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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
YOUBET.COM, INC.
1950 SAWTELLE BOULEVARD, SUITE 180
LOS ANGELES, CALIFORNIA 90025
TELEPHONE: (310) 444-3300
August 20, 1999
Dear Fellow Stockholder:
You are cordially invited to attend Youbet.com's Annual Meeting of
Stockholders to be held on Thursday, September 23, 1999, beginning at 10:00 A.M.
Pacific Daylight Time at Santa Anita Park, Clubhouse, Club Plaza Room, 285 West
Huntington Drive, Arcadia, California 91007.
You are being asked to elect seven directors to the Board of Directors,
amend the 1998 Stock Option Plan and ratify the selection of BDO Seidman, LLP,
as our independent auditors for the fiscal year ending December 31, 1999. Your
Board of Directors urges you to read the accompanying proxy statement and
recommends that you vote "FOR" the nominees proposed, the amendment to the 1998
Stock Option Plan and the ratification of the selection of BDO Seidman, LLP.
The Board of Directors appreciates and encourages stockholder participation
in Youbet.com's affairs. Whether or not you plan to attend the meeting, it is
important that your shares be represented. Accordingly, Youbet.com requests that
you sign, date and mail the enclosed proxy card in the envelope provided at your
earliest convenience. Record holders may also vote electronically or
telephonically by following the instructions printed on the enclosed proxy card.
Thank you for your cooperation.
Very truly yours,
/s/ ROBERT M. FELL
--------------------------------------
Robert M. Fell
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
YOUBET.COM, INC.
1950 SAWTELLE BOULEVARD, SUITE 180
LOS ANGELES, CALIFORNIA 90025
August 20, 1999
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Youbet.com, Inc. will be held at Santa
Anita Park, Clubhouse, Club Plaza Room, 285 West Huntington Drive, Arcadia,
California 91007 on Thursday, September 23, 1999, beginning at 10:00 A.M.
Pacific Daylight Time, for the following purposes:
1. To elect seven directors;
2. To amend the 1998 Stock Option Plan;
3. To ratify the selection of BDO Seidman, LLP as independent auditors for the
fiscal year ending December 31, 1999; and
4. To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
Stockholders of record at the close of business on August 12, 1999 are
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof. A complete list of these stockholders will be available at
Youbet.com's executive offices at 1950 Sawtelle Boulevard, Suite 180, Los
Angeles, California 90025.
Stockholders are requested to complete, sign, date and mail the enclosed
proxy card in the envelope provided. No postage is required if mailed in the
United States. Record holders may also vote electronically or telephonically by
following the instructions printed on the enclosed proxy card.
By Order of the Board of Directors
/s/ GARY N. JACOBS
--------------------------------------
Gary N. Jacobs
SECRETARY
<PAGE>
YOUBET.COM, INC.
1950 SAWTELLE BOULEVARD, SUITE 180
LOS ANGELES, CALIFORNIA 90025
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 23, 1999.
DATED AUGUST 20, 1999
------------------------
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting of Stockholders of Youbet.com, Inc. will be held on
Thursday, September 23, 1999, beginning at 10:00 A.M. Pacific Daylight Time, at
Santa Anita Park, Clubhouse, Club Plaza Room, 285 West Huntington Drive,
Arcadia, California 91007. At this meeting, stockholders will be asked to elect
seven directors, amend the 1998 Stock Option Plan, ratify the selection of BDO
Seidman, LLP, as Youbet.com's independent auditors for the fiscal year ended
December 31, 1999 and transact such other business as may properly come before
the meeting. This proxy statement, together with the accompanying notice and
enclosed proxy card, are first being sent to the stockholders on or about August
20, 1999.
WHO IS ENTITLED TO ATTEND AND VOTE AT THE MEETING?
Stockholders of record at the close of business on August 12, 1999 are
entitled to attend and vote at the meeting. Each share of common stock is
entitled to one vote. The proxy card provided with this proxy statement
indicates the number of shares of Youbet.com common stock that you own and are
entitled to vote.
WHAT CONSTITUTES A QUORUM AT THE MEETING?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on August 12, 1999, the
record date, will constitute a quorum for purposes of this meeting. As of the
record date, 19,121,288 shares of Youbet.com common stock were outstanding. For
purposes of determining whether a quorum exists, proxies received but marked
"withhold" or "abstain" and broker non-votes will be counted.
HOW DO I VOTE BY PROXY?
Your vote is very important. Whether or not you plan to attend the meeting,
Youbet.com urges you to complete, sign and date the enclosed proxy card and
return it in the envelope provided. No postage is required if your proxy card is
mailed in the United States.
If you properly fill in your proxy card and Youbet.com receives it in time
to vote at the meeting, your "proxy" (one of the individuals named on your proxy
card) will vote your shares as you have directed. If you sign the proxy card but
do not make specific choices, your proxy will vote your shares as recommended by
the Board, as follows:
- FOR the election of all seven nominees for director.
- FOR the amendment to the 1998 Stock Option Plan.
- FOR the ratification of the selection of BDO Seidman, LLP as Youbet.com's
independent auditors for the fiscal year ended December 31, 1999.
If any other matter is presented, your proxy will vote your shares in
accordance with your proxy's best judgment. At present, the Board knows of no
other business which is intended to be acted on at the meeting.
<PAGE>
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
If you are a registered stockholder (that is, if you hold your stock in your
own name), you may vote by telephone or electronically through the Internet by
following the instructions printed on your proxy card.
HOW DO I VOTE IF MY SHARES ARE HELD BY MY BROKER?
If your shares are held by your broker in "street name," you should instruct
your broker concerning how to vote your shares in the manner provided by your
broker.
WHAT DISCRETION DOES MY BROKER HAVE TO VOTE MY SHARES HELD IN "STREET NAME?"
Your broker will generally be able to vote your shares with respect to the
election of directors and the ratification of BDO Seidman, LLP as Youbet.com's
independent auditors for the fiscal year ending December 31, 1999 even if it
does not receive instructions from you, so long as your shares are held in the
broker's name. This is because these matters do not generally require specific
voting instructions. There are however, certain matters with respect to which
brokers do not have discretionary authority to vote. The amendment of the 1998
Stock Option Plan is such a matter, and will require specific instructions from
you in order for your broker to vote in favor or against this matter. For
matters where your broker does not have discretionary authority and does not
receive instructions from you, these will be referred to as "broker-non-votes."
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. You may change your vote at any time before the proxy is exercised. To
change your vote, you may:
- file with the Secretary of Youbet.com a written notice "revoking" your
earlier vote;
- submit to Youbet.com's transfer agent a properly completed and signed
proxy card with a later date; or
- vote in person at the meeting (although merely attending the meeting will
not revoke your proxy).
HOW DO I VOTE IN PERSON?
If you plan to attend the meeting and vote in person, Youbet.com will give
you a ballot or a new proxy card when you arrive. However, if your shares are
held in the name of your broker, bank or other nominee, you must contact such
entity with respect to the procedure for attending the meeting and voting in
person.
WHY IS YOUBET.COM AMENDING THE 1998 STOCK OPTION PLAN?
The amendment is necessary to ensure that Youbet.com will be able to offer
stock to attract and retain key employees. Currently the 1998 Stock Option Plan
is limited to 1,000,000 shares of common stock for options granted thereunder.
The Board has increased this limit to 2,500,000 shares of common stock subject
to stockholder approval.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
- FOR THE ELECTION OF DIRECTORS. The seven nominees for director who receive
the most votes from those shares present or represented at the meeting
will be elected. If you do not vote for a particular nominee, your broker
does not vote your shares held in street name, or you withhold authority
for one or all nominees, your vote will not count either "for" or
"against" the nominee, although it will be counted for purposes of
determining whether there is a quorum.
- FOR THE AMENDMENT TO THE 1998 STOCK OPTION PLAN. An affirmative vote of a
majority of the outstanding shares present or represented at the meeting
and which are entitled to vote is required for the approval of the
amendment to the 1998 Stock Option Plan. Unless otherwise instructed on
your signed proxy, your shares will be voted FOR approval of the amendment
to the 1998 Stock
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Option Plan. If your shares represent a broker-non-vote, your vote will
not count either "for" or "against" the proposal. Abstentions will have
the same effect as votes against the proposal. Both abstentions and broker
non-votes will count toward the presence of a quorum.
- FOR THE RATIFICATION OF BDO SEIDMAN, LLP, AS YOUBET.COM'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999. An affirmative vote
of a majority of the outstanding shares present or represented at the
meeting and which are entitled to vote is required for the ratification of
the selection of BDO Seidman, LLP as Youbet.com's independent auditors.
Unless otherwise instructed on your signed proxy, your shares will be
voted FOR ratification of the selection of BDO Seidman, LLP as
Youbet.com's independent auditors. Abstentions will have the same effect
as a vote against ratifying the selection of auditors. If not ratified,
the selection of BDO Seidman, LLP will be reconsidered by the Board,
although the Board will not be required to select different independent
auditors for Youbet.com.
- OTHER MATTERS. Generally, the affirmative vote of a majority of the
outstanding shares present or represented at the meeting and which have
actually voted is required for all other matters which may properly come
before the meeting. At present, the Board knows of no other matters to be
presented for stockholder action at the meeting.
HOW IS YOUBET.COM SOLICITING PROXIES?
Proxies will be solicited on behalf of Youbet.com principally by mail, but
additional solicitations may be made by telephone or other media by the officers
or employees of Youbet.com. Youbet.com may enlist the assistance of brokerage
houses, fiduciaries, custodians and other third parties in soliciting proxies.
All solicitation expenses, including costs of preparing, assembling and mailing
proxy material, will be borne by Youbet.com. In addition, Youbet.com has
retained D.F. King & Co., Inc. to assist in the solicitation for a fee of
approximately $5,000 plus expenses.
PROPOSALS TO BE VOTED UPON
PROPOSAL NO. 1
ELECTION OF DIRECTORS
You are being asked to vote to elect all seven directors at this meeting.
The Board has nominated Robert M. Fell, David M. Marshall, Russell M. Fine,
Caesar P. Kimmel, Alan W. Landsburg, Charles D. Peebler Jr. and William H.
Roedy. Proxies may not be voted for a greater number of persons than the number
of nominees named.
