1
EXHIBIT 99.2
YOU BET INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
2
YOU BET INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this AAgreement@) is entered into as
of June 29, 1998 by and between YOU BET INTERNATIONAL, INC., a Delaware
corporation (the "Company"), and the purchaser listed on the signature page
hereto (the "Purchaser").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. Authorization and Sale of Securities.
1.1 Authorization; Preferred Shares and Warrant. The Company has
authorized the issuance and sale pursuant to the terms and conditions hereof of
20,000 shares of its Series A Convertible Preferred Stock (the "Preferred
Shares") and has authorized the issuance and sale pursuant to the terms and
conditions hereof of a ten (10) year warrant (the "Warrant") to purchase
1,200,000 shares of the Company's common stock, par value $.001 per share (the
"Common Stock"). The Warrant shall be in the form of Schedule 1.1 hereof.
1.2 Issuance and Sale of Preferred Shares. Subject to the terms
and conditions hereof, at the Closing (as defined herein), the Company will
issue and sell to Purchaser, and Purchaser will purchase from the Company,
20,000 Preferred Shares at a purchase price of $25.00 per Preferred Share.
Purchaser shall pay the purchase price of the Preferred Shares by delivering
$10,000 in cash and a promissory note in the amount of $490,000. The promissory
note shall be in the form of Schedule 1.2 hereof; provided that the Purchaser
shall use his reasonable best efforts to prepay the promissory note as soon as
practicably consistent with his other cash requirements. Such promissory note
shall be secured by the Preferred Shares and the Common Stock issuable upon
conversion of the Preferred Shares (the "Conversion Shares").
1.3 Issuance and Sale of Warrant. Subject to the terms and
conditions hereof, at the Closing, the Company will issue and sell to Purchaser,
and the Purchaser will purchase from the Company, the Warrant. The purchase
price of the Warrant will be $75,000. Purchaser shall pay the purchase price of
the Warrant by delivering $5,000 in cash and a promissory note in the amount of
$70,000. The promissory note shall be in the form of Schedule 1.3 hereof. Such
promissory note shall be secured by the Warrant and the shares of Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares").
3
2. Closing; Delivery.
2.1 Closing.
(a) The closing of the purchase and sale of the
Preferred Shares and the Warrant hereunder (the "Closing") shall take place at
the offices of Christensen, Miller, Fink, Jacobs, Xxxxxx, Xxxx & Xxxxxxx, LLP,
2121 Avenue of the Stars, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 on June 29,
1998 (the AClosing Date@) at 10:00 a.m., or at such other time as may be agreed
upon by the Company and the Purchaser.
2.2 Delivery. Subject to the terms of this Agreement, at the
Closing (A) the Company will deliver to the Purchaser (i) a stock certificate
representing the Preferred Shares to be purchased by the Purchaser, and (ii) the
Warrant, and (B) the Purchaser shall deliver the purchase price for the
Preferred Shares and the Warrant.
3. Representations and Warranties of the Company. The Company represents
and warrants and agrees with the Purchaser as of the date hereof and as of the
Closing Date as follows.
3.1 Organization and Standing; Articles and Bylaws. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has the requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified to
do business as a foreign corporation in every jurisdiction where the failure to
so qualify would have a material adverse impact on the Company's business. The
Company has made available to the Purchaser or his special counsel true, correct
and complete copies of the Company's Certificate of Incorporation and Bylaws,
each as amended to date.
3.2 Corporate Power. The Company has all requisite legal and
corporate power to enter into this Agreement and each other agreement relating
hereto, to sell the Preferred Shares and the Warrant hereunder and to carry out
and perform its obligations under the terms of this Agreement, the Warrant and
the other agreements contemplated hereby.
3.3 Subsidiaries. Schedule 3.3 hereof contains a complete list
of all subsidiaries of the Company, together with the percentage ownership by
the Company, the jurisdiction of formation, the names of the directors, partners
or controlling persons and the nature and extent of the operations of such
subsidiary.
3.4 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of common stock, par value $.001 per share
("Common Shares") and 1,000,000 shares of preferred stock, par value $.001 per
share, including 400,000 shares which have been designated Preferred Shares. As
of the date hereof, there are 9,823,994 shares of Common Stock and no shares of
preferred stock issued and outstanding. Except as set forth on
-2-
4
Schedule 3.4 hereto, there are no options, warrants or other agreements which
provide for the issuance of capital stock of the Company and there are no
securities outstanding which are convertible into capital stock of the Company.
