to the Company,
in cash, money order or by official bank or certified check, of an amount
equal to the aggregate Exercise Price, in lawful money of the United States
of America.
The persons entitled to receive the share(s) issuable upon exercise of a
Warrant or Warrants (the "Warrant Shares") shall be treated for all purposes
as the holder of such Warrant Shares as of the close of business on the
Exercise Date. The Company shall not be obligated to issue any fractional
share interests in Warrant Shares issuable or deliverable on the exercise of
any Warrant or scrip or cash with respect thereto, but, if the Company elects
not to issue a fractional share, the Company will pay a cash adjustment in
respect of any fraction of a Warrant Share which would otherwise be issuable
in an amount equal to the same fraction of the market price of a share on the
date of exercise, such market price to be solely determined in good faith by
the Board of Directors of the Company. If more than one Warrant shall be
exercised at one time by the same Registered Holder, the number of full
shares which shall be issuable on exercise thereof shall be computed on the
basis of the aggregated number of full shares issuable on such exercise.
Promptly, in any event within ten business days after the Exercise Date,
the Transfer Agent and Warrant Agent shall cause to be issued and delivered
to the person or persons entitled to receive the same, a certificate or
certificates for the number of Warrant Shares deliverable on such exercise.
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The Company may deem and treat the Registered Holder of the Warrants at
any time as the absolute owner thereof for all purposes, and the Company
shall not be affected by any notice to the contrary. The Warrants shall not
entitle the Registered Holder thereof to any of the rights of shareholders of
the Company or to any dividends declared on the shares, if any, unless the
Registered Holder shall have exercised the Warrants and thereby purchased the
Warrant Shares prior to the record date for the determination of holders of
shares entitled to such dividend or other right.
4. EXERCISE AND TRANSFER RESTRICTIONS. The Warrants may not be presented
to the Transfer Agent and Warrant Agent for transfer at any time after the
Warrants' expiration date of ___________________, at which time the Warrants
shall become wholly void and of no value. Absent an effective registration of
the Warrants under the Securities Act of 1933, as amended, and any applicable
state or foreign jurisdictional securities laws, the Warrants may not be sold or
transferred at any time within one year from their original issuance and only
then provided that such transfer or sale does not violate the registration
requirements of the United States Securities Act of 1933 or any other
applicable, local securities laws requiring registration of such securities
prior to their transfer or sale.
The Holder of a Series D Warrant will have the right to exercise the
Warrant at any time after their date of original issuance by the Company up
until the expiration date of the Warrants on _______________. The Company
intends to qualify the sale of the Common Stock underlying the Warrants in a
limited number of states. The Company will be prevented from issuing Common
Stock in such states upon the exercise of the Warrants unless an exemption
from qualification is available or unless the issuance of Common Stock upon
exercise of the Warrants is qualified. The Company may decide to seek or may
not be able to obtain qualification of the issuance of the underlying Common
Stock in all states or provinces in which the ultimate purchasers of the
Warrant Shares reside. The Warrants may be deprived of any value if a
current prospectus covering the Common Stock issuable upon proper exercise of
the Warrants is not effective or if such shares are not qualified or exempt
from qualification in the states or provinces in which holders of the Warrant
reside. There can be no assurance that the Company will keep any prospectus
covering the Common Stock underlying the Warrants current during the entire
period the Warrants can be exercisable.
5. RESERVATION OF SALES AND PAYMENT OF TAXES. The Company covenants
that it will at all times reserve and have available from its authorized
Common Stock such number of shares as shall then be issuable on the exercise
of outstanding Warrants. The Company covenants that all Warrant Shares which
shall be issuable shall be duly and validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to
the issue thereof.
The Registered Holder shall pay all documentary, stamp or similar taxes
and other government charges that may be imposed with respect to the
issuance, transfer or delivery of any Warrant Shares on exercise of the
Warrants. In the event the Warrant Shares are to be delivered in a name
other than the name of the Registered Holder of the Warrant Certificate, no
such
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delivery shall be made unless the person requesting the same has paid the
amount of any such taxes or charges incident thereto.
6. REGISTRATION OF TRANSFER. The Warrant Certificates may be transferred
in whole or in part, provided any such transfer complies with all applicable
federal and state securities laws, and, if requested by the Company, the
Registered Holder delivers to the Company an opinion of counsel to that effect,
in form and substance reasonably acceptable to the Company. Warrant Certificates
to be transferred shall be surrendered to the Company's Transfer Agent and
Warrant Agent. The Company's Transfer Agent and Warrant Agent shall cause to be
executed, issued and delivered in exchange therefor the Warrant Certificate or
Certificates which the Registered Holder making the transfer shall be entitled
to receive.
The Company's Transfer Agent and Warrant Agent shall keep transfer books
which shall register Warrant Certificates and the transfer thereof. On due
presentment of any Warrant Certificate for registration of transfer to the
Transfer Agent and Warrant Agent such Agent shall execute, issue and deliver
to the transferee or transferees a new Warrant Certificate or Certificates
representing an equal number Warrants transferred. All Warrant Certificates
presented for registration of transfer or exercise shall be duly endorsed or
be accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company and/or the Transfer Agent and Warrant Agent. The
Company and/or the Transfer Agent and Warrant Agent may require payment in
advance of a sum sufficient to cover any tax or other government charge that
may be imposed in connection therewith.
All Warrant Certificates so surrendered, or surrendered for exercise, or
for exchange in case of any mutilated Warrant Certificates, shall be promptly
canceled by the Transfer Agent and Warrant Agent and thereafter retained
until the Expiration Date. Prior to due presentment for registration of
transfer thereof, the Company and its Transfer Agent and Warrant Agent may
treat the Registered Holder of any Warrant Certificate as the absolute owner
of thereof (notwithstanding any notations of ownership or writing thereon by
anyone other than the Company), and the Company, and/or the Transfer Agent
and Warrant Agent shall not be affected by any notice to the contrary.
7. LOSS OR MUTILATION. On receipt by the Company's Transfer Agent and
Warrant Agent of evidence satisfactory as to the ownership and the loss,
theft, destruction or mutilation of this Warrant Certificate, the Company's
Transfer Agent and Warrant Agent shall execute and deliver, in lieu thereof,
a new Warrant Certificate representing an equal aggregate number of Warrants.
In the case of loss, theft or destruction of any Warrant Certificate, the
individual requesting issuance of a new Warrant Certificate shall be required
to indemnify the Company in an amount satisfactory to the Company. In the
event a Warrant Certificate is mutilated, such Warrant Certificate shall be
surrendered and canceled by the Company prior to delivery of a new Warrant
Certificate. Applicants for a new Warrant Certificate shall also comply with
such other reasonable regulations as the Company may prescribe. Any new
Warrant Certificate(s) shall be subject to the same Expiration Date as
existed for the Warrant Certificates being replaced.