Youbet.com knows of no reason why any of the nominees would be unable to
serve as a director. Should, however, such a situation arise, the Board may
designate a substitute nominee or, alternatively, reduce the number of directors
to be elected. If a substitute nominee is selected, the persons named as proxies
will vote for that substitute nominee. Any vacancies not filled at the meeting
may be filled by the Board.
Provided below is a brief description of the business experience of each
nominee for at least the past five years and directorships held in other
companies including all companies which are subject to the reporting
requirements under the Federal securities laws.
THE NOMINEES
ROBERT M. FELL, age 56, has served as Chairman of the Board and Chief
Executive Officer of Youbet.com since June 1998 and as President since July
1999. From 1995 to 1998, prior to joining Youbet.com, Mr. Fell was Chairman of
the Board and Chief Executive Officer of Archon Communications, Inc. ("ACI").
ACI acquired control of Premiere Radio Networks, Inc., which it later sold to
Jacor Communications, Inc. Mr. Fell was also the founder of Silicon Gaming, Inc.
and served as its initial President in 1993. Mr. Fell resigned from the Board of
Silicon Gaming in early 1998. From 1978 to 1995, as
3
<PAGE>
a consultant in the entertainment and communications industry, Mr. Fell, through
Fell & Company, Inc., played a major role in restructuring and augmenting the
management of Columbia Pictures Industries, Twentieth Century Fox and other
major media companies.
RUSSELL M. FINE, age 35, has served as Executive Vice President and Chief
Technology Officer since June 1998. Mr. Fine has been a senior executive and
director of Youbet.com or its predecessors since its founding in 1987. Mr. Fine
was also the Chief Technology Officer and co-founder of MiddleWare Telecom
Corporation and Vice-President of Research and Development of PC-Totes. Both
entities have since been merged into Youbet.com.
CAESAR P. KIMMEL, age 73, has served as a director of Youbet.com since June
1998. Mr. Kimmel has been a private investor for more than the past five years.
Mr. Kimmel is one of the original founders of Warner Communications, Inc., the
predecessor to Time Warner Inc. and served as its Executive Vice President for
twenty five years. Mr. Kimmel is also currently a director of the National
Museum of Racing.
ALAN W. LANDSBURG, age 66, has served as a director of Youbet.com since June
1998. Mr. Landsburg is the founder and has been the Chief Executive Officer of
The Landsburg Company and Alan Landsburg Productions since 1970. As an executive
producer, director and writer he is responsible for more than 2,000 hours of
television production which include seven hit series and more than 50 movies. He
is a founding board member of the Thoroughbred Owners of California. Mr.
Landsburg also serves on Advisory Committees for the California Horse Racing
Board.
DAVID M. MARSHALL, age 36, has served as Vice Chairman of the Board since
June 1998 and as President from 1989 to July 1999. Mr. Marshall has been a
senior executive and director of Youbet.com or its predecessors since its
founding in 1987 and served as Chairman of the Board and Chief Executive Officer
of Youbet.com or its predecessors from 1989 to June 1998. Mr. Marshall was also
the co-founder of MiddleWare Telecom Corporation and PC-Totes, Inc. Both
entities have since been merged into Youbet.com.
CHARLES D. PEEBLER JR., age 63, has served as Chairman Emeritus of True
North Communications, Inc., the worlds sixth largest advertising agency holding
company and Chairman of the Board and Chief Executive Officer of True North's
Diversified Companies Group, since April 1999. From December 1997 to April 1999,
Mr. Peebler was employed as President of True North Communications, Inc. Prior
to December 1997, Mr. Peebler served for approximately 32 years as Chief
Executive Officer of Bozell, Jacobs, Kenyon & Eckhardt or its predecessor
companies. Mr. Peebler currently serves as Chairman of the Board for mPulse and
as a director of American Tool Companies, Inc., Corporate Fulfillment Inc.,
Valmont Industries and Presspoint. Mr. Peebler is Honorary Chairman of the Board
of the American Craft Museum.
WILLIAM H. ROEDY, age 51, has served as a director of Youbet.com since June
1998. Mr. Roedy has been employed by MTV Networks since 1989 and is President of
MTV Networks International and Chairman of MTV Networks Europe. Prior to joining
MTV, Mr. Roedy was at Home Box Office from 1979 to 1989, as manager for national
accounts and affiliate operations and Vice President.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF ALL SEVEN NOMINEES
FOR DIRECTOR.
WHO ARE THE LARGEST OWNERS OF YOUBET.COM'S STOCK?
STOCK OWNERSHIP
As of August 12, 1999 there were 19,121,288 shares of Youbet.com common
stock outstanding. The table below sets forth information, as of August 12, 1999
with respect to the individuals and entities who are known to Youbet.com to own
more than 5% of Youbet.com's common stock and in reliance on
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<PAGE>
Schedules 13D and 13G filed by such individuals and entities. Such filing
requirements became applicable as of the effective date of Youbet.com's Form 8-A
on June 14, 1999.
<TABLE>
<CAPTION>
AMOUNT OF SHARES
BENEFICIALLY PERCENT OF SHARES
NAME OF BENEFICIAL OWNER(1)(2) OWNED OUTSTANDING
- ---------------------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
David M. Marshall........................................................... 2,099,015(3) 11.0
Sid Marshall................................................................ 870,487(4) 4.6
11770-M Pacific Coast Highway
Malibu, CA 90265
Marshall Gift Trust......................................................... 482,250(5) 2.5
1700 Bank of America Plaza
300 South Fourth Street
Las Vegas, NV 80101
Russell M. Fine............................................................. 1,964,991(6) 10.3
</TABLE>
- ------------------------
(1) The address of the above beneficial owners is Youbet.com, Inc., 1950
Sawtelle Boulevard, Suite 180, Los Angeles, California, 90025, unless
otherwise noted.
(2) Beneficial ownership is determined according to the rules of the Securities
and Exchange Commission, and generally includes all voting or investment
power with respect to securities. Except as noted, and subject to community
property laws, the persons named in the table above have sole voting power
of their Youbet.com common stock.
(3) Includes 100 shares of common stock represented by a fully vested stock
option and 55,878 shares of common stock represented by currently
exercisable common stock purchase warrants as follows: Series C-27,939;
Series D-27,939. Excludes shares of common stock and common stock purchase
warrants owned by Sid Marshall and the Marshall Gift Trust. David M.
Marshall is the son of Sid Marshall.
(4) Includes 448,668 shares of common stock represented by currently exercisable
common stock purchase warrants as follows: Series C-356,668; Series
D-92,000. Does not include shares of common stock and common stock purchase
warrants owned by the Marshall Gift Trust. Sid Marshall is the father of
David M. Marshall.
(5) Includes 91,333 shares of common stock subject to currently exercisable
common stock purchase warrants as follows: Series C-30,000; Series D-61,333.
(6) Includes 100 shares of common stock represented by a fully vested stock
option and 40,342 shares of common stock subject to currently exercisable
common stock purchase warrants as follows: Series C-20,171; Series D-20,171.
HOW MUCH STOCK DO YOUBET.COM'S DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS OWN?
The following table shows, as of August 12, 1999 the amount of common stock
of Youbet.com beneficially owned by:
- Youbet.com's directors and nominees;
- the executive officers of Youbet.com named in the Summary Compensation
Table below and certain other key employees; and
- all of the directors and executive officers of Youbet.com as a group.
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STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND NOMINEES
AS OF AUGUST 12, 1999
<TABLE>
<CAPTION>
AMOUNT OF SHARES
BENEFICIALLY PERCENT OF SHARES
NAME OF BENEFICIAL OWNER(1)(2) OWNED OUTSTANDING
- --------------------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Robert M. Fell............................................................. 804,550(3) 4.1
David M. Marshall.......................................................... 2,099,015(4) 11.0
Russell M. Fine............................................................ 1,964,991(5) 10.3
Caesar P. Kimmel........................................................... 56,000(6) *
Alan W. Landsburg.......................................................... 50,000(7) *
Jess Rifkind............................................................... 74,000(8) *
William H. Roedy........................................................... 140,000(9) *
Charles D. Peebler Jr...................................................... 43,250(10) *
Ron W. Luniewski........................................................... 120,100(11) *
Phillip C. Hermann......................................................... 23,850(12) *
Jean M. Prewitt............................................................ -- --
Steve A. Molnar............................................................ 115,850(13) *
Nancy A. Lamb.............................................................. 43,750(14) *
All directors, nominees and executive officers as a group
(14 persons)............................................................. 5,582,123(15) 27.5
</TABLE>
- ------------------------
* less than one percent
(1) The address of the above beneficial owners is Youbet.com, Inc., 1950
Sawtelle Boulevard, Suite 180, Los Angeles, California, 90025, unless otherwise
noted.
(2) Beneficial ownership is determined according to the rules of the
Securities and Exchange Commission, and generally includes all voting or
investment power with respect to securities. Except as noted and subject to
community property laws, the persons named in the table above have sole voting
power of their Youbet.com common stock.
(3) Includes 100 shares of common stock represented by a fully vested stock
option and 600,000 shares of common stock represented by the currently
exercisable portion of the Fell Warrant (as described herein), but does not
include the 600,000 shares of common stock represented by the portion of the
Fell Warrant which is fully vested but not exercisable within 60 days.
(4) Includes 100 shares of common stock represented by a fully vested stock
option and 55,878 shares of common stock represented by currently exercisable
common stock purchase warrants as follows: Series C-27,939; Series D-27,939.
Excludes shares of common stock and common stock purchase warrants owned by Sid
Marshall and the Marshall Gift Trust. David M. Marshall is the son of Sid
Marshall.
(5) Includes 100 shares of common stock represented by a fully vested stock
option and 40,342 shares of common stock subject to currently exercisable common
stock purchase warrants as follows: Series C-20,171; Series D-20,171.
(6) Includes 40,000 shares of common stock represented by a stock option
exercisable within 60 days of August 12, 1999.
(7) Includes 40,000 shares of common stock represented by a stock option
exercisable within 60 days of August 12, 1999.
(8) Includes 60,000 shares of common stock represented by a stock option
exercisable within 60 days of August 12, 1999.
(9) Includes 40,000 shares of common stock represented by a stock option
exercisable within 60 days of August 12, 1999.
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(10) Includes 3,750 shares of common stock represented by a stock option
exercisable within 60 days of August 12, 1999.
(11) Consists solely of 120,100 shares of common stock represented by stock
options exercisable within 60 days of August 12, 1999.
(12) Consists solely of 23,850 shares of common stock represented by stock
options exercisable within 60 days of August 12, 1999.