3.5 Authorization.
(a) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for (i) the issuance and sale of
the Preferred Shares in accordance with this Agreement, (ii) the issuance of the
Conversion Shares upon conversion of the Preferred Shares, (iii) the issuance
and sale of the Warrant in accordance with this Agreement, (iv) the issuance of
Warrant Shares upon exercise of the Warrant, and (v) the execution, delivery and
performance by the Company of this Agreement, the Warrant and the other
agreements contemplated hereby have been taken. This Agreement constitutes and
the Warrant and other agreements executed by the Company at the Closing will
constitute valid and binding obligations of the Company enforceable against it
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditor's rights and rules of laws
concerning equitable remedies.
(b) (i) The Preferred Shares, when issued in compliance
with the provisions of this Agreement, (ii) the Conversion Shares, when issued
upon conversion of the Preferred Shares, and (iii) Warrant Shares, when issued
upon exercise of the Warrant, will be validly issued, fully paid and
nonassessable, and will be free of any liens, encumbrances or restrictions on
transfer; provided, however, that the Preferred Shares, the Conversion Shares
and the Warrant Shares may be subject to restrictions on transfer under state
and/or federal securities laws. The Company has reserved the Conversion Shares
for issuance upon the conversion of the Preferred Shares and has reserved the
Warrant Shares for issuance upon the exercise of the Warrant.
(c) No stockholder of the Company or any other person has
any right of first refusal or any preemptive rights in connection with the
issuance and sale of the Preferred Shares or the issuance of the Conversion
Shares upon the conversion of the Preferred Shares. No stockholder of the
Company or any other person has any right of first refusal or any preemptive
rights in connection with the issuance and sale of the Warrant or the issuance
of the Warrant Shares upon the exercise of the Warrant.
3.6 Title to Properties and Assets; Liens; Intangible Property
etc.
(a) Except as set forth on Schedule 3.6 hereto, the
Company and its subsidiaries have good and marketable title to their respective
properties and assets and good title to all their leasehold estates, in each
case not subject to any mortgage, pledge, lien, encumbrance or charge, other
than those resulting from taxes which have not yet become delinquent and those
arising in the ordinary course of business which do not, individually or in the
aggregate,
-3-
5
materially detract from the value of the property subject thereto or threaten to
interfere with the use of such property or otherwise materially impair the
operations of the Company or its subsidiaries, and which have not arisen
otherwise than in the ordinary course of business.
(b) The Company or its subsidiaries is the licensee, or
the sole and exclusive owner, of all trade names, unregistered trademarks and
service marks, brand names, patents, copyrights, registered trademarks and
service marks, and all applications for any of the foregoing, and all permits,
grants and licenses or other rights with respect thereto, the absence of which
would have a material adverse effect on the business, operations or financial
condition of the Company and its subsidiaries. Except as set forth on Schedule
3.6 the Company and its subsidiaries (i) do not use any of such intangible
property by consent of any other person, or (ii) are not required to make any
payments to others with respect thereto. The Company and its subsidiaries have
not been charged with any infringement of any intangible property of the
character described above nor has it been notified or advised of any claim of
any other person or entity relating to any of such intangible property.
3.7 Material ContractsContracts. Except as set forth on Schedule
3.7 hereto, the Company and its subsidiaries do not have any material contract,
agreement, lease, commitment or proposed transaction, written or oral, absolute
or contingent, other than (i) contracts for services that were entered into in
the ordinary course of business that do not involve more than $25,000 or extend
for more than one year beyond the date hereof, (ii) sales contracts entered into
in the ordinary course of business and (iii) contracts (other than employment
and consulting contracts, contracts with labor unions and license and other
agreements relating to the acquisition or disposition of technology) terminable
at will by the Company or its subsidiaries on no more than 30-days notice
without cost or liability to the Company or its subsidiaries. Schedule 3.7
contains a list of all employment, consulting contracts and contracts with labor
unions and license and other agreements relating to the acquisition or
disposition of technology of the Company or its subsidiaries.
