<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
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-12
</TABLE>
<TABLE>
<S> <C> <C>
YOUBET.COM, INC.
----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(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:
------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
(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):
------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
(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:
------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------
(4) Date Filed:
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</TABLE>
<PAGE>
YOUBET.COM, INC.
1950 SAWTELLE BOULEVARD, SUITE 180
LOS ANGELES, CALIFORNIA 90025
TELEPHONE: (310) 444-3300
August 21, 2000
Dear Fellow Stockholder:
You are cordially invited to attend Youbet.com's Annual Meeting of
Stockholders to be held on Thursday, September 21, 2000, 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 five 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, 2000. 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 telephonically or on-line 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 AND
CHIEF EXECUTIVE OFFICER
<PAGE>
YOUBET.COM, INC.
1950 SAWTELLE BOULEVARD, SUITE 180
LOS ANGELES, CALIFORNIA 90025
August 21, 2000
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 21, 2000, beginning at 10:00 A.M.
Pacific Daylight Time, for the following purposes:
1. To elect five 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, 2000; 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 15, 2000 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 telephonically or on-line by
following the instructions printed on the enclosed proxy card.
By Order of the Board of Directors
/s/ PHILLIP C. HERMANN
Phillip C. Hermann
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<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 21, 2000
DATED AUGUST 21, 2000
------------------------
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 21, 2000, 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
five 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, 2000 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 21, 2000.
WHO IS ENTITLED TO ATTEND AND VOTE AT THE MEETING?
Stockholders of record at the close of business on August 15, 2000 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 15, 2000, the
record date, will constitute a quorum for purposes of this meeting. As of the
record date, 19,520,750 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 five 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, 2000.
<PAGE>
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.
CAN I VOTE BY TELEPHONE OR ON-LINE?
If you are a record stockholder (that is, if you hold your stock in your own
name), you may vote by telephone or on-line 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, 2000 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 options to attract and retain key employees. Currently the 1998 Stock
Option Plan is limited to 2,500,000 shares of common stock for options granted
thereunder. The Board has increased this limit to 3,500,000 shares of common
stock, subject to stockholder approval.
2
<PAGE>
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
- FOR THE ELECTION OF DIRECTORS. The five 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 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, 2000. 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 five directors at this meeting. The
Board has nominated Robert M. Fell, 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.
3
<PAGE>
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 57, has served as Chairman of the Board and Chief
Executive Officer of Youbet.com since June 1998. From 1995 to 1998 prior to
joining the Company, 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 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.
CAESAR P. KIMMEL, age 74, 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 67, 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. Mr. Landsburg serves on Advisory Committees for the California
Horse Racing Board.
CHARLES D. PEEBLER JR, age 64, has served as a Director of Youbet.com since
September 1999. Mr. Peebler has served as Chairman Emeritus of True North
Communications, Inc., the world's 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 is also a Director for Valmont Industries, Inc.,
Dreamline, Inc., and Managing Director of PLUM Capital L.L.C.
WILLIAM H. ROEDY, age 52, 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. 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 FIVE NOMINEES
FOR DIRECTOR.
4
<PAGE>
WHO ARE THE LARGEST OWNERS OF YOUBET.COM'S STOCK?
STOCK OWNERSHIP
As of August 15, 2000 there were 19,520,750 shares of Youbet.com common
stock outstanding. The table below sets forth information, as of August 15, 2000
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 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 PERCENT OF SHARES
NAME OF BENEFICIAL OWNER (1)(2) BENEFICIALLY OWNED OUTSTANDING
------------------------------- ------------------ -----------------
<S> <C> <C>
Robert M. Fell.............................................. 1,204,600(3) 5.87
David M. Marshall........................................... 2,067,265(4) 10.56
Sid Marshall................................................ 865,490(5) 4.33
11770-M Pacific Coast Highway
Malibu, CA 90265
Marshall Gift Trust......................................... 482,250(6) 2.46
1700 Bank of America Plaza
300 South Fourth Street
Las Vegas, NV 80101
Russell M. Fine............................................. 1,871,941(7) 9.57
</TABLE>
------------------------
(1) The address of the above beneficial owners, unless specified, 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 1,000,000 shares of common stock represented by the currently
exercisable portion of the Fell Warrant, but does not include the 200,000
shares of common stock represented by the portion of the Fell Warrant which
is fully vested but not exercisable within 60 days of August 15, 2000.