(13) Includes 115,100 shares of common stock represented by stock options
exercisable within 60 days of August 12, 1999.
(14) Consists solely of 43,750 of common stock represented by stock options
exercisable within 60 days of August 12, 1999.
(15) Includes 513,617 shares of common stock represented by fully vested
stock options and stock options exercisable within 60 days of August 12, 1999,
96,220 shares of common stock represented by currently exercisable common stock
purchase warrants, 600,000 shares of common stock represented by the currently
exercisable portion of the Fell Warrant, but does not include the 600,000 shares
of common stock represented by the portion of the Fell Warrant which is fully
vested but not exercisable within 60 days.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
WHO SITS ON YOUBET.COM'S BOARD?
The Board consists of the following seven members: Robert M. Fell, David M.
Marshall, Russell M. Fine, Caesar P. Kimmel, Alan W. Landsburg, Jess Rifkind and
William H. Roedy. The Board is comprised of only one class. All of the directors
serve from the time they are appointed until the next meeting of stockholders
and until their successors are elected and qualified, or until their earlier
death, retirement, resignation or removal. There are no family relationships
among directors and executive officers. With one exception, all current
directors are also nominees to the Board and are described under the caption
"ELECTION OF DIRECTORS--The Nominees" above.
JESS RIFKIND, age 68, is not standing for reelection to the Board. He has
served as a director of Youbet.com since December 1995. Mr. Rifkind is an
independent management consultant providing counsel to clients in the areas of
management, finance, and high technology. Prior to establishing his current
practice in 1982, Mr. Rifkind held operating and research executive positions
with Xerox Corporation from May 1968 to December 1981; including Vice-President,
Field Engineering, and founder and manager of the Advanced Development Labs of
the Xerox Palo Alto Research Center. Mr. Rifkind is also currently a director of
Gemstone Systems Inc, a computer software company that produces application
server and object database software.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board has standing Executive, Compensation and Audit Committees.
Messrs. Fell, Marshall and Fine are the members of the Executive Committee.
The Executive Committee has full authority to exercise all the powers of the
Board of Directors to the fullest extent permitted by Delaware law. Actions of
the Executive Committee are taken by a majority vote. In fiscal year 1998, the
Executive Committee had no formal meetings and acted two times by written
consent.
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Messrs. Kimmel and Landsburg are the members of the Compensation Committee.
The Compensation Committee administers, reviews and approves, subject to the
Board, Youbet.com's stock option plans, and makes recommendations to the Board
of Directors regarding compensation, including payment of salaries, bonuses and
incentive compensation and other benefit programs, including those relating to
Youbet.com's senior management. In fiscal year 1998, the Compensation Committee
had no formal meetings and did not act by written consent, but did meet
informally on several occasions.
Messrs. Rifkind and Roedy are the members of the Audit Committee. The Audit
Committee interacts with Youbet.com's Chief Financial Officer concerning
Youbet.com's independent auditors and the establishment and oversight of such
systems of internal accounting and auditing controls as it deems appropriate. In
fiscal year 1998, the Audit Committee had no formal meetings and did not act by
written consent, but did meet informally with the auditors on several occasions.
The Board does not have a Nominating Committee.
HOW OFTEN DID THE BOARD MEET IN 1998?
The Board of Directors met in person or telephonically seven times and acted
nine times by written consent in fiscal year 1998. Each director attended more
than 75% of the Board meetings.
HOW ARE YOUBET.COM'S DIRECTORS COMPENSATED?
EMPLOYEE DIRECTORS. Directors who are also employees of Youbet.com receive
no additional compensation for serving on the Board or its Committees.
NON-EMPLOYEE DIRECTORS. Non-employee directors receive no annual retainer
or meeting fees, but are reimbursed for travel costs and other out-of-pocket
expenses incurred in attending Board and Committee meetings. Jess Rifkind, a
non-employee member of the Board, was also paid a consulting fee of $2,400 per
month from January through June 1998. As additional compensation for the
non-employee members of the Board, Youbet.com issued the following stock
options:
- In April 1998, Youbet.com issued a stock option to Jess Rifkind, at that
time the only non-employee director, under the 1995 Stock Option Plan for
Non-Employee Directors to purchase 5,000 shares of common stock at an
exercise price of $5.50 per share. The stock option was fully vested upon
issuance, and is exercisable for a period of ten years from the date of
grant.
- In July 1998, Youbet.com granted to each of its non-employee directors
options to acquire 40,000 shares of common stock, pursuant to the 1998
Stock Option Plan at an exercise price of $2.50 per share. These options
vested monthly over the one-year period beginning July 1998 and are
exercisable for a period of ten years from the date of grant.
ARRANGEMENTS FOR THE ELECTION OF DIRECTORS
In June 1998, pursuant to a private placement of Series A Convertible
Preferred Stock, all of which has since been converted to common stock, the
purchasers of the Series A Convertible Preferred Stock (including Robert M. Fell
and David M. Marshall), Russell M. Fine and Youbet.com, entered into a
stockholders agreement, under which the parties agreed to vote all shares of
Series A Convertible Preferred Stock and common stock beneficially owned by them
(determined in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended) and any stock acquired by them in the future, for the election
to the Board of Directors of four persons designated by Robert M. Fell and three
persons designated by David M. Marshall and Russell M. Fine. The Stockholders
Agreement terminates on June 29, 2000. As of August 12, 1999 the stockholders
agreement covers shares of common stock representing approximately 22.6% of the
outstanding voting power of Youbet.com's stock (not including
8
<PAGE>
shares of common stock beneficially owned as a result of stock options and
warrants). The nominees for the Board were selected with the approval of Messrs.
Fell, Fine and Marshall.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In November 1997 Sid Marshall, the Marshall Gift Trust, and Stuart Fine
exchanged promissory notes having a principal amount of $550,000, plus accrued
interest, for 337,335 shares of common stock, 168,665 Series D common stock
purchase warrants and 220,000 Series C common stock purchase warrants issued in
connection with a private placement by Youbet.com. Sid Marshall and Stuart Fine
are the fathers of David M. Marshall and Russell M. Fine, respectively. The
promissory notes were exchanged on the same terms as all other holders of bridge
notes.
In December 1997 Youbet.com released forfeiture conditions on 2,500,000
shares of common stock held by David M. Marshall, Russell M. Fine and Sid
Marshall, in exchange for the return to Youbet.com of 750,000 shares of common
stock. The forfeiture conditions were imposed in connection with Youbet.com's
merger with Continental Embassy Acquisition, Inc. in 1995. However, as a result
of a change in its marketing strategy in 1997 to focus on building a brand and
becoming the market leader to maximize long-term profitability, Youbet.com did
not believe that it was appropriate to retain the forfeiture conditions.
In June 1998 David M. Marshall converted $104,773 of his employee deferred
compensation into 55,879 shares of common stock (and 27,939 Series C and 27,939
Series D common stock purchase warrants) at $1.875 per share as part of a
company wide deferred salary conversion program.
In June 1998 Russell M. Fine converted $75,640 of his employee deferred
compensation into 40,341 shares of common stock (and 20,171 Series C and 20,171
Series D common stock purchase warrants) at $1.875 per share as part of a
company wide deferred salary conversion program.
In June 1998 Youbet.com issued 177,000 Series C common stock purchase
warrants as additional consideration for short-term advances of $440,000, of
which 90,000 warrants were issued to Sid Marshall and 44,000 warrants were
issued to a company associated with Youbet.com's financial and marketing
consulting firm.
In January 1998 Youbet.com commenced a bridge financing, consisting of a
secured note with interest at 12% due December 1998, secured by a junior lien on
substantially all the assets of Youbet.com and an option to convert into
securities offered in any subsequent private placement (or the equivalent amount
of common stock, if such financing did not consist of common stock), at 75% to
80% of the private placement offering price. Youbet.com issued a total of
$2,415,000 of bridge notes of which $1,247,000 were issued to related parties.
In July 1998, as a result of the sale of Series A Convertible Preferred Stock,
the holders of the bridge notes payable converted such notes into 1,303,319
shares of common stock, including 683,176 shares to related parties, of which
232,821 shares were issued to Sid Marshall and 450,355 shares were issued to
companies associated with Youbet.com's financial and marketing consulting firm.
In June 1998 Youbet.com entered into a Stock Purchase Agreement with certain
investors. Pursuant to this agreement Youbet.com sold 200,000 shares of Series A
Convertible Preferred Stock for $25.00 per share. Robert M. Fell, David M.
Marshall, Jess Rifkind, Caesar P. Kimmel, Alan W. Landsburg, William H. Roedy,
Gary N. Jacobs or trusts of which they are beneficiaries purchased 445, 445,
400, 1,600, 1,000, 10,000 and 2,000 shares, respectively. All of the Series A
Convertible Preferred Stock has since been converted into common stock.
In June 1998 Youbet.com entered into a Securities Purchase Agreement with
the Robert M. Fell Living Trust (the "Fell Trust"). Pursuant to the Securities
Purchase Agreement, the Fell Trust acquired 20,000 shares of Series A
Convertible Preferred Stock and a warrant to purchase 1,200,000 shares of
Youbet.com's common stock (the "Fell Warrant"). The purchase price for the
Series A Convertible Preferred Stock acquired by the Fell Trust was $25.00 per
share, of which $10,000 was paid in cash and $490,000 was paid in the form of a
promissory note (the "$490,000 Note"). The purchase price for the Fell
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<PAGE>
Warrant was $75,000, of which $5,000 was paid in cash and $70,000 was paid in
the form of a promissory note (the "$70,000 Note"). The Fell Warrant expires on
June 29, 2008, and entitles the Fell Trust to purchase 1,200,000 shares of
common stock at $2.50 per share. The Fell Warrant is exercisable one-sixth
commencing on June 29, 1998, and one-sixth thereafter commencing on each six
month anniversary date, but is subject to acceleration under certain
circumstances. The Fell Warrant also provides that, with certain exceptions, the
common stock received upon the exercise of the Fell Warrant may not be sold
until one year following the date the shares were first able to be purchased.