3.8 Permits. To the best of the Company's knowledge, the Company
and its subsidiaries have all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it. To the best of the Company's knowledge, the Company and its subsidiaries are
not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
3.9 Patents, Trademarks, etc, Trademarks, etc. To the best of
the Company's knowledge, the Company and its subsidiaries own, or have the right
to use all patents trademarks, service names, trade names, copyrights, licenses,
trade secrets, information or other proprietary rights necessary to their
business as now conducted or proposed to be conducted without conflict with or
infringement of the rights of others, and have not received a notice that they
are infringing upon or otherwise acting adversely to the right or claimed right
of any person under or with respect to any of the foregoing, and to the
Company's best knowledge there is no basis for any such claim. The Company is
not aware of any violation by a third party of any patents, trademarks, service
-4-
6
marks, trade names, copyrights, trade secrets or other proprietary rights of the
Company or its subsidiaries. The Company is not aware that any employees of the
Company or its subsidiaries are obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreements, or
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with their duties to the Company or its subsidiaries or
that would conflict with the business of the Company or its subsidiaries as
proposed to be conducted (as described in the Company's Form 10-KSB for the
fiscal year ended December 31, 1997). The Company does not believe it is or will
be necessary for the Company or its subsidiaries to utilize any inventions of
any of their employees made prior to the commencement of their employment,
except for inventions that have been assigned to the Company or its
subsidiaries. Schedule 3.9 hereto contains a complete list of the Company's and
its subsidiaries' patents and registered trademarks, service marks, trade names,
and copyrights, and all pending applications therefor. Except as set forth in
Schedule 3.9 hereto, there are no outstanding options, licenses, or agreements
of any kind relating to the foregoing, nor is the Company or its subsidiaries
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity.
3.10 Compliance with Instruments. Except as set forth in
Schedule 3.10 hereto, the Company and its subsidiaries are not in violation of
any terms of their Certificate of Incorporation or its Bylaws, as amended, or
any mortgage, indenture, contract, agreement, instrument, judgment, decree or
order by which they are bound or to which their properties are subject where
such violation would have a material adverse effect on the Company or its
subsidiaries. The execution, delivery and performance of and compliance with
this Agreement and the other agreements contemplated hereby and the transactions
contemplated hereby and thereby will not result in any such violation and will
not be in conflict with or constitute, with or without the giving of notice or
passage of time, a default under any of the foregoing and will not result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company pursuant to any of the foregoing.
3.11 Employees. To the Company's best knowledge, no employee of
or consultant to the Company or its subsidiaries is in violation of any term of
any employment contract, consulting agreement, patent disclosure agreement or
any other contract or agreement relating to the right of any such employee or
consultant to be employed or engaged by the Company or its subsidiaries because
of the nature of the business conducted or to be conducted by the Company or its
subsidiaries or for any other reason, and the continued employment and
engagement by the Company or its subsidiaries of their present employees and
consultants will not result in any such violations. The Company is not aware
that any officer or key employee or key consultant, or that any group of key
employees or key consultants, intends to terminate their employment or
engagement with the Company or its subsidiaries, nor does the Company have a
present intention to terminate the employment or engagement of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, except as set forth on Schedule 3.11 hereto, the employment of each
officer and employee of the Company and its subsidiaries is
-5-
7
terminable at will by the Company or its subsidiaries. There are no asserted
controversies or labor disputes or union organization activities pending or, to
the best knowledge of the Company, threatened, between the Company or its
subsidiaries and their respective employees. Each key employee and key
consultant of the Company and its subsidiaries has executed an Employment
Inventions and Proprietary Rights Assignment and Confidentiality Agreement, a
copy of which has been made available to the Purchaser or his special counsel.
To the Company's knowledge, the Company and its subsidiaries has complied with
all applicable state and federal equal employment opportunity and other laws
relating to employment.