Includes 204,450 shares of common stock owned by Robert M. Fell Living
Trust.
(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 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.
(6) 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.
(7) 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:
5
<PAGE>
Series C-20,171; Series D-20,171. Also includes 7,500 shares of common stock
owned by Mrs. Debra Fine who is the wife of Mr. Fine.
HOW MUCH STOCK DO YOUBET.COM'S DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS OWN?
The following table sets forth, as of August 15, 2000 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.
STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND NOMINEES
AS OF AUGUST 15, 2000
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER (1)(2) OF BENEFICIAL OWNER PERCENT OF CLASS
------------------------------- ------------------- ----------------
<S> <C> <C>
Robert M. Fell.............................................. 1,204,600(3) 5.87
A. L. Frank................................................. 50,000(4) *
Ron W. Luniewski............................................ 170,100(5) *
Phillip C. Hermann.......................................... 55,100(6) *
Nour-Dean Anakar............................................ -- (7) --
Steve A. Molnar............................................. 129,184(8) *
Caesar P. Kimmel............................................ 70,583(9) *
Alan Landsburg.............................................. 64,583(9) *
William H. Roedy............................................ 154,583(9) *
Charles M. Peebler Jr....................................... 107,583(10) *
All directors, nominees and executive officers as a group
(10 persons).............................................. 2,006,316(11) 9.49
</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.
(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 1,000,000 shares of common stock represented by the currently
exercisable portion of the Fell Warrant, but does not include the 200,000
shares of common stock represented by the portion of the Fell Warrant which
is fully vested but not exercisable within 60 days of August 15, 2000.
Includes 204,450 shares of common stock owned by Robert M. Fell Living
Trust.
(4) Consists solely of 50,000 shares of common stock represented by stock
options exercisable within 60 days of August 15, 2000.
(5) Consists solely of 170,100 shares of common stock represented by stock
options exercisable within 60 days of August 15, 2000.
6
<PAGE>
(6) Consists solely of 55,100 shares of common stock represented by stock
options exercisable within 60 days of August 15, 2000.
(7) Commenced employment on January 3, 2000.
(8) Includes 128,434 shares of common stock represented by stock options
exercisable within 60 days of August 15, 2000.
(9) Includes 54,583 shares of common stock represented by a stock option
exercisable within 60 days of August 15, 2000.
(10) Includes 59,583 shares of common stock represented by a stock option
exercisable within 60 days of August 15, 2000. Also, includes 13,000 shares
of common stock owned by Mr. Todd Peebler, the son of Mr. Peebler.
(11) Includes 627,066 shares of common stock represented by fully vested stock
options and stock options exercisable within 60 days of August 15, 2000, and
1,000,000 shares of common stock represented by the currently exercisable
portion of the Fell Warrant.
7
<PAGE>
INFORMATION ABOUT THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
WHO SITS ON YOUBET.COM'S BOARD?
The Board consists of the following five members: Robert M. Fell, Caesar P.
Kimmel, Alan W. Landsburg, Charles M. Peebler Jr., 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.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board has standing Compensation and Audit Committees.
Messrs. Kimmel and Landsburg are the members of the Compensation Committee.
The Compensation Committee administers, reviews and approves, subject to review
by 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 1999, the
Compensation Committee had no formal meetings and did not act by written
consent, but did meet informally on several occasions.
Messrs. Peebler 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 1999, the Audit Committee had one formal meeting and did not act by
written consent.
During 1999 the Board had an executive committee which consisted of
Mr. Robert Fell, Mr. David Marshall, and Mr. Russell Fine. The Executive
Committee had 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 1999, the
Executive Committee had no formal meetings and acted two times by written
consent. Mr. Marshall and Mr. Fine resigned from the board on December 31, 1999
and May 3, 2000 respectively. Following these resignations no replacements were
appointed to the committee and the executive committee ceased to exist.