<PAGE>
8. REDEMPTION OPTION. So long as the average closing price or last
trade on the principal exchange on which, or in the principal market in
which, the Shares trade equals or exceeds $7.50 ("the Notice Price") per
Share for the ten (10) consecutive trading days preceding but not including
the date of such call, the Company shall have the right and option, upon no
less than twenty (20) trading days' written notice to the Registered Holder,
to call, and thereafter to redeem and acquire all the Warrants evidenced
hereby which may remain outstanding and unexercised at the date fixes for
such redemption in such notice (the "Redemption Date"), which Redemption Date
shall be at least twenty (20) trading days after the date of such notice, for
an amount equal to One Cent ($0.01) per Warrant; provided, however, that the
Registered Holder shall have the right during the period between the date of
such notice and the Redemption Date to exercise the Warrants in accordance
with the provisions of Section 3 hereof. Said notice of redemption shall
require the Registered Holder to surrender to the Company's Transfer Agent
and Warrant Agent, on the Redemption Date, his certificate or certificates
representing the Warrants to be redeemed. Notwithstanding the fact that any
Warrants called for redemption have not been surrendered for redemption and
cancellation on the Redemption Date, after the Redemption Date such Warrants
shall be deemed to expired and all rights of the Registered Holder of such
non-surrendered Warrants shall cease and terminate, other than the right to
receive the redemption price of $0.01 per Warrant for such Warrants, without
interest.
In connection with any call hereunder, the Company shall have no
obligation to call any other stock purchase warrant or warrants, whether not
having similar terms, and no call made pursuant to any other stock purchase
warrant shall obligate the Company to exercise its right and option to make a
call hereunder, except that the Company shall not call any Series "C" stock
purchase warrants (including the Warrants evidenced hereby) having terms
substantially identical to the Warrants evidenced hereby unless the Company
concurrently calls all the Series "C" Warrants.
9. ADJUSTMENT OF SHARES. The number and kind of securities issuable upon
exercise of a Warrant or to be delivered upon the redemption of Warrants
hereunder shall be subject to adjustment from time to time upon the happening of
certain events ("Adjustment Event"), as follows:
(a) If the Company shall, at any time prior to the complete exercise of
the Warrants evidenced hereby, declare or pay to the holders of its
outstanding shares of stock, a dividend payable in any kind of shares of
stock or other securities of the Company, or in property, or otherwise than
in cash, the Registered Holder upon thereafter exercising the Warrants
evidenced hereby as herein provided shall be entitled to receive for the
Exercise Price, in addition to one Warrant Share, such additional share or
shares of stock, or payment in lue of any scrip which would otherwise be
required to be issued representing fractions of a share, or other securities
or property as the Registered Holder would have received in the form of such
dividend if he had been the holder of record of such Warrant Shares on the
record date for the determination of common stockholders entitled to receive
such dividend.
(b) If the Company shall, while any Warrants evidenced hereby remain in
force, effect a recapitalization of such character that the Shares covered
hereby shall be changed into or
<PAGE>
become exchangeable for a larger or small number of shares, then, thereafter,
the number of shares which the Registered Holder shall be entitled to
purchase hereunder, shall be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of shares of the
Company by reason of such recapitalization, and the Exercise Price (per
share) shall be in the case of an increase in the number of shares be
proportionately reduced, and in the case of a decrease in the number of
shares be proportionately increased.
(c) In case of any reorganization of the Company (or any other
corporation the stock or other securities of which are at the time receivable
upon exercise of a Warrant) or in case the Company (or any such other
corporation) shall merge into or with or consolidate with another corporation
or convey all or substantially all of its assets to another corporation or
enter into a business combination of any form as a result of which the shares
or other securities receivable upon exercise of a Warrant are converted into
other stock or securities of the same or another corporation, then and in
each case, the Registered Holder of a Warrant, upon exercise of the purchase
right at any time after the consummation of such reorganization,
consolidation, merger, conveyance or combination shall be entitled to
receive, in lieu of the shares or other securities to which such Registered
Holder would have been entitled had he exercised the purchase right
immediately prior thereto, such stock and securities which such Registered
Holder would have owned immediately after such event with respect to the
shares and other securities for which a Warrant may have been exercised
immediately before such event had the Registered Holder Exercised the Warrant
immediately prior to such event.
(d) In case the Company shall at any time prior to the exercise of a
Warrant evidenced hereby make any distribution of its assets to holders of
its Shares by liquidation or partial liquidating dividend or by way of return
of capital, or other than as a dividend payable out of earnings or any
surplus legally available for dividends under the law of the province of its
incorporation, then the Registered Holder upon thereafter exercising such
Warrant as herein provided after the date of record for the determination of
those holders of shares entitled to such distribution of assets, shall be
entitled to receive for the Exercise Price, in addition to a Warrant Share,
the amount of such assets (or at the option of the Company, a sum equal to
the value thereof at the time of such distribution to holders of shares as
such value is determined by the Board of Directors of the Company in good
faith) which would have been payable to the Registered Holder had he been the
holder of record of such Warrant Share receivable upon exercise of such
Warrant on the record date for the determination of those entitled to such
distribution.
The Company shall mail or cause to be mailed to the holder of the
Warrant Certificate at least twenty (20) days prior to any Adjustment Event a
notice specifying the date on which any such Adjustment Event is to occur
together with a description thereof.
In each case of an adjustment in the shares or other securities
receivable upon the exercise of a Warrant, the Company shall promptly notify
the Registered Holder of such adjustment. Such notice shall set forth the
facts upon which such adjustment is based.
<PAGE>
10. ADJUSTMENTS. The Exercise Price and the number of shares of
common stock purchasable upon the exercise of the Warrants are subject to
adjustment upon the occurrence of certain events, including stock dividends,
stock splits, combinations or reclassification of the common stock, or merger
of the Company. No adjustments to the Exercise Price will be made for
dividends (other than stock dividends), if any, paid on the common stock. In
addition, the Company, at its sole discretion, may on thirty (30) days prior
written notice, concurrently adjust downward both the Exercise Price and the
Notice Price; provided, however, that the percentage reduction in the Notice
Price will be identical to the percentage reduction in the Exercise Price.
11. NOTICES. All notices, demands, elections or requests (however
characterized or described) required or authorized hereunder shall be deemed
given sufficiently if in writing and sent by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile or telegram to
the Company, at its principal executive office and to the Registered Holder,
at the address of such holder as set forth on the books maintained by the
Company.
12. GENERAL PROVISIONS. This Warrant Certificate shall be construed and
enforced in accordance with, and governed by, the laws of the State of
California. The headings of this Warrant Certificate are for convenience in
reference only and shall not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the _____ day of __________, ____.
Youbet.com, Inc.
By _____________________________________
DAVID M. MARSHALL
VICE CHAIRMAN
<PAGE>
FORM OF ASSIGNMENT
(To Be Executed by the Registered Holder if He Desires to Assign Warrants
Evidenced by the Within Warrant Certificate)
FOR VALUE RECEIVED, _____________________________________________________
hereby sells, assigns and transfers unto _____________________________________
____________________________ (___) Warrants, evidenced by the within Warrant
Certificate, and does
hereby irrevocably constitute and appoint ____________________________________
Power of Attorney to transfer the said Warrants evidenced by the within
Warrant Certificates on the books of the
Company, with full power of substitution.
Dated: _______________________________ _____________________________________
Signature
Notice: The above signature must correspond with the name as written upon
the face of the Warrant Certificate in every particular, without alteration
or enlargement or any change whatsoever.
<PAGE>
PURCHASE FORM
Dated: ________________, 199_
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _____________________________ shares of Common Stock
and hereby makes payment of $__________________ in payment of the actual
exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ___________________________________________________
(please type or print name in block letters)
Address ________________________________________________
Signature ______________________________________________
<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND
MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
YOUBET.COM, INC.