3.12 Litigation, etc. Except as set forth in Schedule 3.12
hereto there are no actions, suits, proceedings or investigations pending or, to
the Company's best knowledge, threatened against the Company or its
subsidiaries, which, either in any case or in the aggregate, result in a
material adverse impact on the business, prospects, affairs or operations of the
Company or its subsidiaries or in any of its properties or assets, or in any
material impairment of the right or ability of the Company or its subsidiaries
to carry on its business as now conducted or as proposed to be conducted, or in
any material liability on the part of the Company or its subsidiaries or in any
material change in the current equity ownership of the Company or its
subsidiaries, and none which questions the validity of this Agreement or the
other agreements contemplated hereby or any action taken or to be taken in
connection herewith or therewith or seeks to restrain, enjoin, prevent the
consummation of or otherwise affect the transactions contemplated hereby. The
foregoing includes, without limitation, any action, suit, proceeding, or
investigation pending or currently threatened involving the prior employment of
any employees of the Company or its subsidiaries, their use of any information
or techniques allegedly proprietary to any of their former employees, their
obligations under any agreements with prior employers, and negotiations by the
Company with potential backers of, or investors in, the Company or its proposed
business. The Company and its subsidiaries are not a party or subject to any
writ, order, decree or judgment.
3.13 Registration Rights. Other than as provided in the
Registration Rights Agreement dated as of the Closing Date or as set forth on
Schedule 3.13 hereof, the Company is not under any obligation to register any
presently outstanding securities, or any securities which may hereafter be
issued, under the Securities Act of 1933, as amended (the "Securities Act").
3.14 Governmental Consents, etc. No consent, approval or
authorization of, or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the other agreements contemplated
hereby or the offer, sale or issuance of the Preferred Shares, the Warrant, or
the issuance of Conversion Shares or Warrant Shares, or the consummation of any
other transaction contemplated hereby or thereby, except for filings under
applicable state securities laws which filings, if required, will be made and
will be effective within the time periods required by law.
-6-
8
3.15 Securities Act. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Preferred Shares and the Warrant in conformity with the terms of this Agreement
and the issuance of the Conversion Shares and the Warrant Shares constitutes, or
will constitute, transactions exempt from the registration requirements of
Section 5 of the Securities Act.
3.16 Insurance. The Company maintains insurance with extended
coverage, covering such risks and providing such coverage as is customary for
companies in the same stage of development as the Company.
3.17 Disclosure. No statement by the Company contained in this
Agreement or the other agreements contemplated hereby, including all exhibits
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. The
Confidential Private Placement Memorandum dated May 18, 1998 previously
delivered to the Purchaser does not contain any untrue statement of material
fact nor does it omit to state a material fact necessary to make the statements
therein not misleading.
3.18 Taxes. The Company and its subsidiaries have filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company and its subsidiaries have paid all
taxes and other assessments due, except those contested by it in good faith. The
provision for taxes of the Company as shown in the Financial Statements (as
defined in Section 3.20 below) is adequate for taxes due or accrued as of the
date thereof. The Company and its subsidiaries have never had any tax deficiency
proposed or assessed against it and have not executed any waiver of any statute
of limitations on the assessment or collection of any tax or governmental
charge. None of the Company's or its subsidiaries' federal income tax returns
and none of their state or franchise tax or sales or use tax returns has ever
been audited by governmental authorities. Since the date of the Financial
Statements, the Company has made adequate provision on its books of account for
all taxes, assessments and governmental charges with respect to its business,
properties and operations for such period. The Company and its subsidiaries have
withheld or collected from each payment made to each of their employees, the
amount of all taxes (including, but not limited to, those required by relevant
federal statutes) required to be withheld or collected therefrom, and have paid
the same to the proper tax receiving officers or authorized depositories.
3.19 Transactions with Principals. Except as set forth on
Schedule 3.19 hereto, no employee, stockholder, director or officer of the
Company or its subsidiaries, consultant to the Company or its subsidiaries, or
any affiliate or immediate family member thereof (a "Related Party") is indebted
to the Company or its subsidiaries, nor is the Company or its subsidiaries
indebted (or committed to make loans or extend or guarantee credit) to any
Related Party. To the best of the Company's knowledge, except as set forth on
Schedule 3.19 hereto, no Related Party is, directly or indirectly, interested in
any material contract with the Company or its subsidiaries. Set forth on
Schedule 3.19 hereto is a list of each agreement, instrument or other writing
intended
-7-
9
to constitute a legal obligation between the Company or its subsidiaries and any
Related Party at the time of the Closing. Except as set forth in that certain
Stockholders Agreement of even date herewith, to the best of the Company's
knowledge, there is no voting agreement or other arrangement among its
stockholders with respect to the election of any individual or individuals to
the Company's Board of Directors.