The $490,000 Note bears interest at the rate of 8% per annum, which may, at the
option of the Fell Trust, be paid currently or added to the principal amount of
the note. The $490,000 Note is due June 29, 2002, provided that the Fell Trust
is required to prepay the note, without penalty, as soon as possible consistent
with its other cash requirements. The $70,000 Note bore interest at the rate of
6% per annum, which could, at the option of the Fell Trust, be paid currently or
added to the principal amount of the note. The $70,000 Note was due on June 29,
2008. The Fell Trust pledged the Fell Warrant and the Series A Convertible
Preferred Stock acquired pursuant to the Securities Purchase Agreement to secure
its obligations under the $490,000 Note and the $70,000 Note (collectively the
"Notes"). In December 1998 the Fell Trust converted the Series A Preferred Stock
into common stock. On July 8, 1999 the Board approved the recommendation of the
Compensation Committee to grant Fell & Company, Inc. a performance-based bonus
as a result of the services of Robert M. Fell which has been credited against
the Notes, consisting of a $280,000 (plus accrued interest), credited in
recognition of the completion of the placement of 11% Senior Convertible
Discount Notes, $140,000 (plus accrued interest) to be credited upon completion
of Youbet.com's underwritten offering, $70,000 (plus accrued interest) credited
at such time as Youbet.com achieves 15,000 subscribers and $70,000 (plus accrued
interest) to be credited at such time as Youbet.com achieves 25,000 subscribers.
As a result of the bonuses described above, the $70,000 Note has been satisfied
and the outstanding principal balance on the $490,000 Note has been reduced to
$140,000. The Fell Trust has agreed that the $490,000 Note will be with full
recourse to the Fell Trust and Youbet.com has released to the Fell Trust all of
the collateral pledged in connection with the Notes.
On July 8, 1999 the Board approved the recommendation of the Compensation
Committee to grant, David Marshall, Inc. and Mr. Fine each a performance-based
bonus of $300,000, payable as follows: $30,000 in recognition of the completion
of the placement of the 11% Senior Convertible Discount Notes; $120,000 in
recognition of completion of the underwritten offering; $75,000 upon Youbet.com
achieving 15,000 subscribers and $75,000 upon Youbet.com achieving 25,000
subscribers.
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<PAGE>
WHO ARE YOUBET.COM'S EXECUTIVE OFFICERS?
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Robert M. Fell............................ Chairman of the Board, President and Chief Executive Officer
David M. Marshall......................... Vice Chairman of the Board
Russell M. Fine........................... Director, Executive Vice President and Chief Technology Officer
Ron W. Luniewski.......................... Executive Vice President and Chief Operating Officer
Phillip C. Hermann........................ Executive Vice President and Chief Financial Officer
Jean M. Prewitt........................... Executive Vice President, International
Steve A. Molnar........................... Executive Vice President, Racing
Nancy A. Lamb............................. Vice President, Marketing
Gary N. Jacobs............................ Secretary
</TABLE>
Biographical information concerning Robert M. Fell, David M. Marshall and
Russell M. Fine, who are also nominees for director, can be found under the
caption "ELECTION OF DIRECTORS--The Nominees" above. Biographical information
concerning Youbet.com's executive officers who are not nominees for director are
briefly described below with regards to their business experience for at least
the past five years and directorships held in other companies including all
companies which are subject to the reporting requirements under the Federal
securities laws.
RON W. LUNIEWSKI, age 35, has served as Executive Vice President and Chief
Operating Officer of Youbet.com since February 1999, and was President of You
Bet!, Inc. a subsidiary of Youbet.com or its predecessor since March 1996. For
more than five years prior to joining Youbet.com, or its predecessor, Mr.
Luniewski was with Electronic Data Systems as a system engineer and held a
variety of positions in software development, project management and business
development.
PHILLIP C. HERMANN, age 50, has served as Executive Vice President and Chief
Financial Officer of Youbet.com since May 1998. From August 1997 to April 1998,
Mr. Hermann was Chief Operating Officer and Chief Financial Officer of Cloud 9
Interactive, a diversified entertainment company. Previously, from 1992 to
August 1997, Mr. Hermann was Executive Vice President and Chief Financial
Officer of Strawberry Industries, a consumer products company. From 1982 to 1986
Mr. Hermann was Vice President and Chief Financial Officer of the Walt Disney
Telecommunications Group.
JEAN M. PREWITT, age 50, has served as Executive Vice President,
International of Youbet.com since April 1999. From July 1994 to January 1999,
Ms. Prewitt was with podesta.com, a governmental affairs/public relations firm
specializing in media and technology clients. Previously, Ms. Prewitt was with
the National Telecommunications and Information Administration from 1989 to
1994, where she advised and represented the United States in communications and
information policies. She also served as Senior Vice President and General
Counsel of United International Pictures from 1982 to 1989.
STEVE A. MOLNAR, age 56, has served as Executive Vice President, Racing of
Youbet.com since February 1999 and was Chief Executive Officer of You Bet!, Inc.
a subsidiary of Youbet.com or its predecessor from April 1997 to April 1998.
From May 1994 through December 1995, Mr. Molnar was a consultant to the horse
racing industry including Youbet.com. Mr. Molnar's involvement in the horse
racing industry spans 12 years prior to joining Youbet.com. From November 1988
to April 1994 he held the position of President and Chief Operating Officer of
McKinnie Systems.
NANCY A. LAMB, age 41, has served as Vice President, Marketing of Youbet.com
since April 1999. From September 1998 to April 1999 and from November 1997 to
December 1997, Ms. Lamb was self-
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<PAGE>
employed as a marketing consultant. Previously, from January 1997 to September
1998, Ms. Lamb was Vice President of Worldwide Marketing at Mattel, Inc. From
October 1996 to October 1997, Ms. Lamb was Director of Marketing at ABC
Interactive. From December 1995 to June 1996, Ms. Lamb was Vice President of
Marketing and Creative Services at GT Interactive Software. From June 1992 to
December 1995, Ms. Lamb was a director of Worldwide Marketing at Mattel.
GARY N. JACOBS, age 54, has served as Secretary of Youbet.com since July
1998. For more than the last five years he has been a senior partner at
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, or its
predecessors. Mr. Jacobs is counsel for Youbet.com and is a director of The
InterGroup Corporation, which owns and operates rental properties and invests in
other companies.
HOW WERE YOUBET.COM'S EXECUTIVE OFFICERS COMPENSATED IN 1998?
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by Youbet.com for the
years ended December 31, 1998, 1997 and 1996 to the Chief Executive Officer, the
executive officers of Youbet.com whose total salary and bonus for 1998 exceeded
$100,000 and certain other key employees.
SUMMARY COMPENSATION TABLE
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION
- --------------------------------- ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Robert M. Fell(1)................ 1998 $ 81,136(4) $ 363(5) $4,500(6)
Chairman of the Board and 1997 -- -- --
Chief Executive Officer 1996 -- -- --
David M. Marshall(2)............. 1998 140,000 363(5) 52,279(7)
Vice Chairman of the Board and 1997 130,000 -- 17,185(8)
President
1996 130,000 -- --
Russell M. Fine.................. 1998 138,333 363(5) 39,898(9)
Executive Vice President 1997 120,000 -- 14,825(10)
and Chief Technology Officer 1996 120,000 -- --
Ron W. Luniewski................. 1998 138,333 363(5) 2,991(11)
Executive Vice President 1997 120,000 -- 10,306(12)
and Chief Operating Officer 1996 101,385 -- --
Phillip C. Hermann(3)............ 1998 96,667 363(5) 75,456(5)
Executive Vice President and 1997 -- -- --
Chief Financial Officer 1996 -- -- --
Steve A. Molnar.................. 1998 119,375 363(5) 3,158(11)
Executive Vice President, Racing 1997 121,460 -- 10,812(13)
1996 78,750 -- --
</TABLE>
- ------------------------
(1) Joined Youbet.com's management in June 1998.
(2) Served as Chief Executive Officer of Youbet.com until June 1998.
(3) Joined Youbet.com's management in May 1998.
(4) Represents compensation paid to Fell & Company, Inc. for the services of
Robert M. Fell (see Employment and Service Agreements below).
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<PAGE>
(5) See Option Grants in 1998 below.
(6) Represents automobile allowance.
(7) Represents interest on deferred compensation of $9,854, an automobile
allowance of $7,500, and a discount of $34,925 on the conversion of deferred
compensation into 55,879 shares of common stock.
(8) Represents an automobile allowance of $6,000, and interest on deferred
compensation of $11,185.
(9) Represents interest on deferred compensation in of $7,185, automobile
allowance of $7,500 and a discount of $25,213 on the conversion of deferred
compensation into 40,342 shares of common stock.
(10) Represents an automobile allowance of $6,000 and interest on deferred
compensation of $8,825.
(11) Represents interest on deferred compensation.
(12) Represents interest on deferred compensation of $3,743 and a 25% bonus
on deferred compensation of $6,563.
(13) Represents interest on deferred compensation of $3,921 and a 25% bonus
on deferred compensation of $6,891.
OPTION GRANTS IN 1998
The following table sets forth certain information regarding option grants
to each of Youbet.com's named executive officers during the year ended December
31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-----------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO PRICE EXPIRATION
NAME GRANTED (1) EMPLOYEES IN 1998 PER SHARE DATE
- -------------------------------------------------------- ----------- ------------------- ----------- ------------
<S> <C> <C> <C> <C>
Ron W. Luniewski........................................ 100,000 12.0% $ 2.50 02/05/2003
100 * 2.50 12/11/2003
Phillip C. Hermann...................................... 75,000 9.0 2.50 04/30/2008
5,000 * 2.50 04/30/2003
100 * 2.50 12/11/2003
Steve A. Molnar......................................... 50,000 6.0 2.50 02/05/2003
100 * 2.50 12/11/2003
David M. Marshall....................................... 100 * 2.50 12/11/2003
Russell M. Fine......................................... 100 * 2.50 12/11/2003
Robert M. Fell.......................................... 100 * 2.50 12/11/2003
</TABLE>
- ------------------------
* less than one percent
(1) Options were granted under the 1995 Stock Option Plan and the 1998 Stock
Option Plan and are exercisable for common stock of Youbet.com.