Incorporated Under the Laws of the State of Delaware
No. ________ ______ Common Stock
Purchase Warrants
CERTIFICATE FOR COMMON STOCK
PURCHASE WARRANTS
SERIES E
1. WARRANTS. This Warrant Certificate certifies that
________________________, or registered assigns (the "Registered Holder") is
the registered owner of the above indicated number of Warrants expiring on
the Expiration Date, as hereinafter defined. One (1) Warrant entitles the
Registered Holder to purchase one (1) share of the $.001 par value common
stock (a "Share") of Youbet.com, Inc a Delaware corporation (the "Company"),
from the Company at a purchase price of Three Dollars and Twelve and One-Half
Cents ($3.125) (the "Exercise Price") at any time during the Exercise Period,
as hereinafter defined, upon surrender at the principal office of the Company
of this Warrant Certificate with the exercise form appended hereto duly
completed and executed and accompanied by payment of the Exercise Price.
Upon due presentment for transfer or exchange of this Warrant
Certificate at the principal office of the Company, a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued in exchange for this Warrant Certificate,
subject to the limitations provided herein, upon payment of any tax or
governmental charge imposed in connection with such transfer. Subject to the
terms hereof, the Company shall deliver Warrant Certificates in required
whole number denominations to Registered Holders in connection with any
transfer or exchange permitted hereunder.
2. RESTRICTIVE LEGEND. Each Warrant Certificate and each certificate
representing Shares issued upon exercise of a Warrant, unless such Shares are
then registered under the Securities Act of 1933, as amended (the "Act"),
shall bear a legend in substantially the following form:
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<PAGE>
"THE [SECURITIES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES OR
BLUE SKY LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND
QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES OR
BLUE SKY LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS
APPLICABLE."
3. EXERCISE. Subject to the terms hereof, the Warrants evidenced by
this Warrant Certificate may be exercised at the Exercise Price in whole or
in part at any time during the period (the "Exercise Period") commencing on
_______________ and terminating at the close of business on _________________.
The Exercise Period may also be extended by the Company's
Board of Directors.
In the event the Shares issuable upon exercise of the Warrants
represented by this Warrant Certificate have not yet been registered under
the Act or are not then covered by a current prospectus meeting the
requirements of the Act, the right of a holder of such Warrants to exercise
such Warrants shall be conditioned upon such holder providing the Company
with an opinion of counsel, in form and substance reasonably acceptable to
the Company, to be effect that the issuance of Shares upon exercise of such
Warrants is exempt from the registration requirements of the Act.
A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date (the "Exercise Date") of the surrender to
the Company at its principal offices of this Warrant Certificate with the
exercise form attached hereto completed and executed by the Registered Holder
and accompanied by payment to the Company, in cash or by check (which shall
be accepted subject to collection), of an amount equal to the aggregate
Exercise Price, in lawful money of the United States of America.
The person entitled to receive the Shares issuable upon exercise of a
Warrant or Warrants ("Warrant Shares") shall be treated for all purposes as
the holder of such Warrant Shares as of the close of business on the Exercise
Date. The Company shall not be obligated to issue any fractional share
interests in Warrant Shares issuable or deliverable on the exercise of any
Warrant or scrip or cash with respect thereto, and such right to a fractional
share shall be of no value whatsoever. If more than one Warrant shall be
exercised at one time by the same Registered Holder, the number of full
Shares which shall be issuable on exercise thereof shall be computed on the
basis of the aggregate number of full shares issuable on such exercise.
Promptly, and in any event within ten business days after the Exercise
Date, the Company shall cause to be issued and delivered to the person or
persons entitled to receive the same, a certificate or certificates for the
number of Warrant Shares deliverable on such exercise.
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<PAGE>
The Company may deem and treat the Registered Holder of the Warrants at
any time as the absolute owner thereof for all purposes, and the Company
shall not be affected by any notice to the contrary. The Warrants shall not
entitle the Registered Holder thereof to any of the rights of shareholders or
to any dividend declared on the Shares unless the Registered Holder shall
have exercised the Warrants and thereby purchased the Warrant Shares prior to
the record date for the determination of holders of Shares entitled to such
dividend or other right.
4. RESERVATION OF SHARES AND PAYMENT OF TAXES. The Company
covenants that it will at all times reserve and have available from its
authorized Common Stock such number of Shares as shall then be issuable on
the exercise of outstanding Series E Warrants. The Company covenants that
all Warrant Shares which shall be so issuable shall be duly and validly
issued, fully paid and non-assessable, and free from all taxes, liens and
charges with respect to the issue thereof.
The Registered Holder shall pay all documentary, stamp or similar taxes
and other government charges that may be imposed with respect to the
issuance, transfer or delivery of any Warrant Shares on exercise of the
Warrants. In the event the Warrant Shares are to be delivered in a name
other than the name of the Registered Holder of the Warrant Certificate, no
such delivery shall be made unless the person requesting the same has paid
the amount of any such taxes or charges incident thereof.
5. REGISTRATION OF TRANSFER. The Warrant Certificates may be
transferred in whole or in part, provided any such transfer complies with all
applicable federal and state securities laws and, if requested by the
Company, the Registered Holder delivers to the Company an opinion of counsel
to that effect, in form and substance reasonably acceptable to the Company.
Warrant Certificates to be transferred shall be surrendered to the Company at
its principal office. The Company shall execute, issue and deliver in
exchange therefor the Warrant Certificate or certificates which the
Registered Holder making the transfer shall be entitled to receive.
The Company shall keep transfer books at its principal office, which
shall register Warrant Certificates and the transfer thereof. On due
presentment of any Warrant Certificate for registration of transfer at such
office, the Company shall execute, issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants. All Warrant Certificates presented for
registration of transfer or exercise shall be duly endorsed or be accompanied
by a written instrument or instruments of transfer in form satisfactory to
the Company. The Company may require payment of a sum sufficient to cover
any tax or other government change that may be imposed in connection
therewith.
All Warrant Certificates so surrendered, or surrendered for exercise, or
for exchange in case of mutilated Warrant Certificates, shall be promptly
canceled by the Company and thereafter retained by the Company until the
Expiration Date. Prior to due presentment for registration of transfer
thereof, the Company may treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof (notwithstanding any
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<PAGE>
notations of ownership or writing thereon made by anyone other than the
Company), and the Company shall not be affected by any notice to the
contrary.
6. LOSS OR MUTILATION. On receipt by the Company of evidence
satisfactory as to the ownership of and the loss, theft, destruction or
mutilation of this Warrant Certificate, the Company shall execute and
deliver, in lieu thereof, a new Warrant Certificate representing an equal
aggregate number of Warrants. In the case of loss, theft or destruction of
any Warrant Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company in a form and amount
satisfactory to the Company. In the event a Warrant Certificate is
mutilated, such Certificate shall be surrendered and canceled by the Company
prior to delivery of a new Warrant Certificate. Applicants for a new Warrant
Certificate shall also comply with such other regulations and pay such other
reasonable charges as the Company may prescribe.