The Board does not have a Nominating Committee. The functions of the
Nominating Committee are performed by the full Board.
HOW OFTEN DID THE BOARD MEET IN 1999?
The Board of Directors met in person or telephonically seven times and acted
nine times by written consent in fiscal year 1999. 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. As compensation for
the non-employee members of the Board, Youbet.com issued the following stock
options:
- In September 1999, Youbet.com granted Mr. Charles M. Peebler options to
acquire 40,000 shares of common stock, pursuant to the 1998 Stock Option
Plan, at an exercise price of $7.00
8
<PAGE>
per share. These options vest monthly over the one-year period beginning
September 1999 and are exercisable for a period of ten years from the date
of grant.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In June 1998 David M. Marshall converted $104,773 of his employee-deferred
compensation into 55,878 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 40,342 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, Caesar P. Kimmel, Alan W. Landsburg, William H. Roedy or trusts of
which they are beneficiaries purchased 445, 445, 1,600, 1,000, and 10,000
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 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
9
<PAGE>
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) 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 has been paid in recognition of
the completion of the placement of the 11% Senior Convertible Discount Notes;
$120,000 has been paid 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.
During January 2000, Mr. J. Terrance Lanni became a member of the board of
directors of Youbet.com. In connection with his appointment, Youbet issued
Mr. Lanni 100,000 stock options to purchase Youbet's common stock at an exercise
price of $4.94 per share, the market price at the time of issuance, vesting over
a period of 25 months. Mr. Lanni resigned from the board effective June 30,
2000, and therefore forfeited 76,000 of the stock options previously issued to
him representing options that have not vested as of June 30, 2000.
WHO ARE YOUBET.COM'S EXECUTIVE OFFICERS?
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------
<S> <C> <C>
Robert M. Fell.................... 57 Chairman of the Board and Chief
Executive Officer
A.L. Frank........................ 56 President and Chief Operating
Officer
Ron W. Luniewski.................. 36 Executive Vice President
Phillip C. Hermann................ 51 Executive Vice President and Chief
Financial Officer
Nour-Dean Anakar.................. 43 Managing Director, International
Steve A. Molnar................... 57 Executive Vice President, Racing
</TABLE>
Biographical information concerning Robert M. Fell, who is also a nominee 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 directorship held in
other companies including all companies which are subject to the reporting
requirements under the federal securities laws.
10
<PAGE>
A.L. FRANK
Mr. Frank has served as President and Chief Operating Officer of Youbet.com
since February 2000 and April 2000, respectively. Prior to joining the Company,
Mr. Frank served as President and Founder of Onyx Software, Inc., a software and
venture capital consulting firm, since 1990. Through Onyx he served as President
and CEO of Thinque Systems Corporation prior to which he founded and grew
several software firms. From 1987 to 1990 Mr. Frank served as President and CEO
of Indysy Software, which was sold to Novell, Inc. From 1980 to 1986 he served
as Founder, President and CEO of California Software which was sold to Computer
Associates.
RON W. LUNIEWSKI
Mr. Luniewski has served as Executive Vice President of Youbet.com since
February 1999, and from February 1999 through March 2000 was Chief Operating
Officer. Mr. Luniewski was President of You Bet!, Inc. a subsidiary of the
Company or its predecessor since March 1997. For more than the 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
Mr. Hermann 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.
NOUR-DEAN ANAKAR
Mr. Anakar has served as Managing Director, International since
January 2000. Prior to joining Youbet.com, Mr. Anakar was Senior Vice President
of Virtgame.com International and Managing Director of Virtual Gaming Argentina
since June 1999. From May 1997 to April 1999, Mr. Anakar was a Senior Vice
President with Ladbrokes USA. From November 1992 to May 1997, Mr. Anakar held
the position of Senior Vice President and General manager for Ladbrokes
Argentina, a wholly owned subsidiary of the Hilton Group PLC.