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<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth the number of shares acquired upon the
exercise of stock options during the year ended December 31, 1998 and the number
of shares covered by both exercisable and unexercisable stock options held by
each of the named executive officers at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END(1) AT YEAR-END(2)
ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ------------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Ron W. Luniewski.................. -- -- 175,100 25,000 $ 679,388 $ 97,000
Phillip C. Hermann................ -- -- 5,100 75,000 19,788 291,000
Steve A. Molnar................... -- -- 130,100 20,000 504,788 67,600
David M. Marshall................. -- -- 100 -- 388 --
Russell M. Fine................... -- -- 100 -- 388 --
Robert M. Fell.................... -- -- 100 -- 388 --
----- ----- ----------- ------------- ------------ -------------
TOTAL........................... -- -- 310,600 120,000 $ 1,205,128 $ 455,600
----- ----- ----------- ------------- ------------ -------------
----- ----- ----------- ------------- ------------ -------------
</TABLE>
- ------------------------
(1) Options shown were granted under the 1995 Stock Option Plan and the 1998
Stock Option Plan and are exercisable for common stock.
(2) The dollar values are calculated by determining the difference between the
weighted average exercise price of the options and the market price for the
common stock of $6.38 on December 31, 1998.
DO YOUBET.COM'S EXECUTIVE OFFICERS HAVE ANY SPECIAL EMPLOYMENT, TERMINATION
OF EMPLOYMENT OR CHANGE-IN-CONTROL ARRANGEMENTS?
EMPLOYMENT AND SERVICE AGREEMENTS
In June 1998 Youbet.com and Fell & Company, Inc. entered into a services
agreement which was amended in March 1999 pursuant to which Robert M. Fell
serves as Chairman of the Board, Chief Executive Officer and since July 1999,
President. For making Mr. Fell's services available, Fell & Company, Inc.
receives a base fee of $225,000 per year, subject to cost of living increases,
plus the amount of payroll taxes Youbet.com would pay if Mr. Fell were an
employee of Youbet.com and other miscellaneous benefits. While Mr. Fell is
serving as Chief Executive Officer he will devote 100% of his business time to
the affairs of Youbet.com. At such time as Mr. Fell is no longer serving as
Chief Executive Officer, he will be required to devote 70% of his business time
to the affairs of Youbet.com and the base fee will be reduced to $150,000 per
year. The services agreement expires in June 2001. If Fell & Company, Inc. is
willing to renew the agreement and Youbet.com does not do so, Fell & Company,
Inc. will receive a termination fee equal to the amount paid to Fell & Company,
Inc. by Youbet.com during the 12 months preceding the expiration of the
agreement.
In January 1999 David Marshall, Inc. and Youbet.com entered into a services
agreement pursuant to which David M. Marshall serves as Vice-Chairman of the
Board and, until July 1999 when he relinquished the position in favor of Mr.
Fell, as President. For making Mr. Marshall's services available, David
Marshall, Inc. receives a base fee of $150,000 per year, subject to cost of
living increases, plus the amount of payroll taxes Youbet.com would pay if Mr.
Marshall were an employee of Youbet.com and other miscellaneous benefits. David
Marshall, Inc. is also entitled to receive an annual bonus determined by the
Board in its discretion. The services agreement also provided that the
compensation and benefits paid by Youbet.com for Mr. Marshall's services will be
no less favorable than the compensation and benefits received by any employee of
Youbet.com, other than the Chief Executive Officer (if other than Robert M.
Fell). In July 1999, the services agreement was amended to delete this
provision. The services agreement
14
<PAGE>
expires in June 2003. The services agreement permits David Marshall, Inc. to
terminate the agreement at anytime after December 31, 1999 and receive the
compensation and benefits provided under the agreement for the lesser of two
years or the remaining portion of the term, but at least one year. The services
agreement replaced an employment agreement between Mr. Marshall and Youbet.com
which had substantially the same terms.
In June 1998 Russell Fine and Youbet.com entered into an employment
agreement pursuant to which Mr. Fine will serve as Chief Technology Officer. Mr.
Fine will receive a base salary of $150,000, subject to cost of living
increases, and other miscellaneous benefits. Mr. Fine is also entitled to
receive an annual bonus determined by the Board. The employment agreement also
provides that the compensation and benefits paid to Mr. Fine will be no less
favorable than the compensation and benefits provided to any employee of
Youbet.com, other than the Chief Executive Officer (if other than Mr. Fell). In
July 1999, the employment agreement was amended to delete this provision. The
employment agreement expires in June 2003. The employment agreement permits Mr.
Fine to terminate the agreement at anytime after December 29, 1999 and receive
the compensation and benefits provided under the agreement for the lesser of two
years or the remaining portion of the term, but at least one year.
In February 1999 Ron Luniewski and Youbet.com entered into an employment
agreement pursuant to which Mr. Luniewski serves as Executive Vice President and
Chief Operating Officer of Youbet.com through April 2000. This employment
agreement replaced an agreement which was to expire in April 1999 and provides
for Mr. Luniewski to receive an annual salary of $150,000, options to purchase
100,000 shares of common stock and other miscellaneous benefits. The options
have a 10 year term, vest in four equal annual installments beginning in May
2000 and are exercisable for $10.50 per share. All options will vest upon a
change of control of Youbet.com. Mr. Luniewski is also entitled to receive an
annual bonus determined by the Board in its discretion. The agreement also
permits Mr. Luniewski to terminate his employment with Youbet.com under certain
circumstances and receive two months salary and benefits.
In February 1999 Phillip Hermann and Youbet.com entered into an employment
agreement pursuant to which Mr. Hermann serves as Executive Vice President and
Chief Financial Officer of Youbet.com through April 2000. This employment
agreement replaced an agreement which was to expire in April 1999 and provides
for Mr. Hermann to receive an annual salary of $150,000, options to purchase
50,000 shares of common stock and other miscellaneous benefits. The options have
a 10 year term, vest in four equal annual installments beginning in May 2000 and
are exercisable for $10.50 per share. All options will vest upon a change of
control of Youbet.com. Mr. Hermann is also entitled to receive an annual bonus
determined by the Board in its discretion.
Additionally, the Compensation Committee recommended and the Board on July
1999 adopted the payment of certain performance-based bonuses to Fell & Company,
Inc., David Marshall, Inc. and Mr. Fine. These bonuses are described under the
caption "Certain Relationships and Transactions" above.
PROPOSAL NO. 2
AMENDMENT TO THE 1998 STOCK OPTION PLAN
GENERAL
You are being asked to approve the amendment to the 1998 Stock Option Plan
which was originally adopted by the Board in February 1998. The amendment to the
1998 Stock Option Plan will be effective upon approval by the stockholders of
Youbet.com. The amendment reserves an additional 1,500,000 shares of Youbet.com
common stock for options in addition to the 1,000,000 shares previously reserved
for a total of 2,500,000 shares of common stock. The principal features of the
1998 Stock Option Plan are summarized below, but the summary is qualified in its
entirety by reference to the 1998 Stock Option Plan. Copies of the 1998 Stock
Option Plan will be available at the meeting and may also be obtained by making
written request to Youbet.com at 1950 Sawtelle Boulevard, Suite 180, Los
Angeles, California 90025.
15
<PAGE>
DESCRIPTION OF THE 1998 STOCK OPTION PLAN
In February 1998, Youbet.com's adopted the 1998 Stock Option Plan and
reserved 1,000,000 shares of common stock for options granted thereunder. In
April 1999, the Board approved an amendment of the 1998 Stock Option Plan,
subject to stockholder approval, to reserve 500,000 additional shares of common
stock for options thereunder and in July 1999, the Board approved a further
amendment of the 1998 Stock Option Plan, subject to stockholder approval, to
reserve 1,500,000 shares of common stock for options thereunder (including the
500,000 shares previously approved) for a total of 2,500,000 shares of common
stock.
The 1998 Stock Option Plan provides for the granting of incentive stock
options within the meaning of Section 422A of the Internal Revenue Code of 1986
and non-qualified stock options. Non-qualified stock options may be granted to
employees, directors, officers and consultants of Youbet.com, while incentive
stock options may be granted only to employees of Youbet.com and its affiliates.
The 1998 Stock Option Plan is currently administered by the Compensation
Committee, which determines the terms and conditions of the options granted
under the 1998 Stock Option Plan, including the exercise price, number of shares
subject to options and the vesting and exercisability of options granted under
the 1998 Stock Option Plan.
The exercise price of the incentive stock options granted under the 1998
Stock Option Plan must be at least equal to the fair market value of the common
stock of Youbet.com on the date of grant, and must be at least 110% of fair
market value when granted to a 10% or more stockholder. The exercise price of
non-qualified stock options will be determined by the Compensation Committee.
The 1998 Stock Option Plan will terminate on the earlier of February 6, 2008
or the date on which no additional shares of stock are available for issuance
under the plan.
The term of all options granted under the 1998 Stock Option Plan may not
exceed ten years, except that the term of incentive options granted to a 10% or
more stockholder may not exceed five years.
The purchase price for all options is payable in full upon exercise and may
be paid by cash, by a check drawn against sufficient funds, by delivery to
Youbet.com of a promissory note from the option holder, or such other
consideration as the Compensation Committee in its sole discretion determines to
be consistent with the 1998 Stock Option Plan's purpose and applicable law, or a
combination of such methods of payment. If common stock of Youbet.com is used to
pay the purchase price of the shares as to which the option is exercised, the
Compensation Committee will value such common stock in accordance with
procedures established by it. Any promissory note to purchase shares underlying
the options will be a full recourse, interest-bearing obligations secured by the
shares being purchased and contain such terms as the Compensation Committee may
require.
Options may not be transferred or assigned except upon the death of the
option holder provided that, if permitted by the applicable option agreement,
non-qualified options may be transferred to the option holder's spouse, adult
lineal descendants, adult spouses of adult lineal descendants or trusts for the
benefit of the option holder's minor or adult lineal descendants.
The market value of the shares of Youbet.com common stock as of August 12,
1999, on the Nasdaq National Market was $6.22 per share.
The grant of a non-qualified stock option under the 1998 Stock Option Plan
will not result in any federal income tax consequences to the option holder or
to Youbet.com. Upon exercise of a non-qualified stock option, the option holder
is subject to income taxes at the rate applicable to ordinary compensation
income on the difference between the option exercise price and the fair market
value of the shares on the date of exercise. This income is subject to
withholding for federal income and employment tax purposes. Youbet.com is
entitled to an income tax deduction in the amount of the income recognized by
the option holder. Any gain or loss on the option holder's subsequent
disposition of the shares of Youbet.com
16
<PAGE>
common stock will receive long or short-term capital gain or loss treatment,
depending on whether the shares are held for more than one year following
exercise. Youbet.com does not receive a tax deduction for any such gain. The
maximum marginal rate at which ordinary income is taxed to individuals is
currently 39.6%. The maximum rate at which long-term capital gains for most
types of property are taxed is 20%.