7. ADJUSTMENT OF SHARES. The number and kind of securities
issuable upon exercise of a Warrant shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) STOCK SPLITS, STOCK COMBINATIONS AND CERTAIN STOCK
DIVIDENDS. If the Company shall at any time subdivide or
combine its outstanding Shares, or declare a dividend in
Shares or other securities of the Company convertible into
or exchangeable for Shares, a Warrant for the same Exercise
Price shall, after such subdivision or combination or after
the record date for such dividend, be exercisable for that
number of Shares and other securities of the Company that
the Registered Holder would have owned immediately after
such event with respect to the Shares and other securities
for which a Warrant may have been exercised immediately
before such event had the Warrant been exercised immediately
before such event. Any adjustment under this Section 7 (a)
shall become effective at the close of business on the date
the subdivision, combination or dividend becomes effective.
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER. In
case of any reorganization of the Company (or any other
corporation the stock or other securities of which are at
the time receivable upon exercise of a Warrant) or in case
the Company (or any such other corporation) shall merge into
or with or consolidate with another corporation or convey
all or substantially all of its assets to another
corporation or enter into a business combination of any form
as a result of which the Shares or other securities
receivable upon exercise of a Warrant are converted into
other stock or securities of the same or another
corporation, then and in each such case, the Registered
Holder of a Warrant, upon exercise of the purchase right at
any time after the consummation of such reorganization,
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<PAGE>
consolidation, merger, conveyance or combination, shall for
the same Exercise Price be entitled to receive, in lieu of
the Shares or other securities to which such Registered
Holder would have been entitled had he exercised the
purchase right immediately prior thereto, such stock and
securities which such Registered Holder would have owned
immediately after such event with respect to the Shares and
other securities for which a Warrant may have been exercised
immediately before such event had the Warrant been exercised
immediately prior to such event.
In each case of an adjustment in the Shares or other securities
receivable upon the exercise of a Warrant, the Company shall
promptly notify the Registered Holder of such adjustment. Such
notice shall set forth the facts upon which such adjustment is
based.
8. REDUCTION IN EXERCISE PRICE AT COMPANY'S OPTION. The Company's
Board of Directors may, at its sole discretion, reduce the Exercise Price of
the Warrants in effect at any time either for the remaining life of the
Warrants or any shorter period of time determined by the Company's Board of
Directors. The Company shall promptly notify the Registered Holders of any
such reduction in the Exercise Price.
9. NOTICES. All notices, demands, elections, or requests (however
characterized or described) required or authorized hereunder shall be deemed
given sufficiently if in writing and sent by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile or telegram to
the Company, at its principal executive office, and to the Registered Holder,
at the address of such holder as set forth on the books maintained by the
Company.
10. GENERAL PROVISIONS. This Warrant Certificate shall be constructed
and enforced in accordance with, and governed by, the laws of the State of
California. Except as otherwise expressly stated herein, time is of the
essence in performing hereunder. The headings of this Warrant Certificate
are for convenience in reference only and shall not limit or otherwise affect
the meaning hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of this _____day of __________, ____.
Youbet.com, Inc.
By:
----------------------------
David M. Marshall
Vice Chairman
5
<PAGE>
YOUBET.COM, INC.
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
-------------------
JR TEN - as joint tenants with right (Cust) (Minor)
of survivorship and not as under Uniform Gifts
tenants in common to Minors Act____________
(State)
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
(To be executed by the Registered Holder if He Desires to Assign Warrants
Evidenced by the Within Warrant Certificate)
FOR VALUE RECEIVED __________________________________________ hereby sells,
assigns and transfers unto ___________________________________ (___)
Warrants, evidenced by the within Warrant Certificate, and does hereby
irrevocably constitute and appoint ____________________________ Attorney to
transfer the said Warrants evidenced by the within Warrant Certificates on
the books of the Company, with full power of substitution.
Dated: ____________________________ ____________________________________
Signature
Notice: The above signature must correspond with the name as written upon
the face of the Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Signature Guaranteed: ___________________________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF
THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
6
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if he Desires to Exercise Warrants Evidenced
by the Warrant Certificate)
To Youbet.com, Inc.
The undersigned hereby irrevocably elects to exercise ___________________
(____) Warrants, evidenced by the within Warrant Certificate for, and to
purchase thereunder, ___________________________ (____) full shares of Common
Stock issuable upon exercise of said Warrants and delivery of $_________ and
any applicable taxes.
The undersigned requests that certificate for such shares by issued in
the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
_________________________________________ _________________________________
(Please print name and address)
______________________________________________________________________________
______________________________________________________________________________
If said number of Warrants shall not be all the Warrants evidenced by
the within Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised by issued in the name of
and delivered to:
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
______________________________________________________________________________
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
7
<PAGE>
Dated: ___________________________________ Signature: ________________________
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever, or if signed by any other
person the From of Assignment hereon must be duly executed and if the
certificate representing the shares or any Warrant Certificate representing
Warrants not exercised is to be registered in a name other than that in which
the within Warrant Certificate is registered, the signature of the holder
hereof must be guaranteed.
Signature Guaranteed: _______________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF
THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
8
<PAGE>
NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON
THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
NO. _________ ______ COMMON STOCK
PURCHASE WARRANT
YOUBET.COM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CERTIFICATE FOR COMMON STOCK PURCHASE WARRANTS
EXERCISABLE AT $3.125
THIS CERTIFIES that, for value received, ___________________________
(together with all permitted assigns, the "Holder") is entitled to subscribe
for, and purchase from, YOUBET.COM, a Delaware corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from time to
time during the period commencing two days immediately following the
effective date earlier to occur of (i) the registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), relating to a sale
of the Company's securities, other than pursuant to a stock option plan
(which registration statement shall include either the first filing by the
Company of a registration statement on Form S-1 or SB-2, whether for its own
account or in respect of any selling shareholders) of the common stock, $.001
par value (the "Common Stock"), of the Company and for a period of four years
thereafter or (ii) _______________ (such date being referenced to as the
Initial Exercise Date), and terminating at 5:00 p.m., Los Angeles local time,
on the fifth anniversary of the Initial
<PAGE>
Exercise Date (the "Exercise Period"), [___________] shares of Common Stock.
This Warrant is exercisable at an exercise price per share equal to $3.125
per share; provided, however, that upon the occurrence of any of the events
specified in Section 5 hereof, the rights granted by this Warrant, including
the number of shares of Common Stock to be received upon such exercise, shall
be adjusted as therein specified.
Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a "Warrant Share".
This Warrant is non-callable by the Company.
SECTION 1 EXERCISE OF WARRANT.
This Warrant may be exercised during the Exercise Period, either in
whole or in part, by the surrender of this Warrant (with the election at the
end hereof duly executed) to the Company at its office at 1950 Sawtelle
Boulevard, Suite 180, Los Angeles, California 90025, or at such other place
as is designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
product of the Exercise Price and the number of Warrant Shares for which this
Warrant is being exercised.
SECTION 2 RIGHTS UPON EXERCISE; DELIVERY OF SECURITIES.
Upon each exercise of the Holder's rights to purchase Warrant
Shares, the Holder shall be deemed to be the holder of record of the Warrant
Shares, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing the Warrant Shares with respect to which
this Warrant was exercised shall not then have been actually delivered to the
Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates
representing the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised
in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a Warrant evidencing the right of the
Holder to purchase the balance of the aggregate number of Warrant Shares
purchasable hereunder as to which this Warrant has not been exercised or
assigned.