STEVE A. MOLNAR
Mr. Molnar has served as Executive Vice President, Racing of the Company
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.
11
<PAGE>
HOW WERE YOUBET.COM'S EXECUTIVE OFFICERS COMPENSATED IN 1999?
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by Youbet.com for the
years ended December 31, 1999, 1998 and 1997 to the Chief Executive Officer and
to the executive officers of Youbet.com:
SUMMARY COMPENSATION TABLE
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION
---------------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Robert M. Fell.............................. 1999 $217,033(1) $420,000(2) $ 9,738(4)
Chairman of the Board and Chief Executive 1998 81,136(1) 363(3) 4,500(5)
Officer 1997 -- -- --
Russell M. Fine (21)........................ 1999 153,125 150,000 7,200(5)
Executive Vice President and Chief 1998 138,333 363(3) 39,989(7)
Technology
Officer 1997 120,000 -- 14,825(8)
Ron W. Luniewski............................ 1999 153,125 12,500 281,600(6)
Executive Vice President and Chief Operating 1998 138,333 363(3) 168,621(9)
Officer (20) 1997 120,000 -- 10,306(10)
Phillip C. Hermann.......................... 1999 153,125 12,500 87,247(13)
Executive Vice President and Chief Financial 1998 96,667 363(3) 75,456(14)
Officer 1997 -- -- --
Steve A. Molnar............................. 1999 110,000 -- 75,000(12)
Executive Vice President, Racing 1998 119,375 363(3) 85,973(15)
1997 121,460 -- 10,812(11)
David M. Marshall (16)...................... 1999 156,775(17) 150,000 9,000(5)
Vice Chairman of the Board.................. 1998 140,000 363(3) 52,279(18)
1997 130,000 -- 17,185(19)
</TABLE>
------------------------
(1) Represents compensation paid to Fell & Company, Inc. for the services of
Robert M. Fell (see "Employment and Service Agreements" below).
(2) Represents a bonus which was applied against promissory notes totaling
$560,000 (see "Certain Relationships and Related Transactions" below).
(3) Represents income from fully vested stock options awarded as bonuses in
1998.
(4) Represents automobile allowance of $1,575 and non-business expense
reimbursements of $8,163.
(5) Represents automobile allowance.
(6) Represents automobile allowance of $6,600 and income of $275,000 resulting
from the exercise of options (see "Option Exercises and Fiscal Year-End
Values" below).
(7) Represents interest on deferred compensation 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.
12
<PAGE>
(8) Represents an automobile allowance of $6,000 and interest on deferred
compensation of $8,825.
(9) Represents $2,991 interest on deferred compensation and $165,630 relating to
1998 vesting of stock options (see "Option Exercises and Fiscal Year-End
Values" below).
(10) Represents interest on deferred compensation of $3,743 and a 25% bonus on
deferred compensation of $6,563.
(11) Represents interest on deferred compensation of $3,921 and a 25% bonus on
deferred compensation of $6,891.
(12) Represents income of $75,000 resulting from the exercise of options (see
"Option Exercises and Fiscal Year-End Values" below).
(13) Represents automobile allowance of $6,435 and income of $80,812 relating to
a stock option awarded in 1998 (see "Option Exercises and Fiscal Year-End
Values" below).
(14) Represents income relating to 1998 vesting of stock options awarded in 1998
(see "Option Exercises and Fiscal Year-End Values" below).
(15) Represents $3,158 interest on deferred compensation and $82,815 relating to
1998 vesting of stock options (see "Option Exercises and Fiscal Year-End
Values" below).
(16) Resigned as Vice Chairman of the Board effective December 31, 1999.
(17) Represents compensation paid to David Marshall, Inc. for the services of
David M. Marshall (see "Employment and Services Agreements "below).
(18) 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.
(19) Represents an automobile allowance of $6,000 and interest on deferred
compensation of $11,185.
(20) During March 2000 Mr. Ron Luniewski's title was changed to Executive Vice
President.
(21) Resigned as Chief Technology Officer of the Company and from the Board of
Directors on May 3, 2000.
