Youbet.com has agreed to pay TV Games Network $725,000 and withdraw its proposed staggered board and supermajority voting proxy material in exchange for TVG dropping all pending litigation and related arbitration.
TVG, a shareholder in Youbet with an option to buy a majority interest in the company, filed a lawsuit against Youbet last September for failing to adequately notify shareholders of the consequences of a buyout by TVG parent company Gemstar-TV Guide International.
TVG felt staggered term limits for the Youbet board and a threshold of two-thirds majority to change Youbet articles and by-laws could leave TVG with not enough seats on the board to make changes, even if it owned a majority interest.
In court documents, TVG contended the proxy material was designed "to frustrate TVG's contractual right to acquire control of Youbet."
An agreement in principle between the two companies was reached in January and the deal was finalized Monday. Youbet must pay TVG's court costs ($725,000) and also withdraw the original proxy proposal. Additionally, the deal prohibits TVG from exercising or transferring its warrant in Youbet until April 1. The TVG warrant expires May 18.
TVG acquired a 16.6% interest in Youbet in June 2002.