SECTION 3 REGISTRATION OF TRANSFER AND EXCHANGE.
Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to
treat the registered holder of any Warrant on the Warrant Register 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, such Warrant on the part of
any other person, and shall not be liable for any registration or transfer of
Warrants which are registered or to be registered in the name of a fiduciary
or the nominee of a fiduciary unless made with the
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<PAGE>
actual knowledge that a fiduciary or nominee is committing a breach of trust
in requesting such registration of transfer, or with the knowledge of such
facts that its participation therein amounts to bad faith. This Warrant
shall be transferable on the books of the Company only upon delivery thereof
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. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his, her, or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants
to the person entitled thereto. This Warrant may be exchanged, at the option
of the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person if, in the opinion of counsel to the
Company, such transfer does not comply with the provisions of the Securities
Act and the rules and regulations thereunder.
SECTION 4 RESERVATION OF SHARES.
The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of providing
for the exercise of the Warrants, such number of shares of Common Stock as
shall, from time to time, be sufficient therefor. The Company represents
that all shares of Common Stock issuable upon exercise of this Warrant are
duly authorized and, upon receipt by the Company of the full payment for such
Warrant Shares, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof and will
not be issued in violation of any preemptive or similar rights of
stockholders.
SECTION 5 ANTIDILUTION.
(a) In the event that the Company shall at any time after the
Initial Exercise Date; (i) declare a dividend on the outstanding Common
Stock payable in shares of its capital stock, (ii) subdivide the outstanding
Common Stock; (iii) combine the outstanding Common Stock into a smaller
number of shares; or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Exercise Price per Warrant
Share in effect at the time of the record date for the determination of
stockholders entitled to receive such dividend or distribution or of the
effective date of such subdivision, combination, or reclassification shall be
adjusted so that it shall equal the price determined by multiplying such
Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action. Such adjustment shall be
made successively whenever any event listed above shall occur and shall
become effective at the close of business on such record date
-3-
<PAGE>
or at the close of business on the date immediately preceding such effective
date, as applicable.
(b) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
(c) In any case in which this Section 5 shall require that an
adjustment in the number of Warrant Shares be made effective as of a record
date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to the Holder, if the Holder exercised this
Warrant after such record date, the Warrant Shares, if any, issuable upon
such exercise over and above the number of Warrant Shares issuable upon such
exercise on the basis of the number of shares of Common Stock in effect prior
to such adjustment; provided, however, that the Company shall deliver to the
Holder a due bill or other appropriate instrument evidencing the Holder's
right to receive such additional shares of Common Stock upon the occurrence
of the event requiring such adjustment.
(d) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable and the Exercise Price thereof after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the
exercise of this Warrant. If any fraction of a share of Common Stock would
be issuable on the exercise of this Warrant (or specified portions thereof),
the Company shall purchase such fraction for an amount in cash equal to the
same fraction of the average closing sale price (or average of the closing
bid and asked prices, if closing sale price is not available) of Common Stock
for the 10 trading days ending on and including the date of exercise of this
Warrant.
(f) No adjustment in the Exercise Price per Warrant Share shall
be required if such adjustment is less than $0.25; provided, however, that
any adjustments which by reason of this Section 5 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(g) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subsection (a) above, the number of Warrant
Shares issuable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Warrant Shares theretofore issuable
upon exercise of this Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
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<PAGE>
SECTION 6 RECLASSIFICATION; REORGANIZATION; MERGER.
(a) In case of any capital reorganization, other than in the
cases referred to in Section 5(a) hereof, or the consolidation or merger of
the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into
shares of other stock or other securities or property), or in the case of any
sale, lease, or conveyance to another corporation of the property and assets
of any nature of the Company as an entirety or substantially as an entirety
(such actions being hereinafter collectively referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of
this Warrant (in lieu of the number of Warrant Shares theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the respective number of Warrant Shares which would
otherwise have been deliverable upon the exercise of this Warrant would have
been entitled upon such Reorganization if this Warrant had been exercised in
full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
Board of Directors of the Company, shall be made in the application of the
provisions herein set forth with respect to the rights and interests of the
Holder so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other
property thereafter deliverable upon exercise of this Warrant. Any such
adjustment shall be made by, and set forth in, a supplemental agreement
between the Company, or any successor thereto, and the Holder, with respect
to this Warrant, and shall for all purposes hereof conclusively be deemed to
be an appropriate adjustment. The Company shall not effect any such
Reorganization unless, upon or prior to the consummation thereof, the
successor corporation, or if the Company shall be the surviving corporation in
any such Reorganization and is not the issuer of the shares of stock or other
securities or property to be delivered to holders of shares of the Common
Stock outstanding at the effective time thereof, then such issuer, shall
assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities, cash, or other property as such Holder shall be
entitled to purchase in accordance with the foregoing provisions. In the
event of sale, lease, or conveyance or other transfer of all or substantially
all of the assets of the Company as part of a plan for liquidation of the
Company, all rights to exercise this Warrant shall terminate 30 days after
the Company gives written notice to the Holder that such sale or conveyance
or other transfer has been consummated.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par
value or from a specified par value to no par value, or as a result of a
subdivision or combination, but including any change in the shares into two
or more classes or series of shares), or in case of any consolidation or
merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par
value to a specified par value, or as a result of a subdivision or
combination, but including any
-5-
<PAGE>
change in the shares into two or more classes or series of shares), the
Holder or holders of this Warrant shall have the right thereafter to receive
upon exercise of this Warrant solely the kind and amount of shares of stock
and other securities, property, cash, or any combination thereof receivable
upon such reclassification, change, consolidation, or merger by a holder of
the number of Warrant Shares for which this Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments, which shall
be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
SECTION 7 NOTICE OF CERTAIN EVENTS.
In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease, or conveyance of
property, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
15 days prior to; (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution,
rights, warrants, or other securities are to be determined; (ii) the date on
which any such reclassification, change of outstanding shares of Common
Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution, or winding-up is expected to become
-6-
<PAGE>
effective and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
change of outstanding shares, consolidation, merger, sale, lease, conveyance
of property, liquidation, dissolution, or winding-up; or (iii) the date of
such action which would require an adjustment to the Exercise Price per
Warrant Share.
SECTION 8 CHARGES AND TAXES.
The issuance of any shares or other securities upon the exercise of
this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not
be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 9 PERIODIC REPORTS.
The Company agrees that following the Initial Exercise Date and
until all the Warrant Shares shall have been sold pursuant to Rule 144 under
the Securities Act, it shall use its best efforts to keep current in filing
all reports, statements, and other materials required to be filed with the
Commission to permit holders of the Warrant Shares to sell such securities
under Rule 144 under the Securities Act.
SECTION 10 LEGEND.
Until sold pursuant to the provisions of Rule 144 or otherwise
registered under the Securities Act, the Warrant Shares issued on exercise of
the Warrants shall be subject to a stop transfer order and the certificate or
certificates representing the Warrant Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THE
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED IN
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<PAGE>
THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.
SECTION 11 LOSS; THEFT; DESTRUCTION; MUTILATION.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon receipt by the Company of reasonably
satisfactory indemnification, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.
SECTION 12 STOCKHOLDER RIGHTS.