3.20 Company SEC Filings. The Company has delivered to the
Purchaser a copy of the Company's Form 10-KSB for the year ended December 31,
1997 and a copy of the Company's Form 10-QSB for the quarter ended March 31,
1998 (collectively the "SEC Filings"). The SEC Filings, and the financial
statements contained therein, comply in all material respects with applicable
securities laws and regulations. The SEC Filings do not contain any
misstatements of material fact or fail to state a material facts necessary to
make the statements therein not misleading. The audited financial statements
included in the SEC Filings comply as to form with applicable accounting
requirements and with the published rules and regulations of the Securities and
Exchange Commission with respect thereto. The financial statements included in
the SEC Filings have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto.) The balance sheets contained in the SEC
Filings present fairly, in all material respects, the financial condition of the
Company as of the date of the SEC Filings. The income statements contained in
the SEC Filings present fairly, in all material respects, the results of the
Company's operations for the period covered thereby and do not contain any items
of special or nonrecurring income, except as specifically set forth therein.
Since the date of the SEC Filings there has been no material adverse change in
the financial condition, liabilities, assets or business of the Company and its
subsidiaries.
3.21 Liabilities. The Company and its subsidiaries have no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except (a) the liabilities and obligations of the Company as set
forth in the financial statements included in the SEC Filings, (b) liabilities
and obligations which have occurred subsequent to December 31, 1997 in the
ordinary course of business, which in the aggregate have not been material, and
(c) obligations under contracts incurred in the ordinary course of business,
which obligations are not required to be set forth on a balance sheet or in the
notes thereto in accordance with generally accepted accounting principles, and
which in any event are not material.
3.22 Absence of Certain Changes. Since the December 31, 1997,
there has not been:
(a) Any change in the assets, liabilities, financial
condition or operating results of the Company and its subsidiaries from that
reflected in the financial statements included in the SEC Filings, except
changes in the ordinary course of business that have not been, in the aggregate,
material;
-8-
10
(b) Any material damage, destruction, or loss, whether or
not covered by insurance, affecting the business, properties, prospects or
financial condition of the Company and its subsidiaries (as such business is
presently conducted and as it is proposed to be conducted);
(c) Any waiver or compromise by the Company or its
subsidiaries of a valuable right or of a material debt owed to it;
(d) Any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or its subsidiaries,
except in the ordinary course of business and which is not material;
(e) Any material change to any agreement listed on
Schedule 3.7 hereof;
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director, or stockholder of the Company or
its subsidiaries;
(g) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets by the Company
or its subsidiaries;
(h) Receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company or its
subsidiaries;
(i) Any declaration, setting aside or payment of a
dividend or other distribution in respect of any of the Company's capital stock,
or any direct or indirect redemption, purchase or other acquisition of any such
stock by the Company; or
(j) Any other event or condition of any character that
might materially and adversely affect the business, properties, prospects or
financial condition of the Company and its subsidiaries (as such business is
presently conducted and as it is proposed to be conducted) or any agreement or
commitment by the Company or its subsidiaries to do any of the things described
in this Section 3.22.
3.23 Environmental and Safety Laws. To the best of the Company's
knowledge, the Company and its subsidiaries are not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to the best of the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
3.24 Minute Book. The minute books of the Company and its
subsidiaries provided to the Purchaser, or his special counsel, contain a
complete and accurate summary of all meetings of directors and stockholders, and
all actions by written consent taken thereby, since the date of incorporation of
the Company or its subsidiaries, as applicable.
-9-
11
3.25 Year 2000. The systems of the Company and its subsidiaries
will properly recognize and process date sensitive information when the year
changes to 2000. To the Company's best knowledge, each party with which the
Company or its subsidiaries conducts business will be able to properly recognize
and process date sensitive information when the year changes to 2000, except
where the failure to recognize and process such information would not have a
material adverse effect on the Company or its subsidiaries their business.
3.26 Purchaser Consents and Approvals. Except as set forth in
Schedule 3.26 hereto, the Purchaser shall not, solely by reason of his purchase
of Preferred Shares or Warrant, be required to obtain any license, consent,
approval or authorization, or make any designation, declaration or filing with
any governmental authority or other entity except as may be required pursuant to
Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended.