OPTION GRANTS IN 1999
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, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
----------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED (1) IN 1999 PER SHARE DATE
---- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Ron W. Luniewski................................ 100,000 9.46% $5.31(2) 02/22/2009
Phillip C. Hermann.............................. 50,000 4.73% $5.31(2) 02/22/2009
</TABLE>
------------------------
(1) Options were granted under the 1998 Stock Option Plans and are exercisable
for common stock of Youbet.com.
(2) Options were originally issued at an exercise price of $10.50 and
subsequently repriced during 2000 to $5.31, the current market price on the
date of repricing.
13
<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, 1999 and the number
of shares covered by both exercisable and unexercisable stock options held by
each of the named executive officers at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT YEAR-END (1) OTIONS AT YEAR-END (2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ron W. Luniewski.......... 36,667(3) $275,000 145,100 100,000 $262,994 $ --
Phillip C. Hermann........ -- -- 23,850 106,250 43,228 101,953
Steve A. Molnar........... 10,000(4) 75,000 115,100 13,334 208,619 17,501
Robert M. Fell............ -- -- 100 -- 181 --
David Marshall (5)........ -- -- 100 -- 181 --
Russell M. Fine (6)....... -- -- 100 -- 181 --
--------- -------- ------- ------- -------- --------
TOTAL................... 46,667 $350,000 284,350 219,584 $515,384 $119,454
========= ======== ======= ======= ======== ========
</TABLE>
------------------------
(1) Options shown were granted under the 1995 and 1998 Stock Option Plans and
are exercisable for common stock. See "1995 Stock Option Plans" and "1998
Stock Option Plans" for a description of the material terms of these
options.
(2) The dollar values are calculated by determining the difference between the
weighted average exercise price of the options and the closing market price
for the common stock of $4.3125 on December 31, 1999.
(3) Represents a cashless exercise of 55,000 options sold at $7.50 per share,
with 18,333 options forfeited.
(4) Represents a cashless exercise of 15,000 options sold at $7.50 per share,
with 5,000 options forfeited.
(5) Resigned as Vice Chairman of the Board on December 31, 1999.
(6) Resigned as Chief Technology Officer of the Company and from the Board of
Directors on May 3, 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee makes recommendations to the Board of Directors
regarding the compensation of Youbet.com's executives and establishes, monitors
and implements the policies governing such compensation. During 1999, the
Compensation Committee was comprised of Caesar P. Kimmel and Alan W. Landsburg.
The policies of the Compensation Committee may be summarized as follows:
1. Youbet.com's compensation programs are designed to attract, motivate and
retain qualified key executives;
2. An executive's salary, bonuses and incentive compensation and other
benefit programs should reflect both the Company's performance as a whole
and the executive's individual performance and effort;
3. Youbet.com's compensation programs should enable the executive to have a
financial interest in Youbet.com that parallels the financial interests
of Youbet.com's shareholders.
14
<PAGE>
Youbet.com's executives are compensated in the form of a salary and a
combination of other incentive based compensation such as bonuses, grants of
stock under Youbet.com's stock option plans and other benefit programs. The
annual salaries of the executives are generally reviewed on an annual basis to
ensure that these salaries are competitive with other technology based companies
that are in a similar stage of development. Youbet.com awards bonuses to its
executives on an annual basis, after the end of the fiscal year, based on a
combination of Youbet.com's performance as a whole and the executive's
individual performance and effort. Additional bonuses may be awarded in
recognition of financially rewarding events. The "SUMMARY COMPENSATION TABLE AS
OF DECEMBER 31, 1999," included in this Proxy Statement, provides information
regarding the compensation of Youbet.com's executive officers and is based upon
the policies described in this report.
For additional information regarding the compensation paid to Youbet.com's
executive officers, please see "EMPLOYMENT AND SERVICE AGREEMENTS" BELOW.