The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.
SECTION 13 GOVERNING LAW.
This Warrant shall be construed in accordance with the laws of the
State California applicable to contracts made and performed within such
State, without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed on the ____ day of _______, ____.
YOUBET.COM
BY: __________________________
DAVID M. MARSHALL
VICE CHAIRMAN
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<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________ shares of
Common Stock, $.001 par value, of Youbet.com, a Delaware corporation (the
"Company"), and does hereby irrevocably constitute and appoint ___________
attorney to transfer such Warrant on the books of the Company, with full
power of substitution.
Dated: _________________
Signature_______________________
-9-
<PAGE>
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
-10-
<PAGE>
ELECTION TO EXERCISE
To: Youbet.com
1950 Sawtelle Boulevard, Suite 180
Los Angeles, California 90025
The undersigned hereby exercises his, her, or its rights to purchase
shares of Common Stock, $.001 par value ("the Common Stock"), of Youbet.com a
Delaware corporation (the "Company"), covered by the within Warrant and
tenders payment herewith in the amount of $_____ in accordance with the terms
thereof, and requests that certificates for the securities constituting such
shares of Common Stock be issued in the name of, and delivered to:
(Print Name, Address, and Social Security or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common Stock covered by the within Warrant, that a new Warrant for
the balance of the shares of Common Stock covered by the within Warrant shall
be registered in the name of, and delivered to, the undersigned at the
address stated below.
Dated: __________________ Name________________________
(Print)
Address:
________________________
(Signature)
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<PAGE>
NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
NO. _________ ______ COMMON STOCK
PURCHASE WARRANT
YOUBET.COM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CERTIFICATE FOR COMMON STOCK PURCHASE WARRANTS
EXERCISABLE AT $5.250
THIS CERTIFIES that, for value received, ___________________ (together with
all permitted assigns, the "Holder") is entitled to subscribe for, and purchase
from, YOUBET.COM, INC., a Delaware corporation (the "Company"), upon the terms
and conditions set forth herein, at any time or from time to time during the
period commencing two days immediately following the effective date earlier to
occur of (i) the registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), relating to a sale of the Company's securities,
other than pursuant to a stock option plan (which registration statement shall
include either the first filing by the Company of a registration statement on
Form S-1 or SB-2, whether for its own account or in respect of any selling
shareholders) of the common stock, $.001 par value (the "Common Stock"), of the
Company and for a period of four years thereafter or (ii) ______________ (such
date being referenced to as the Initial Exercise Date),
<PAGE>
and terminating at 5:00 p.m., Los Angeles local time, on the fifth anniversary
of the Initial Exercise Date (the "Exercise Period"), [___________] shares of
Common Stock. This Warrant is exercisable at an exercise price per share equal
to $5.250 per share; provided, however, that upon the occurrence of any of the
events specified in Section 5 hereof, the rights granted by this Warrant,
including the number of shares of Common Stock to be received upon such
exercise, shall be adjusted as therein specified.
Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a "Warrant Share".
This Warrant is non-callable by the Company.
SECTION 1 EXERCISE OF WARRANT.
This Warrant may be exercised during the Exercise Period, either in
whole or in part, by the surrender of this Warrant (with the election at the end
hereof duly executed) to the Company at its office at 1950 Sawtelle Boulevard,
Suite 180, Los Angeles, California 90025, or at such other place as is
designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to the
product of the Exercise Price and the number of Warrant Shares for which this
Warrant is being exercised.
SECTION 2 RIGHTS UPON EXERCISE; DELIVERY OF SECURITIES.
Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing the Warrant Shares with respect to which this Warrant
was exercised shall not then have been actually delivered to the Holder. As
soon as practicable after each such exercise of this Warrant, the Company shall
issue and deliver to the Holder a certificate or certificates representing the
Warrant Shares issuable upon such exercise, registered in the name of the Holder
or its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
Warrant evidencing the right of the Holder to purchase the balance of the
aggregate number of Warrant Shares purchasable hereunder as to which this
Warrant has not been exercised or assigned.
SECTION 3 REGISTRATION OF TRANSFER AND EXCHANGE.
Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register 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, such Warrant on the part of any other person,
and shall not be liable for any registration or transfer of Warrants which are
registered
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<PAGE>
or to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee is committing
a breach of trust in requesting such registration of transfer, or with the
knowledge of such facts that its participation therein amounts to bad faith.
This Warrant shall be transferable on the books of the Company only upon
delivery thereof 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. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his, her, or its authority shall be produced. Upon any registration
of transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares (or portions thereof), upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act and the rules and regulations thereunder.
SECTION 4 RESERVATION OF SHARES.
The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the Warrants, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor. The Company represents that all
shares of Common Stock issuable upon exercise of this Warrant are duly
authorized and, upon receipt by the Company of the full payment for such Warrant
Shares, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof and will not be issued in
violation of any preemptive or similar rights of stockholders.
SECTION 5 ANTIDILUTION.
(a) In the event that the Company shall at any time after the
Initial Exercise Date; (i) declare a dividend on the outstanding Common Stock
payable in shares of its capital stock, (ii) subdivide the outstanding Common
Stock; (iii) combine the outstanding Common Stock into a smaller number of
shares; or (iv) issue any shares of its capital stock by reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Exercise Price per Warrant Share in effect at the time
of the record date for the determination of stockholders entitled to receive
such dividend or distribution or of the effective date of such subdivision,
combination, or reclassification shall be adjusted so that it shall equal the
price determined by multiplying such Exercise Price by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action, and the denominator of which shall be the number of shares
of Common Stock outstanding after giving effect to such action. Such adjustment
shall be made successively whenever any event
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<PAGE>
listed above shall occur and shall become effective at the close of business on
such record date or at the close of business on the date immediately preceding
such effective date, as applicable.
(b) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
(c) In any case in which this Section 5 shall require that an
adjustment in the number of Warrant Shares be made effective as of a record date
for a specified event, the Company may elect to defer, until the occurrence of
such event, issuing to the Holder, if the Holder exercised this Warrant after
such record date, the Warrant Shares, if any, issuable upon such exercise over
and above the number of Warrant Shares issuable upon such exercise on the basis
of the number of shares of Common Stock in effect prior to such adjustment;
provided, however, that the Company shall deliver to the Holder a due bill or
other appropriate instrument evidencing the Holder's right to receive such
additional shares of Common Stock upon the occurrence of the event requiring
such adjustment.
(d) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable and the Exercise Price thereof after such adjustment and setting
forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(e) The Company shall not be required to issue fractions of shares
of Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share of Common Stock would be issuable on the
exercise of this Warrant (or specified portions thereof), the Company shall
purchase such fraction for an amount in cash equal to the same fraction of the
average closing sale price (or average of the closing bid and asked prices, if
closing sale price is not available) of Common Stock for the 10 trading days
ending on and including the date of exercise of this Warrant.
(f) No adjustment in the Exercise Price per Warrant Share shall be
required if such adjustment is less than $0.25; provided, however, that any
adjustments which by reason of this Section 5 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
(g) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subsection (a) above, the number of Warrant
Shares issuable upon exercise of this Warrant shall simultaneously be adjusted
by multiplying the number of Warrant Shares theretofore issuable upon exercise
of this Warrant by the Exercise Price in effect on the date hereof and dividing
the product so obtained by the Exercise Price, as adjusted.