3.27 Employee Benefit Plans. Except as set forth on Schedule
3.27 hereto, the Company and its ERISA affiliates (as defined in the Employment
Retirement Income Security Act of 1974, as amended ("ERISA")), if any, do not
maintain, administer or contribute to, and are not required to contribute to,
or, within the six years prior to the Closing Date, have not maintained,
administered or contributed to or were required to contribute to any employee
benefit plan that covers any of their respective employees or former employees
(with respect to any such employee's relationship with any of them). The Company
and its ERISA affiliates, if any, do not maintain and have not established any
welfare benefit plan within the meaning of Section 3(1) of ERISA that provides
for continuing benefits or coverage for any employee, former employee or any
beneficiary of any employee or former employee after such employee or former
employee's termination of employment, except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations thereunder. The Company and its ERISA Affiliates, if any, do not
contribute to, and are not obligated to contribute to, and within the past six
years have not contributed to or been obligated to contribute to, any
multiemployer plan.
3.28 Hazardous Materials. The Company and its subsidiaries have
not, at any time, used, generated, disposed of, discharged, stored, transported
to or from, released or threatened to release of any hazardous materials, in any
form, quantity or concentration, on, from, under or affecting such property,
nor, to the best of the Company's knowledge, are any hazardous materials present
or existing on, from, under or affecting any such property other than as used by
the Company or its subsidiaries in the ordinary course of business and in
compliance with applicable law.
4. Representations and Warranties by the Purchaser. The Purchaser
represents and warrants to the Company as follows:
4.1 Investment Intent. The Preferred Shares and the Warrant are
being acquired, and the Conversion Shares and the Warrant Shares will be
acquired, for the Purchaser's
-10-
12
own account, for investment and not with a view to, or for resale in connection
with, any distribution or public offering in violation of the Securities Act.
4.2 Unregistered Securities. The Purchaser understands that
the Preferred Shares and the Warrant have not been, and the Conversion Shares
and the Warrant Shares will not be, registered under the Securities Act by
reason of their issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof, that the Company has no present intention of registering the Preferred
Shares, Warrant, Conversion Shares or Warrant Shares, that the securities must
be held by the Purchaser indefinitely, and that the Purchaser must therefore
bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
registration.
4.3 Access to Information. During the negotiation of the
transactions contemplated herein, the Purchaser and his representatives and
legal counsel have been afforded full and free access to corporate books,
financial statements, records, contracts, documents, and other information
concerning the Company and to its offices and facilities, have been afforded an
opportunity to ask such questions of the Company's officers, employees, agents,
accountants and representatives concerning the Company's business, operations,
financial conditions, assets, liabilities and other relevant matters as they
have deemed necessary or desirable, and have been given all such information as
has been requested, in order to evaluate the merits and risks of the prospective
investments contemplated herein. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 3 of this
Agreement or the right of the Purchaser to rely thereon, provided that the
Purchaser shall promptly notify the Company of any breaches of any such
representations and warranties of which he has actual knowledge.
4.4 Due Diligence Investigation. The Purchaser has been solely
responsible for the Purchaser's own "due diligence" investigation of the Company
and its management and business, for his own analysis of the merits and risks of
this investment, and for his own analysis of the fairness and desirability of
the terms of the investment. In taking any action or performing any role
relative to the arranging of the proposed investment, the Purchaser has acted
solely in his own interest, and the Purchaser (or any of his agents or
employees) has not acted as an agent of the Company. The Purchaser has such
knowledge and experience in financial and business matters that the Purchaser is
capable of evaluating the merits and risks of the purchase of the Preferred
Shares and the Warrant pursuant to the terms of this Agreement and of protecting
the Purchaser's interests in connection therewith.
4.5 Accredited Investor. The Purchaser is an "Accredited
Investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act. The Purchaser is able to bear the economic risk of the
purchase of the Securities pursuant to the terms of this Agreement, including a
complete loss of the Purchaser's investment in the Securities.
-11-
13
4.6 Power and Authority. The Purchaser has the full right, power
and authority to enter into and perform the Purchaser's obligations under this
Agreement and the other agreements contemplated hereby to which the Purchaser is
a party, and this Agreement and the other agreements contemplated hereby to
which the Purchaser is a party constitute valid and binding obligations of the
Purchaser enforceable in accordance with their terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules of law concerning equitable remedies.