Caesar P. Kimmel
Alan W. Landsburg
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 and as the Chief Executive Officer. 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. On March 8, 2000
Youbet.com, subject to the closing of the acquisition of the off-track betting
and bingo operations in Argentina, increased the base fee of Fell &
Company, Inc. to $375,000 per year, retroactive to March 8, 2000. In addition,
Robert M. Fell was granted an option to purchase 300,000 shares of common stock,
pursuant to the 1998 Stock Plan at an exercise price of $4.875. The options have
a ten-year term and vest in two annual installments beginning July 2001.
In April 2000 Ron Luniewski and Youbet.com entered into an employment
agreement pursuant to which Mr. Luniewski serves as Executive Vice President of
Youbet.com through April 2001. This employment agreement provides for
Mr. Luniewski to receive an annual salary of $175,000 per year subject to cost
of living increases. 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. This employment
agreement replaced an employment agreement entered into between Mr. Luniewski
and Youbet.com in February 1999, expiring on April 2000 which had substantially
the same terms.
15
<PAGE>
In April 2000 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 2001. This employment
agreement provides for Mr. Hermann to receive an annual salary of $165,000
subject to cost of living increases. Mr. Hermann is also entitled to receive an
annual bonus determined by the Board in its discretion. This employment
agreement replaced an employment agreement entered into between Mr. Hermann and
Youbet.com in February 1999 expiring in April 2000 which had substantially the
same terms.
In June 1998 Russell Fine and Youbet.com entered into an employment
agreement pursuant to which Mr. Fine served as Chief Technology Officer.
Mr. Fine received a base salary of $150,000 in 1999, and other miscellaneous
benefits. Effective December 31, 1999 Mr. Fine's base salary was increased to
$165,000. Mr. Fine was also entitled to receive an annual bonus determined by
the board of directors. The employment agreement permitted Mr. Fine to terminate
the agreement 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. Mr. Fine's agreement was terminated
on May 3, 2000 and he resigned as a member of the board of directors and as the
Chief Technology Officer. Effective May 3, 2000 Mr. Fine and Youbet.com entered
into a consulting agreement pursuant to which Mr. Fine will provide consulting
services to Youbet.com for a period of three years. For making his services
available, Mr. Fine will receive a base fee of $182,500 per year and other
miscellaneous benefits.
In January 1999 David Marshall, Inc. and Youbet.com entered into a services
agreement pursuant to which David M. Marshall served as Vice-Chairman of the
Board of Youbet.com until December 31, 1999. For making Mr. Marshall's services
available, David Marshall, Inc. received a base fee of $150,000 per year plus
the amount of payroll taxes Youbet.com would have paid if Mr. Marshall were an
employee of Youbet.com and other miscellaneous benefits. David Marshall, Inc.
was also entitled to receive an annual bonus determined by the Board in its
discretion. David Marshall, Inc. terminated the agreement pursuant to a
provision which permitted David Marshall, Inc. to terminate the agreement at
anytime after December 31, 1999 and receive the compensation and benefits
provided under the agreement for two years. The services agreement replaced an
employment agreement entered into between Mr. Marshall and Youbet.com in
June 1998, which had substantially the same terms. Mr. Marshall resigned his
position as Vice Chairman effective December 31, 1999.
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.
16
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the percentage change in the
cumulative total return on Youbet.com's common stock against the cumulative
total return of the Nasdaq Market Index and the SIC Code Index 7990, Amusement
and Recreation Services, for the period from June 15, 1999 through December 31,
1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YOUBET.COM INC AMUSEMENT, RECREATION SVC, NEC NASDAQ MARKET INDEX
<S> <C> <C> <C>
6/15/99 100.00 100.00 100.00
6/30/99 90.59 100.00 100.00
7/30/99 64.36 93.66 98.22
8/31/99 65.84 91.16 101.59
9/30/99 59.41 94.81 101.74
10/29/99 31.68 96.10 109.61
11/30/99 37.62 94.63 122.59
12/31/99 34.16 101.50 149.86
</TABLE>
PROPOSAL NO. 2
AMENDMENT TO THE 1998 STOCK OPTION PLAN
GENERAL
You are being asked to approve an amendment to the 1998 Stock Option Plan
which was originally adopted by the Board in February 1998. This amendment to
the 1998 Stock Option Plan will be effective upon approval by the stockholders
of Youbet.com. The amendment reserves an additional 1,000,000 shares of
Youbet.com common stock for options in addition to the 2,500,000 shares
previously reserved for a total of 3,500,000 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 requests to Youbet.com at 1950 Sawtelle
Boulevard Suite 180, Los Angeles, California 90025.