The grant of an incentive stock option under the 1998 Stock Option Plan will
not result in any federal income tax consequences to the option holder or to
Youbet.com. An option holder recognizes no federal taxable income upon
exercising an incentive stock option, subject to the alternative minimum tax
rules discussed below, and Youbet.com receives no deduction at the time of
exercise. In the event of a disposition of stock acquired upon exercise of an
incentive stock option, the tax consequences depend upon how long the option
holder has held the shares of common stock. If the option holder does not
dispose of the shares within two years after the incentive stock option was
granted, nor within one year after the incentive stock option was exercised, the
option holder will recognize a long-term capital gain (or loss) equal to the
difference between the sale price of the shares and the exercise price.
Youbet.com is not entitled to any deduction under these circumstances.
If the option holder fails to satisfy either of the foregoing holding
periods, he or she must recognize ordinary income in the year of the disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is the lesser of the difference between the amount realized on
the disposition and the exercise price, or the difference between the fair
market value of the stock on the exercise date and the exercise price. Any gain
in excess of the amount taxed as ordinary income will be treated as a long or
short-term capital gain, depending on whether the stock was held for more than
one year. Youbet.com, in the year of the disqualifying disposition, is entitled
to a deduction equal to the amount of ordinary income recognized by the option
holder.
The "spread" under an incentive stock option--i.e., the difference between
the fair market value of the shares at exercise and the exercise price--is
classified as an item of adjustment in the year of exercise for purposes of the
alternative minimum tax.
The foregoing is only a summary of the current effect of federal income
taxation upon the option holder and Youbet.com with respect to the shares
purchased under the 1998 Stock Option Plan. Reference should be made to the
applicable provisions of the Internal Revenue Code. In addition, the summary
does not discuss the tax consequences of a option holder's death or the income
tax laws of any municipality, state or foreign country to which such option
holder may be subject.
The Board may suspend or terminate and may amend the 1998 Stock Option Plan
from time to time, except that certain types of amendments will require approval
of the stockholders. Upon termination of a option holder's employment or
consulting relationship with Youbet.com, all unvested options terminate and are
no longer exercisable. Vested qualified options remain exercisable for a period
not to exceed three months following the termination date, unless the option
holder was terminated for cause or voluntarily resigned in which all vested
options will also terminate. However, because shares underlying the options have
not been registered, the Compensation Committee has extended the exercise period
for the options granted under the 1998 Stock Option Plan until three months
after employment is terminated or the underlying shares are registered,
whichever is later (but no later than the expiration of the options).
The 1998 Stock Option Plan also permits Youbet.com to assist a option holder
to exercise options granted under the 1998 Stock Option Plan, including paying
any tax obligations arising therefrom by making a loan to the option holder,
permitting the option holder to pay the exercise price of the stock option over
a term of years or guaranteeing a loan.
At present, there are 1,383,550 stock options granted under the plan, of
which 383,550 options have been granted subject to the stockholders' approval of
the amendment to the plan.
THE BOARD BELIEVES THAT IT IS IN THE BEST INTERESTS OF YOUBET.COM FOR IT TO
HAVE STOCK OPTIONS AVAILABLE FOR GRANT TO EMPLOYEES, DIRECTORS, OFFICERS AND
CONSULTANTS WHO PROVIDE SERVICES TO YOUBET.COM. ACCORDINGLY, THE
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BOARD RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE 1998 STOCK
OPTION PLAN. UNLESS OTHERWISE INSTRUCTED ON YOUR SIGNED PROXY, IT WILL BE VOTED
FOR APPROVAL OF THE AMENDMENT TO THE 1998 STOCK OPTION PLAN.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective November 3, 1997, Deloitte & Touche LLP ("Deloitte & Touche")
resigned as Youbet.com's independent auditor. Deloitte & Touche audited
Youbet.com's consolidated financial statements for the years ended December 31,
1995 and 1996. Deloitte & Touche's reports for the years ended December 31, 1995
and 1996 contained an explanatory paragraph raising substantial doubt about
Youbet.com's ability to continue as a going concern. Other than the foregoing
explanatory paragraph, Deloitte & Touche's reports on Youbet.com's financial
statements for the years ended December 31, 1995 and 1996 did not contain an
adverse opinion or a disclaimer of opinion, nor were the reports modified as to
audit scope or uncertainty. During the years ended December 31, 1995 and 1996,
and the period from January 1, 1997 through November 3, 1997, there were no
disagreements with Deloitte & Touche on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Deloitte & Touche, would
have caused such firm to make reference to the subject matter of the
disagreements in connection with its reports on Youbet.com's consolidated
financial statements.
Effective March 3, 1998, Youbet.com engaged BDO Seidman, LLP as Youbet.com's
new independent auditor. The engagement of BDO Seidman, LLP was approved by the
Board. Prior to the engagement of BDO Seidman, LLP, Youbet.com did not consult
with such firm regarding the application of accounting principles to a specific
completed or contemplated transaction, or any matter that was either the subject
of a disagreement or a reportable event. However, prior to the engagement of BDO
Seidman, LLP, Youbet.com consulted with such firm in order to confirm
Youbet.com's expectation that the auditor's opinion with respect to Youbet.com's
1997 consolidated financial statements would contain a modification paragraph
reflecting uncertainty with respect to Youbet.com's ability to continue as a
going concern.
PROPOSAL NO. 3
SELECTION OF INDEPENDENT AUDITORS
The Board, acting on the recommendation of its Audit Committee, has selected
the firm of BDO Seidman, LLP, which has served as independent auditors of
Youbet.com since March 3, 1998, to conduct an audit, in accordance with
generally accepted auditing standards, of Youbet.com's consolidated financial
statements for the fiscal year ending December 31, 1999. A representative of
that firm is expected to be present at the meeting to respond to appropriate
questions and will be given an opportunity to make a statement if he or she so
desires. This selection is being submitted for ratification at the meeting. If
not ratified, the selection will be reconsidered by the Board, although the
Board will not be required to select different independent auditors for
Youbet.com. Unless otherwise instructed on your signed proxy, it will be voted
FOR ratification of the selection of BDO Seidman, LLP.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF BDO SEIDMAN, LLP AS YOUBET.COM'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, Youbet.com's directors, its
executive officers and any persons holding more than ten percent of Youbet.com's
common stock are required to report their ownership of Youbet.com's common stock
and any changes in that ownership to the Securities and Exchange Commission.
Specific due dates for these reports have been established and Youbet.com will,
in the future, be required to report in proxy statement(s) any failure to file
by these dates. Youbet.com
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became subject to the reporting requirements of Section 16(a) as of the
effective date of its Form 8-A on June 14, 1999. Therefore, no Section 16(a)
filings for the 1998 fiscal year were required.
STOCKHOLDER PROPOSALS
If you wish to submit proposals to be included in Youbet.com's year 2000
proxy statement, Youbet.com must receive them on or before April 20, 2000.
Please address your proposals to Youbet.com's Secretary at Youbet.com, 1950
Sawtelle Boulevard, Suite 180, Los Angeles, California 90025. Proposals must
satisfy the procedures set forth in Rule 14a-8 under the Securities Exchange Act
of 1934.
ANNUAL REPORT
A copy of Youbet.com's Annual Report to Stockholders on Form 10-KSB for the
fiscal year ended December 31, 1998 and Youbet.com's Form 10-QSB for the
quarterly period ended June 30, 1999 is being mailed with this proxy statement
to all stockholders of record as of August 12, 1999.
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YOU BET INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND DEFINITIONS.
(a) The 1998 Stock Option Plan (the "Plan") of You Bet International, Inc.,
a Delaware corporation (the "Company"), is hereby adopted. The Plan shall
provide for the issuance of incentive stock options ("ISOs") and nonqualified
stock options ("NSOs") to purchase the Stock (as defined at Section 3(a)) of the
Company.
(b) The purpose of this Plan is to promote the long-term success of the
Company by attracting, motivating and retaining directors, officers, employees
and consultants of the Company and its Affiliates (the "Participants") through
the use of competitive long-term incentives which are tied to shareholder value.
The Plan seeks to balance Participants' and shareholder interests by providing
incentives to the Participants in the form of stock options which offer rewards
for achieving the long-term strategic and financial objectives of the Company.
(c) The Plan is intended to provide a means whereby Participants may be
given an opportunity to purchase shares of Stock of the Company pursuant to (i)
options which may qualify as ISOs under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), or (ii) NSOs which may not so
qualify.
(d) The term "Affiliates" as used in this Plan means, in the case of an ISO,
parent or subsidiary corporations, as defined in Section 424(e) and (f) of the
Code (but substituting "the Company" for "employer corporation"), including
parents or subsidiaries which become such after adoption of the Plan, and in all
other cases, any entity which is controlled by or which controls the Company.
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Board") or such other committee appointed by the Board
to administer the Plan (the "Committee") or the Board acting as a whole.
(b) The Committee or the Board may from time to time determine which
Participants (each an "option holder") shall be granted options under the Plan,
the terms thereof (including without limitation determining whether the option
is an ISO and the times at which the options shall become exercisable), and the
number of shares of Common Stock for which an option or options may be granted.
(c) If rights of the Company to repurchase Stock are imposed, the Board or
the Committee may, in its sole discretion, accelerate, in whole or in part, the
time for lapsing of any rights of the Company to repurchase shares of such Stock
or forfeiture restrictions.
(d) If rights of the Company to repurchase Stock are imposed, the
certificates evidencing such shares of Stock awarded hereunder, although issued
in the name of the option holder concerned, shall be held by the Company or a
third party designated by the Committee in escrow subject to delivery to the
option holder or to the Company at such times and in such amounts as shall be
directed by the Board under the terms of this Plan. Share certificates
representing Stock which is subject to repurchase rights shall have imprinted or
typed thereon a legend or legends summarizing or referring to the repurchase
rights.
(e) The Board or the Committee shall have the sole authority, in its
absolute discretion, to adopt, amend and rescind such rules and regulations,
consistent with the provisions of the Plan, as, in its opinion, may be advisable
in the administration of the Plan, to construe and interpret the Plan, the rules
and regulations, and the instruments evidencing options granted under the Plan
and to make all other
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YOU BET INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
2. ADMINISTRATION OF THE PLAN. (CONTINUED)
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations and interpretations of the Committee shall be
binding on all option holders under the Plan.