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<PAGE>
SECTION 6 RECLASSIFICATION; REORGANIZATION; MERGER.
(a) In case of any capital reorganization, other than in the cases
referred to in Section 5(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in the case of any sale, lease, or conveyance to
another corporation of the property and assets of any nature of the Company as
an entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of Warrant
Shares theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the respective number of Warrant
Shares which would otherwise have been deliverable upon the exercise of this
Warrant would have been entitled upon such Reorganization if this Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of the Holder so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of this Warrant. Any such adjustment shall be made by, and set
forth in, a supplemental agreement between the Company, or any successor
thereto, and the Holder, with respect to this Warrant, and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. The
Company shall not effect any such Reorganization unless, upon or prior to the
consummation thereof, the successor corporation, or if the Company shall be the
surviving corporation in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the obligation to deliver to the
Holder such shares of stock, securities, cash, or other property as such Holder
shall be entitled to purchase in accordance with the foregoing provisions. In
the event of sale, lease, or conveyance or other transfer of all or
substantially all of the assets of the Company as part of a plan for liquidation
of the Company, all rights to exercise this Warrant shall terminate 30 days
after the Company gives written notice to the Holder that such sale or
conveyance or other transfer has been consummated.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from a specified par value to no par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par
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<PAGE>
value to a specified par value, or as a result of a subdivision or combination,
but including any change in the shares into two or more classes or series of
shares), the Holder or holders of this Warrant shall have the right thereafter
to receive upon exercise of this Warrant solely the kind and amount of shares
of stock and other securities, property, cash, or any combination thereof
receivable upon such reclassification, change, consolidation, or merger by a
holder of the number of Warrant Shares for which this Warrant might have been
exercised immediately prior to such reclassification, change, consolidation, or
merger. Thereafter, appropriate provision shall be made for adjustments, which
shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
SECTION 7 NOTICE OF CERTAIN EVENTS.
In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common Stock
in shares of Common Stock or make any other distribution (other than regularly
scheduled cash dividends which are not in a greater amount per share than the
most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants, or other securities to all holders of
Common Stock entitling them to purchase any additional shares of Common Stock or
any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease, or conveyance of
property, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the Company;
or
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to; (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined; (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale,
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lease, conveyance of property, liquidation, dissolution, or winding-up is
expected to become effective and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange
their shares for securities or other property, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution, or winding-up; or (iii)
the date of such action which would require an adjustment to the Exercise Price
per Warrant Share.
SECTION 8 CHARGES AND TAXES.
The issuance of any shares or other securities upon the exercise of
this Warrant and the delivery of certificates or other instruments representing
such shares or other securities shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 9 PERIODIC REPORTS.
The Company agrees that following the Initial Exercise Date and until
all the Warrant Shares shall have been sold pursuant to Rule 144 under the
Securities Act, it shall use its best efforts to keep current in filing all
reports, statements, and other materials required to be filed with the
Commission to permit holders of the Warrant Shares to sell such securities under
Rule 144 under the Securities Act.
SECTION 10 LEGEND.
Until sold pursuant to the provisions of Rule 144 or otherwise
registered under the Securities Act, the Warrant Shares issued on exercise of
the Warrants shall be subject to a stop transfer order and the certificate or
certificates representing the Warrant Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1)
A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THE SECURITIES, WHICH COUNSEL AND OPINION
ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
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<PAGE>
OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR APPLICABLE STATE SECURITIES LAWS.
SECTION 11 LOSS; THEFT; DESTRUCTION; MUTILATION.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon receipt by the Company of reasonably
satisfactory indemnification, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.
SECTION 12 STOCKHOLDER RIGHTS.
The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
SECTION 13 GOVERNING LAW.
This Warrant shall be construed in accordance with the laws of the
State California applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed on the _____ day of _______________, ____.
YOUBET.COM, INC.
By: __________________________
David M. Marshall
Vice Chairman
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<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________ shares of
Common Stock, $.001 par value, of Youbet.com, Inc. a Delaware corporation (the
"Company"), and does hereby irrevocably constitute and appoint ___________
attorney to transfer such Warrant on the books of the Company, with full power
of substitution.
Dated: _________________
Signature______________________
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<PAGE>
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE>
ELECTION TO EXERCISE
To: Youbet.com, Inc.
1950 Sawtelle Boulevard, Suite 180
Los Angeles, California 90025
The undersigned hereby exercises his, her, or its rights to purchase shares
of Common Stock, $.001 par value ("the Common Stock"), of Youbet.com, Inc., a
Delaware corporation (the "Company"), covered by the within Warrant and tenders
payment herewith in the amount of $_____ in accordance with the terms thereof,
and requests that certificates for the securities constituting such shares of
Common Stock be issued in the name of, and delivered to:
(Print Name, Address, and Social Security or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common Stock covered by the within Warrant, that a new Warrant for the
balance of the shares of Common Stock covered by the within Warrant shall be
registered in the name of, and delivered to, the undersigned at the address
stated below.
Dated: __________________ Name________________________
(Print)
Address:
________________________
(Signature)
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<PAGE>
EXHIBIT 4.12
No. 99LG-__
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.
YOUBET.COM, INC.
WARRANT TO PURCHASE COMMON STOCK
August 24, 1999
YOUBET.COM, INC., a Delaware corporation formerly known as You Bet
International, Inc. (the "Company"), hereby certifies that for value received
________________ (the "Holder"), or its assigns is entitled to purchase from the
Company ________________ shares of the Company's Common Stock, par value $.001
per share ("Common Stock"), for $2.50 per share (the "Exercise Price"). The
shares of Common Stock which may be purchased upon the exercise of this Warrant
are sometimes referred to herein as the "Warrant Shares." By its acceptance of
this Warrant the Holder agrees to the terms hereof.
Section 1. EXERCISABILITY OF WARRANT. This Warrant shall be
exercisable on the date hereof until 5:00 p.m., Los Angeles time on June 29,
2003 (the "Termination Date") and thereafter this Warrant shall not be
exercisable. The number of Warrant Shares issuable upon exercise of this
Warrant 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.
<PAGE>
2.2 TRANSFER. Subject to the terms hereof, this Warrant shall
be transferrable 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.
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
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<PAGE>
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.
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."
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<PAGE>
The certificates shall also contain such legends as may be
required by applicable state securities laws and other applicable laws.
Section 4. 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 Holder of its intention so to do. Upon the written request of
the 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 Warrant
Shares, the Company will cause such Warrant Shares 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 Warrant
Shares, as the case may be, by the Holder. In the event that any
registration by the Company 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 the Securities Act, the Holder
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 4(b) hereof, the number of Warrant Shares 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
Warrant Shares and other 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, the Holder shall not be entitled
to include any Warrant Shares 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 Common Stock each, (ii) an
aggregate of 50% of the total number of shares of Common Stock which may be
sold by all of the selling stockholders in such offering (including Common
Stock to be sold by Messrs. Marshall and Fine), and (iii) the number of
shares of Common Stock desired to be sold by Messrs. Marshall and Fine;
provided, however that the foregoing priority will no longer be applicable to
Mr. Marshall and Mr. Fine, as the case may be, at such times as Mr. Marshall
or Mr. Fine, as the case may be, has sold an aggregate of two hundred
thousand (200,000) shares of Common Stock. Thereafter, the Holder, together
with other selling shareholders participating in such offering,
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<PAGE>
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 without thereby incurring any
liability to the Holder pursuant to this Section 4.