DESCRIPTION OF THE 1998 STOCK OPTION PLAN
In February 1998, Youbet.com 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 to reserve 500,000
additional shares of common stock for options thereunder. In July 1999, the
Board approved an amendment of the 1998 Stock Option Plan, approved by the
stockholders at the September 20, 1999 stockholders meeting to reserve an
additional 1,500,000 shares of common stock for options thereunder (including
the 500,000 shares previously approved). In August 2000, the Board approved an
amendment of the 1998 Stock Option Plan subject to stockholders
17
<PAGE>
approval, to reserve an additional 1,000,000 shares of common stock for options
thereunder for a total of 3,500,000 shares of commons 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 15,
2000, on the Nasdaq National Market was $2.13 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 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 federal maximum marginal rate at which
ordinary income is taxed to individuals is currently 39.6%. The federal maximum
rate at which long-term capital gains for most types of property are taxed is
20%.
18
<PAGE>
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 an 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.
19
<PAGE>
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 2,515,481 stock options granted under the plan, of
which 15,481 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 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 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, 2000. 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, 2000.
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.
Youbet.com became subject to the reporting requirements of Section 16(a) as of
the effective date of its Form 8-A on June 14, 1999. Youbet.com believes all
required reports were timely filed.
20
<PAGE>
STOCKHOLDER PROPOSALS
If you wish to submit proposals to be included in Youbet.com's year 2001
proxy statement, Youbet.com must receive them on or before April 20, 2001.
Please address your proposals to Youbet.com's Secretary at Youbet.com, Inc. 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, 1999 and Youbet.com's Form 10-Q for the quarterly
period ended June 30, 2000 are being mailed with this proxy statement to all
stockholders of record as of August 15, 2000.
21
<PAGE>
------------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
YOUBET.COM, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 21, 2000
The undersigned hereby appoints Robert M. Fell and Phillip C. Hermann,
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 21, 2000, 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>
------------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
YOUBET.COM, INC.
SEPTEMBER 21, 2000
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
Caesar P. Kimmel
Alan W. Landsburg
Charles D. Peebler, Jr.
William H. Roedy
FOR AGAINST ABSTAIN
2. To approve an amendment of
Youbet.com's 1998 Stock Option
Plan to increase by 1,000,000 / / / / / /
the number of shares available for
issuance thereunder.
3. To ratify the selection of BDO
Seidman, LLP to serve as
Youbet.com's independent auditors / / / / / /
for the fiscal year ending
December 31, 2000.
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, (ii) Youbet.com's 1999 Annual Report, and (iii)
Youbet.com's June 30, 2000 Quarterly Report (10-Q).
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>
------------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
YOUBET.COM, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 21, 2000
The undersigned hereby appoints Robert M. Fell and Phillip C. Hermann, 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 21, 2000, 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 21, 2000
-----------------------------------
PROXY VOTING INSTRUCTIONS
-----------------------------------
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--------------------------------
WHEN PROXY PROOF IS OKAYED PLEASE SIGN & DATE IT HERE___________________________
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
Caesar P. Kimmel
Alan W. Landsburg
Charles D. Peebler, Jr.
William H. Roedy
FOR AGAINST ABSTAIN
2. To approve an amendment of
Youbet.com's 1998 Stock Option
Plan to increase by 1,000,000 / / / / / /
the number of shares available for
issuance thereunder.
3. To ratify the selection of BDO
Seidman, LLP to serve as
Youbet.com's independent auditors / / / / / /
for the fiscal year ending
December 31, 2000.
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, (ii) Youbet.com's 1999 Annual Report, and (iii)
Youbet.com's June 30, 2000 Quarterly Report (10-Q).
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.
--------------------------------------------------------------------------------