3. STOCK SUBJECT TO THE PLAN.
(a) "Stock" shall mean the Common Stock of the Company or such stock as may
be changed as contemplated by Section 3(c) below. Stock shall include shares
drawn from either the Company's authorized but unissued shares of Common Stock
or from reacquired shares of Common Stock, including without limitation shares
repurchased by the Company in the open market.
(b) Options may be granted under the Plan from time to time to eligible
persons to purchase an aggregate of up to 1,000,000 shares of Stock. Stock
options awarded pursuant to the Plan which are forfeited, terminated,
surrendered or cancelled for any reason prior to exercise shall again become
available for grants under the Plan (including any option cancelled in
accordance with the cancellation regrant provisions of Section 6(f) herein).
(c) If there shall be any change in the Stock subject to the Plan, including
Stock subject to any option granted hereunder, through merger, consolidation,
recapitalization, reorganization, reincorporation, stock split, reverse stock
split, stock dividend, combination or reclassification of the Company's Stock or
other similar events, an appropriate adjustment shall be made by the Committee
in the number of shares and/or the option price with respect to any unexercised
shares of Stock. Consistent with the foregoing, in the event that the
outstanding Stock is changed into another class or series of capital stock of
the Company, outstanding options to purchase Stock granted under the Plan shall
become options to purchase such other class or series and the provisions of this
Section 3(c) shall apply to such new class or series.
(d) The Company may grant options under the Plan in substitution for options
held by employees of another company who become employees of the Company as a
result of merger or consolidation. The Company may direct that substitute
options be granted on such terms and conditions as deemed appropriate by the
Board or the Committee.
(e) The aggregate number of shares of Stock approved by the Plan may not be
exceeded without amending the Plan and obtaining shareholder approval within
twelve months of such amendment.
4. ELIGIBILITY.
Persons who shall be eligible to receive stock options granted under the
Plan shall be those Participants referred to in Section 1(b) above; provided,
however, that (i) ISOs may only be granted to employees of the Company and its
Affiliates and (ii) any person holding capital stock possessing more than 10% of
the total combined voting power of all classes of capital stock of the Company
or any Affiliate shall not be eligible to receive ISOs unless the exercise price
per share of Stock is at least 110% of the fair market value of the Stock on the
date the option is granted.
5. EXERCISE PRICE FOR OPTIONS GRANTED UNDER THE PLAN.
(a) All ISOs will have option exercise prices per option share equal to the
fair market value of a share of the Stock on the date the option is granted,
except that in the case of ISOs granted to any person possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
Affiliate the price shall be not less than 110% of such fair market value. The
option exercise prices per
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YOU BET INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
5. EXERCISE PRICE FOR OPTIONS GRANTED UNDER THE PLAN. (CONTINUED)
option for NSO's shall be as determined by the Committee. The price of ISOs or
NSOs granted under the Plan shall be subject to adjustment to the extent
provided in Section 3(c) above.
(b) The fair market value on the date of grant shall be determined based
upon the closing price on an exchange on that day or, if the Stock is not listed
on an exchange, on the average of the closing bid and asked prices in the Over
the Counter Market on that day.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Each option granted pursuant to the Plan shall be evidenced by a written
stock option agreement (the "Option Agreement") executed by the Company and the
person to whom such option is granted. The Option Agreement shall designate
whether the option is an ISO or an NSO.
(b) The term of each ISO and NSO shall be no more than 10 years, except that
the term of each ISO issued to any person possessing more than 10% of the voting
power of all classes of stock of the Company or any Affiliate shall be no more
than 5 years.
(c) In the case of ISOs, the aggregate fair market value (determined as of
the time such option is granted) of the Stock to which ISOs are exercisable for
the first time by any individual during any calendar year (under this Plan and
any other plans of the Company or its Affiliates if any) shall not exceed the
amount specified in Section 422(d) of the Internal Revenue Code, or any
successor provision in effect at the time an ISO becomes exercisable.
(d) The Option Agreement may contain such other terms, provisions and
conditions regarding vesting, repurchase or other similar provisions as may be
determined by the Committee and not inconsistent with this Plan. If an option,
or any part thereof, is intended to qualify as an ISO, the Option Agreement
shall contain those terms and conditions which the Committee determines are
necessary to so qualify under Section 422 of the Internal Revenue Code.
(e) The Committee shall have full power and authority to extend the period
of time for which any option granted under the 1998 Option Plan is to remain
exercisable following the option holder's cessation of service as an employee or
consultant, including without limitation cessation as a result of death or
disability; provided, however, that in no event shall such option be exercisable
after the specified expiration date of the option term.
(f) The Committee shall have full power and authority to effect at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution new options under the Plan covering the same or different numbers
of shares of Stock with the same or different exercise prices.
(g) As a condition to option grants under the Plan, the option holder agrees
to grant the Company the repurchase rights as the Company may at its option
require and as may be set forth in the Option Agreement or a separate repurchase
agreement.
(h) Any option granted under the Plan may be subject to a vesting schedule
as provided in the Option Agreement and, except as provided in this Section 6
herein, only the vested portion of such option may be exercised at any time
during the Option Period. All rights to exercise any option shall lapse and be
of no further effect whatsoever immediately if the option holder's service as an
employee is terminated for "Cause" (as hereinafter defined) or if the option
holder voluntarily terminates the option holder's service as an employee. The
unvested portion of the option will lapse and be of no further effect
immediately upon
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YOU BET INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
6. TERMS AND CONDITIONS OF OPTIONS. (CONTINUED)
any termination of employment of the option holder for any reason. In the
remaining cases where the option holder's service as an employee is terminated
or due to death, permanent disability, or is terminated by the Company (or its
Affiliates) without Cause at any time, the vested portion of the option will
extend for a period of three (3) months following the termination of employment
and shall lapse and be of no further force or effect whatsoever only if it is
not exercised before the end of such three (3) month period. There shall be
"Cause" for termination as set forth in any applicable employment or consulting
agreement or, in the absence of such agreement if (i) the option holder is
convicted of a felony, (ii) the option holder engages in any fraudulent or other
dishonest act to the detriment of the Company, (iii) the option holder fails to
report for work on a regular basis, except for periods of authorized absence or
bona fide illness, (iv) the option holder misappropriates trade secrets,
customer lists or other proprietary information belonging to the Company for the
option holder's own benefit or for the benefit of a competitor, (v) the option
holder engages in any willful misconduct designed to harm the Company or its
shareholders, or (vi) the option holder fails to perform properly assigned
duties with a failure to cure after 20 days notice.
(i) No fractional shares of Stock shall be issued under the Plan, whether by
initial grants or any adjustments to the Plan.
7. USE OF PROCEEDS.
Cash proceeds realized from the sale of Stock under the Plan shall
constitute general funds of the Company.
8. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
(a) The Board may at any time suspend or terminate the Plan, and may amend
it from time to time in such respects as the Board may deem advisable provided
that (i) such amendment, suspension or termination complies with all applicable
state and federal requirements and requirements of any stock exchange on which
the Stock is then listed, including any applicable requirement that the Plan or
an amendment to the Plan be approved by the shareholders. The Plan shall
terminate on the earlier of (i) ten (10) years from February 6, 1998 or (ii) the
date on which no additional shares of Stock are available for issuance under the
Plan.
(b) No option may be granted during any suspension or after the termination
of the Plan, and no amendment, suspension or termination of the Plan shall,
without the option holder's consent, alter or impair any rights or obligations
under any option granted under the Plan.
(c) The Committee, with the consent of affected option holders, shall have
the authority to cancel any or all outstanding options under the Plan and grant
new options having an exercise price which may be higher or lower than the
exercise price of cancelled options.
9. ASSIGNABILITY OF OPTIONS AND RIGHTS.
(a) Subject to Subparagraph (b), no Option issued under the Plan shall be
assignable or transferable by an option holder other than by will or the laws of
descent and distribution. An Option awarded to an option holder during such
option holder's lifetime shall be exercisable only by an option holder or his or
her guardian or legal representative.
(b) Notwithstanding Subparagraph (a), in the case of an NSO, an option
holder shall be permitted to transfer the Option to the option holder's spouse,
adult lineal descendants, adult spouses of adult lineal
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YOU BET INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
9. ASSIGNABILITY OF OPTIONS AND RIGHTS. (CONTINUED)
descendants and trusts for the benefit of the option holder's minor or adult
lineal descendants (a "Related Transferee") if the Option Agreement under which
the Option is granted so specifies. If the Option is transferred to a Related
Transferee pursuant to the preceding sentence, the Related Transferee shall,
upon exercise of the Option, hold the Stock subject to all the provisions of the
transferor's Option Agreement in the same manner as the transferor and shall
execute and deliver to the Company such instruments as the Company shall require
to evidence the same.
10. PAYMENT UPON EXERCISE.
Payment of the purchase price upon exercise of any option or right to
purchase Stock granted under this Plan shall be made by giving the Company
written notice of such exercise, specifying the number of such shares of Stock
as to which the option is exercised. Such notice shall be accompanied by payment
of an amount equal to the Option Price of such shares of Stock. Such payment may
be (i) cash, (ii) by check drawn against sufficient funds, (iii) by delivery to
the Company of the option holder's promissory note, (iv) such other
consideration as the Committee, in its sole discretion, determines and is
consistent with the Plan's purpose and applicable law, or (v) any combination of
the foregoing. Any Stock used to exercise options to purchase Stock (including
Stock withheld upon the exercise of an option to pay the purchase price of the
shares of Stock as to which the option is exercised) shall be valued in
accordance with procedures established by the Committee. Any promissory note
used to exercise options to purchase Stock shall be a full recourse,
interest-bearing obligation secured by Stock in the Company being purchased and
containing such terms as the Committee shall determine. If a promissory note is
used to exercise options the option holder agrees to execute such further
documents as the Company may deem necessary or appropriate in connection with
issuing the promissory note, perfecting a security interest in the stock
purchased with the promissory note and any related terms the Company may
propose. Such further documents may include, without limitation, a security
agreement and an assignment separate from certificate. If accepted by the
Committee in its discretion, such consideration also may be paid through a
broker-dealer sale and remittance procedure pursuant to which the option holder
(I) shall provide irrevocable written instructions to a designated brokerage
firm to effect the immediate sale of the purchased Stock and remit to the
Company, out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate option price payable for the purchased Stock plus
all applicable Federal and State income and employment taxes required to be
withheld by the Company in connection with such purchase and (II) shall provide
written directives to the Company to deliver the certificates for the purchased
Stock directly to such brokerage firm in order to complete the sale transaction.