4.7 Legend. Purchaser acknowledges that each certificate
representing the Preferred Shares, the Warrant, the Conversion Shares and the
Warrant Shares may be endorsed with substantially the following legends:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE AACT@), OR ANY
STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
APPLICABLE SECURITIES UNDER THE ACT AND ANY STATE SECURITIES
LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION.
Any other legends required by applicable state
securities laws or any applicable state laws regulating the
Company's business.
5. Conditions to Closing.
5.1 Conditions to Obligations of the Purchaser. The obligation
of the Purchaser to purchase the Preferred Shares and the Warrant at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions, any of which may be waived by the Purchaser:
(a) Representations and Warranties Correct; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof and in the other agreements to be delivered by the Company at the Closing
were true and correct when made, and shall be true and correct on the Closing
Date with the same force and effect as if they had been made on and as of said
date; and the Company shall have performed all obligations and conditions
required herein or therein to be performed or observed by it on or prior to the
Closing Date.
(b) Opinion of Company's Counsel. The Purchaser shall have
received from Loeb & Loeb LLP an opinion, dated the Closing Date, substantially
in the form as that attached hereto as Schedule 5.1(b) attached hereto.
-12-
14
(c) Consents and Waivers. The Company shall have obtained
any and all consents (including all governmental or regulatory consents,
approvals or authorizations required in connection with the valid execution and
delivery of this Agreement and the other agreements contemplated hereby),
permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
(d) Legislative Changes. There shall not have been any
change to federal or state law which would have a material adverse effect on the
business, properties, prospectus or financial condition of the Company (as such
business is presently conducted as it is proposed to be conducted).
(e) Registration Rights Agreement. The Company shall have
entered into a Registration Rights Agreement substantially in the form of
Schedule 5.1(e)(i) covering the Conversion Shares and the Warrant Shares.
(f) Related Transactions. Concurrent with the Closing the
Company shall sell at least 200,000 additional Preferred Shares as contemplated
by that certain Private Placement Memorandum dated May 18, 1998. The Company
shall also have substantially complied with the requirements of the other
related transactions contemplated by the parties hereto of even date herewith.
(g) Compliance Certificate. The Company shall have
delivered to the Purchaser a certificate, executed by the President of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions
specified in this subsection 5.1.
(h) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser and his special
counsel, and the Purchaser and his special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
5.2 Conditions to Obligations of the Company. The Company's obligation
to sell and issue the Preferred Shares and the Warrant at the Closing is subject
to the fulfillment on or prior to the Closing Date of the following conditions,
any of which may be waived by the Company:
(a) Representations and Warranties. The representations
and warranties made by the Purchaser in Section 4 and in the other agreements to
be delivered att the Closing hereof shall be true and correct with made, and
shall be true and correct on the Closing Date with the same force and effect as
if they had been made on and as of said date.
-13-
15
(b) Related Transactions. Concurrent with the Closing the
Company shall sell at least 200,000 additional Preferred Shares as contemplated
by that certain Private Placement Memorandum dated May 18, 1998.
6. Removal of Legend and Transfer Restrictions. Any legend endorsed on a
certificate pursuant to subsection 4.2(a) and the stop transfer instructions
with respect to such securities shall be removed and the Company shall issue a
certificate without such legend to the holder thereof if (i) such securities are
registered under the Securities Act, a prospectus meeting the requirements of
Section 10 of the Securities Act is available, and the holder of such securities
agrees to deliver such prospectus to the extent required by law, (ii) if such
legend may be properly removed under the terms of Rule 144 promulgated under the
Securities Act or (iii) if such holder provides the Company with an opinion of
counsel for such holder, reasonably satisfactory to legal counsel for the
Company, to the effect that a sale, transfer or assignment of such Securities
may be made without registration.
7. Miscellaneous.
7.1 Waivers and Amendments. Neither this Agreement nor any
provision hereof may be amended, changed, waived, discharged or terminated
orally, but only by a statement in writing signed by the party against which
enforcement of the amendment, change, waiver, discharge or termination is
sought, except to the extent provided in this Section 7.1.
7.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California, without regard to conflicts of
laws principles.
7.3 Survival. The representations and warranties made herein
shall survive until the first anniversary of the execution of this Agreement and
the closing of the transactions contemplated hereby.