Section 5. 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 Securities and Exchange
Commission (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 Holder with copies of all registration
statements, amendments and supplements proposed to be filed and provide the
Holder 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 Warrant Shares 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 Warrant Shares 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;
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<PAGE>
(e) use commercially reasonable efforts to cause the Warrant
Shares 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 Warrant Shares 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 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
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<PAGE>
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 Holder 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 the Holder, underwriter, attorney,
accountant or agent in connection with such registration statement.
For purposes of this Warrant, 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
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 the Holder as
the Company may reasonably require in connection with the preparation of a
registration statement which includes the Warrant Shares (the "Holder
Information") of the 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.
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In connection with any registration by the Company in an underwritten
public offering, the Company and Holder will 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.
Section 6. REGISTRATION EXPENSES. All expenses incurred in
connection with a registration hereunder or otherwise incurred by the Company
in complying with this Warrant, 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 shareholders (such counsel to be
selected by the holders of a majority of the shares of Common Stock 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 Warrant
Shares (collectively the "Registration Expenses"). The Company will pay all
Registration Expenses in connection with each registration statement under
this Warrant.
Section 7. INDEMNIFICATION.
(a) In the event of a registration of any Warrant Shares
under the Securities Act pursuant to this Warrant, the Company will indemnify
and hold harmless the Holder, its affiliates, officers, directors, partners,
employees, advisors and agents, each underwriter of such Warrant Shares
thereunder and each other person, if any, who controls the Holder or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, to which the 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 any material fact contained in any
registration statement under which such Warrant Shares were registered under
the Securities Act pursuant to this Warrant, 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 the 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.
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(b) In the event of a registration of any Warrant Shares
under the Securities Act pursuant to this Warrant, the 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 Warrant Shares 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 Warrant Shares were registered
under the Securities Act pursuant to this Warrant, 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 the 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 the
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 the Holder be greater than
the amount received (net of commissions and expenses) by the Holder from the
sale of the Warrant Shares 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 7(c) and shall only relieve the indemnifying party
from any liability which it may have to such indemnified party under this
Section 7(c) if and to the extent the indemnifying party is materially
prejudiced by 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 7(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
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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)
the Holder exercising rights under this Section 7, or any controlling person
of the Holder, makes a claim for indemnification pursuant to this Section 7
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 7 provides
for indemnification in such case, or (ii) contribution under the Securities
Act may be required on the part of the Holder or any such controlling person
in circumstances for which indemnification is provided under this Section 7;
then, and in each such case, the Company and the 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 the
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) the Holder will not
be required to contribute any amount in excess of the net proceeds received
by the Holder from the sale of all such Warrant Shares 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.
Section 8. 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 the Holder may reasonably request, all to the extent required from
time to time to enable the Holder to sell Warrant Shares 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 the
Holder the Company shall deliver to the Holder a written statement as to
whether the Company has complied with such information and requirements.
Section 9. INCONSISTENT REGISTRATION RIGHTS. The rights granted
to the Holder hereunder are not inconsistent with rights granted to any other
person.
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Section 10. 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 11. CERTAIN COVENANTS
11.1 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. 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.
11.2 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 Warrant 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, and (c) 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 12. ANTI-DILUTION PROVISIONS.
12.1 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,
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(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
(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 12.3 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 12.1) 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 12.1) receivable by the Holder as
aforesaid during such period, giving effect to all adjustments called for during
such period by this Section 12.
12.2 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 12; 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.
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(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 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 12.2 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 12.3, 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 11.2.
12.3 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 12.3. 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 12.3) 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 12.3) be in effect, and (b) the
denominator is the Exercise Price in effect on the date of such exercise;
provided that in no event may the Exercise Price be reduced below the par value
of the Common Stock.
12.4 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
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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 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 the
Holder a like certificate setting forth the Exercise Price at the time in
effect an showing how it was calculated.
Section 13. HOLDER NOT A SHAREHOLDER. The 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 14. 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: Youbet.com, Inc.
1950 Sawtelle Boulevard
Suite 180
Los Angeles, CA 90025
Attention: Chief Executive Officer
Fax: (310) 444-3390
TO HOLDER: ________________
9301 Wilshire Boulevard, Suite 215
Beverly Hills, California 90212
Fax: (310) 248-4444
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
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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 15. ASSIGNMENT. This Warrant shall be binding upon and shall
inure to the benefit of the parties hereto and their successors and assigns.
Section 16. 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.
Section 17. 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 18. 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
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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 19. ENTIRE UNDERSTANDING. This Warrant contains the entire
terms of the Holder's 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 20. 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]
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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.
YOUBET.COM, INC.
a Delaware corporation
By: _______________________________
Name:
Title:
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PURCHASE FORM
____________________, 19__
To: Youbet.com, Inc.
Reference is made to the Warrant to Purchase Common Stock dated May 11,
1999 (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]
________________________________
________________________________
________________________________
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EXHIBIT A
____________, 19__
YOUBET.COM, INC.
__________________________
__________________________
Re: WARRANT EXERCISE
Gentlemen:
In connection with the exercise of that certain Warrant No. __ dated
as of May 11, 1999 (the "Warrant") of Youbet.com, Inc., a Delaware
corporation formerly known as You Bet International, Inc. (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
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to the satisfaction of certain conditions and that such Rule may cease to be
available for resale of the Securities.
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
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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,
______________________
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[LETTERHEAD OF CHRISTENSEN, MILLER, FINK, JACOBS, GLASER, WEIL & SHAPIRO, LLP]
September 29, 1999
Youbet.com, Inc.
1950 Sawtelle Boulevard
Suite 180
Los Angeles, CA 90025
Re: Registration Statement on Form S-3 (File No. 333-85675)
Dear Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (File No.
333-85675), as amended by Amendment No. 1 (the "Registration Statement")
filed by you with the Securities and Exchange Commission in connection with
the registration under the Securities Act of 1933 of 7,834,179 shares of
Common Stock (the "Shares"). As your legal counsel in connection with this
transaction, we have examined the proceedings taken and we are familiar with
the proceedings proposed to be taken by you in connection with the
registration of the Shares.
It is our opinion that based upon and in reliance upon completion of the
proceedings being taken, the Shares to be sold by the selling stockholders
pursuant to the Registration Statement, when sold in the manner described in
the Registration Statement, will be validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in
the Registration Statement and in any amendment to it.
Very truly yours,
/s/ CHRISTENSEN, MILLER, FINK, JACOBS,
GLASER, WEIL & SHAPIRO, LLP
<PAGE>
BDO Seidman, LLP
1900 Avenue of the Stars, 11th Floor
Los Angeles, CA 90067
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Youbet.com, Inc.
Los Angeles, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Amended No. 1 to the Registration Statement on
Form S-3 of our report dated March 25, 1999, except for Note 11, which is as
of April 6, 1999, accompanying the financial statements of You Bet
International, Inc. (the "Company") as of December 31, 1997 and 1998, and for
the years then ended, as included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus which is part of such Registration Statement.
BDO SEIDMAN, LLP
Los Angeles, California
September 27, 1999