11. WITHHOLDING TAXES.
(a) Shares of Stock issued hereunder shall be delivered to an option holder
only upon payment by such person to the Company of the amount of any withholding
tax required by applicable federal, state, local or foreign law. The Company
shall not be required to issue any Stock to an option holder until such
obligations are satisfied.
(b) The Committee may, under such terms and conditions as it deems
appropriate, authorize an option holder to satisfy withholding tax obligations
under this Section 11 by surrendering a portion of any Stock previously issued
to the option holder or by electing to have the Company withhold shares of Stock
from the Stock to be issued to the option holder, in each case having a fair
market value equal to the amount of the withholding tax required to be withheld.
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YOU BET INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
12. CORPORATE TRANSACTIONS.
(a) For the purpose of this Section 12, a "Corporate Transaction" shall
include any of the following shareholder-approved transactions to which the
Company is a party:
(i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change
the State of the Company's incorporation; or
(ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company in liquidation or dissolution of the Company.
(b) Upon the occurrence of a Corporate Transaction, if the surviving
corporation or the purchaser, as the case may be, does not assume the
obligations of the Company under the Plan, then irrespective of the vesting
provisions contained in individual option agreements, all outstanding options
shall become immediately exercisable in full and each option holder will be
afforded an opportunity to exercise their options prior to the consummation of
the merger or sale transaction so that they can participate on a pro rata basis
in the transaction based upon the number of shares of Stock purchased by them on
exercise of options if they so desire. To the extent that the Plan is unaffected
and assumed by the successor corporation or its parent company a Corporate
Transaction will have no effect on outstanding options and the options shall
continue in effect according to their terms.
(c) Each outstanding option under this Plan which is assumed in connection
with the Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would have been issued
to the option holder in connection with the consummation of such Corporate
Transaction had such person exercised the option immediately prior to such
Corporate Transaction. Appropriate adjustments shall also be made to the option
price payable per share, provided the aggregate option price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under this Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
(d) The grant of options under this Plan shall in no way affect the right of
the Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
13. LOANS OR GUARANTEE OF LOANS.
(a) The Committee may, in its discretion, assist any option holder in the
exercise of options granted under this Plan, including the satisfaction of any
income and employment tax obligations arising therefrom by (i) authorizing the
extension of a loan from the Company to such option holder, (ii) permitting the
option holder to pay the exercise price for the Stock in installments over a
period of years or (iii) authorizing a guarantee by the Company of a third party
loan to the option holder. The terms of any loan, installment method of payment
or guarantee (including the interest rate and terms of repayment) will be upon
such terms as the Committee specifies in the applicable option or issuance
agreement or otherwise deems appropriate under the circumstances. Loans,
installment payments and guarantees may be granted with or without security or
collateral (other than to option holders who are not employees, in which event
the loan must be adequately secured by collateral other than the purchased
Stock). However, the maximum credit available to the option holder may not
exceed the exercise or purchase price of the acquired shares of Stock plus any
Federal and State income and employment tax liability incurred by the option
holder in connection with the acquisition of such shares of Stock.
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YOU BET INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
13. LOANS OR GUARANTEE OF LOANS. (CONTINUED)
(b) The Committee may, in its absolute discretion, determine that one or
more loans extended under this financial assistance program shall be subject to
forgiveness by the Company in whole or in part upon such terms and conditions as
the Committee may deem appropriate.
14. REGULATORY APPROVALS.
The obligation of the Company with respect to Stock issued under the Plan
shall be subject to all applicable laws, rules and regulations and such
approvals by any governmental agencies or stock exchanges as may be required.
The Company reserves the right to restrict, in whole or in part, the delivery of
Stock under the Plan until such time as any legal requirements or regulations
have been met relating to the issuance of Stock, to their registration or
qualification under the Securities Exchange Act of 1934, if applicable, or any
applicable state securities laws, or to their listing on any stock exchange at
which time such listing may be applicable.
15. NO EMPLOYMENT/SERVICE RIGHTS.
Neither the action of the Company in establishing this Plan, nor any action
taken by the Board or the Committee hereunder, nor any provision of this Plan
shall be construed so as to grant any individual the right to remain in the
employ or service of the Company (or any parent, subsidiary or affiliated
corporation) for any period of specific duration, and the Company (or any
parent, subsidiary or affiliated corporation retaining the services of such
individual) may terminate or change the terms of such individual's employment or
service at any time and for any reason, with or without cause.
16. MISCELLANEOUS PROVISIONS.
(a) The provisions of this Plan shall be governed by the laws of the State
of California, as such laws are applied to contracts entered into and performed
in such State, without regard to its rules concerning conflicts of law.
(b) The provisions of this Plan shall inure to the benefit of, and be
binding upon, the Company and its successors or assigns, whether by Corporate
Transaction or otherwise, and the option holders, the legal representatives of
their respective estates, their respective heirs or legatees and their permitted
assignees.
(c) The option holders shall have no dividend rights, voting rights or any
other rights as a shareholder with respect to any options under the Plan prior
to the issuance of a stock certificate for such Stock.
(d) With respect to grants to non-U.S. residents, options may be granted
hereunder which may vary from the terms of the Plan but which are consistent
with the purposes thereof to the extent necessary or appropriate to comply with
foreign laws including but not limited to tax laws.
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[LOGO]
August 17, 1999
Dear Stockholder,
We are very pleased to announce that Youbet.com, Inc. has retained the
services of Morgen-Walke Associates. Morgen-Walke Associates is a leading
independent investor relations firm headquartered in New York with offices in
Boston, Dallas, San Francisco, Paris and Tel Aviv. Morgen-Walke will assist
our management team in communicating with the financial community and our
stockholders. In order to keep our expanding stockholder base informed of
developments regarding Youbet.com, we are making Morgen-Walke a point of
contact. If you have questions or would like further information, please
call, fax, e-mail or write:
Morgen-Walke Associates
44 Montgomery Street, Suite 650
San Francisco, CA 94104
Phone: 415.296.7383 or 310.444.3348
Facsimile: 415.296.0446
E-mail: [email protected]
www.morgen-walke.com
We are also pleased to inform you that on August 23, 1999 Youbet.com will be
shipping a new version of its client software. New features include:
- Improved A/V, sharper sound and clearer pictures.
- Up to 12 information products per track.
- Faster information downloads.
- Youbet Central, a new feature offering enhanced racing information.
If you would like us to send you a CD, please visit the "Sign Me Up!" page of
our website at www.youbet.com and enter registration code W7293YB or call
888.YOUBET8 (888.968.2388). Your CD will be mailed to you.
Sincerely,
/s/ PHILLIP C. HERMANN
- ----------------------------
Phillip C. Hermann
Executive Vice President and
Chief Financial Officer
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
YOUBET.COM, INC.
SEPTEMBER 23, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A /X/ Please mark your
votes as in this example.
VOTE FOR VOTE
all nominees listed at right WITHHELD
(except as marked to the from all
contrary below) nominations
1. Election of Directors / / / /
(Instructions: To withhold authority to vote for any one or more nominees, write
that nominee's or nominees' name(s) in the space provided below.)
- -------------------------------------------------------------------------------
Nominees:
Robert M. Fell
Russell M. Fine
Caesar P. Kimmel
Alan W. Landsburg
David M. Marshall
Charles D. Peebler, Jr.
William H. Roedy
2. To approve an amendment of Youbet.com's 1998 Stock Option Plan to increase by
1,500,000 the number of shares available for issuance thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the selection of BDO Seidman, LLP to serve as Youbet.com's
independent auditors for the fiscal year ending December 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES LISTED IN PROPOSAL (1)
ABOVE AND "FOR" PROPOSALS (2) AND (3) ABOVE.
The undersigned hereby acknowledges receipt of the (i) Notice of Annual
Meeting and Proxy Statement and (ii) Youbet.com's 1998 Annual Report.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
SIGNATURE DATE
--------------------------------------- ---------------
SIGNATURE DATE
--------------------------------------- ---------------
Note: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, give the full titles. If a
corporation, sign in full corporation name by President or other
authorized officer. If a partnership, sign in partnership name by
authorized persons.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
YOUBET.COM, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 23, 1999
The undersigned hereby appoints Robert M. Fell and David M.
Marshall, and each of them proxies, each with power of substitution, to
vote for the undersigned at the Annual Meeting of Stockholders of
Youbet.com, Inc. to be held at Santa Anita Park, Clubhouse, Club Plaza
Room, 285 West Huntington Drive, Arcadia, California 91007, on Thursday,
September 23, 1999, at 10:00 a.m., local time, and at any adjournment
thereof, with respect to:
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS of
YOUBET.COM, INC.
SEPTEMBER 23, 1999
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon
as possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
-----------------------------------
YOUR CONTROL NUMBER IS
-----------------------------------
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A /X/ Please mark your
votes as in this example.
VOTE FOR VOTE
all nominees listed at right WITHHELD
(except as marked to the from all
contrary below) nominations
1. Election of Directors / / / /
(Instructions: To withhold authority to vote for any one or more nominees, write
that nominee's or nominees' name(s) in the space provided below.)
- --------------------------------------------------------------------------------
Nominees:
Robert M. Fell
Russell M. Fine
Caesar P. Kimmel
Alan W. Landsburg
David M. Marshall
Charles D. Peebler, Jr.
William H. Roedy
2. To approve an amendment of Youbet.com's 1998 Stock Option Plan to increase by
1,500,000 the number of shares available for issuance thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the selection of BDO Seidman, LLP to serve as Youbet.com's
independent auditors for the fiscal year ending December 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES LISTED IN PROPOSAL (1)
ABOVE AND "FOR" PROPOSALS (2) AND (3) ABOVE.
The undersigned hereby acknowledges receipt of the (i) Notice of Annual
Meeting and Proxy Statement and (ii) Youbet.com's 1998 Annual Report.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
SIGNATURE DATE
--------------------------------------- ---------------
SIGNATURE DATE
--------------------------------------- ---------------
Note: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, give the full titles. If a
corporation, sign in full corporation name by President or other
authorized officer. If a partnership, sign in partnership name by
authorized persons.
- --------------------------------------------------------------------------------
PROOF #4