7.4 Attorneys' Fees. Should any party hereto or any person bound
by the provisions of this Agreement institute any legal action against any other
person(s) and/or party to enforce the provisions hereof (including any claim for
breaches of representations and warranties), the prevailing party in such action
shall be entitled to receive from the losing party, in addition to any other
relief to which the prevailing party may be entitled, such amount as the court
may adjudge to be reasonable attorneys' fees and court costs.
7.5 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto. The Company may not assign this Agreement.
7.6 Entire Agreement. This Agreement, including the schedules
hereto, embodies the entire agreement and understanding between the parties
hereto with respect to the
-14-
16
matters dealt with herein and supersedes all prior written or oral agreements
and understandings with respect to such matters, including but not limited to,
the Memorandum of Understanding dated as of April 1, 1998 between the Company
and Fell & Company, Inc.
7.7 Notices, etc. All notices and other communications provided
for hereunder shall be in writing and shall be sent by first class mail, telex,
telecopy or hand delivery:
If to the Company, to:
YOU BET INTERNATIONAL, INC.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telecopy No.: 000-000-0000
With a copy to:
LOEB & LOEB LLP
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to the Purchaser, to the address of the Purchaser as shown on the
signature page hereto, or to such other address as the Purchaser shall have
designated in writing, with a copy to: Christensen, Miller, Fink, Jacobs,
Xxxxxx, Weil & Xxxxxxx, LLP, 2121 Avenue of the Stars 00xx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx, Attention: Xxxx X. Xxxxxx, Esq., Telecopy No.: (000) 000-0000.
All such notices and communications shall be deemed to have been given or made
(a) when delivered by hand, (b) five business days after being deposited in the
mail, postage prepaid, (c) when telexed, answer-back received or (d) when
telecopied, receipt acknowledged.
7.8 Severability. In the event that anyone or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentences hereof shall not be in any way impaired, it being intended that all
rights, powers and privileges of the parties hereto shall be enforceable to the
fullest extent of the law.
7.9 Finder's Fees.
(a) The Company (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement other than West
-15-
17
Coast Capital Corp., whose compensation arrangements are fully and accurately
set forth on Schedule 7.9 hereto, and (ii) hereby agrees to indemnify and to
hold the Purchaser harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Company, or any of its employees or representatives,
are responsible.
(b) The Purchaser (i) represents and warrants that he has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which he, or any of his employees or representatives, are responsible.
7.10 Expenses. The Company shall bear expenses and legal fees
incurred with respect to this Agreement and the transactions contemplated
hereby. The Company agrees to pay the fees, expenses and disbursements of
Christensen, Miller, Fink, Jacobs, Xxxxxx, Xxxx & Xxxxxxx, LLP, special counsel
to the Purchaser, incurred in connection with the transactions contemplated
hereby and by the Stock Purchase Agreement of even date herewith; provided that
the Company shall not be obligated to pay any fees, expenses or disbursements in
excess of $100,000. At the closing the Company shall pay an amount estimated by
Christensen, Miller, Fink, Jacobs, Glaser, Weil, & Xxxxxxx, LLP to have been
incurred by it in connection with the transaction contemplated hereby.
Thereafter, the Company, upon receipt of supplemental statements, shall pay any
additional fees, expenses and disbursements of Christensen, Miller, Fink,
Jacobs, Glaser, Weil, & Xxxxxxx, LLP, provided that the aggregate amount paid to
Christensen, Miller, Fink, Jacobs, Glaser, Weil, & Xxxxxxx, LLP shall not exceed
$100,000.
7.11 Descriptive Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meanings of terms contained herein.
7.12 Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto or hereunder may be executed any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
7.13 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to the Purchaser, upon any breach or default of
the Company under this Agreement, shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
remedies, either under this Agreement, or by law or otherwise afforded to the
Purchaser, shall be cumulative and not alternative.
-16-
18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"COMPANY"
YOU BET INTERNATIONAL, INC.
By:____________________________________
Its:___________________________________
By:____________________________________
Its:___________________________________
-17-
19
PURCHASER'S COUNTERPART SIGNATURE PAGE
YOU BET INTERNATIONAL SECURITIES PURCHASE AGREEMENT
June __, 1998
XXXXXX X. XXXX LIVING TRUST
-----------------------------------------------
Xxxxxx X. Xxxx
Trustee
Address of Purchaser
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
-18-
