SEPARATION AGREEMENT AND MUTUAL RELEASE OF CLAIMS

Exhibit 10.1

SEPARATION AGREEMENT AND MUTUAL RELEASE OF CLAIMS

THIS SEPARATION AGREEMENT (the “Agreement”) is made and entered into as of the 29 ^th day of November, 2007 and effective on the Effective Date (defined below), by and between CHARLES F. CHAMPION (the “Executive”) and YOUBET.COM, INC., a Delaware corporation (the “Company”).

W I T N E S S E T H :

THAT, WHEREAS, the Executive was initially employed by the Company as its President and Chief Operating Officer pursuant to an employment agreement dated March 11, 2002; and

WHEREAS, effective as of June 16, 2003, the Executive has been employed by the Company as its Chief Executive Officer and Chairman of the Board pursuant to an employment agreement entered into on November 21, 2003, and amended by a first amendment thereto on August 1, 2005, and a second amendment thereto on January 11, 2006 (collectively, the “Employment Agreement”); and

WHEREAS, the Company and the Executive have agreed that the Executive’s employment is ending effective December 11, 2007; and

WHEREAS, while the Company intends to and shall honor its obligations to the Executive under the Employment Agreement, the Company and the Executive desire to slightly modify their arrangement and to release one another, all as provided in this Agreement;

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which the parties to this Agreement hereby acknowledge, the parties hereby agree as follows:

1. Separation .

(A)  Transition . The Company hereby agrees to continue to employ the Executive through the close of business on December 11, 2007 (the “Separation Date”). Until the Separation Date, and except for illness or injury, vacations, PTO, holidays, and emergencies, Executive will continue to perform his regular and customary duties (and with the perquisites he has enjoyed prior to his signing this Agreement), and the Executive will work with the Company to effectuate a smooth transition of the Company’s leadership, provided, however, that Executive may pursue other employment and consulting opportunities to commence after the Separation Date so long as such pursuit does not interfere with Executive’s regular and customary duties. The Company may terminate Executive’s employment prior to the Separation Date only for “Cause,” as that term is defined in Section 7(d) of the Executive’s Employment Agreement, and then only if the Executive is afforded the procedural protections set forth in Section 7(d) of the Employment Agreement for a determination of whether there is, in fact, “Cause.”

(B)  Departure . Effective as of the Separation Date, the Executive’s employment with the Company will end by reason of a termination of his employment without

(C) “Cause” as that term is defined in the Employment Agreement. Effective as of the Separation Date, the Executive will cease to hold any and all offices with the Company, and, notwithstanding any contrary provisions in the Employment Agreement, shall resign from the Board and shall not seek re-election to the Board at any time thereafter.

(D)  Announcement . The announcement of the Executive’s departure from the Company will be made at a time determined by the Company, but it shall not be made unless and until the Company has delivered to the Executive (A) by certified or cashier’s checks or by wire transfer the payments due him under Section 5(A) of this Agreement and (B) originals of the agreed upon documents under Section 5(B) of this Agreement. For purposes of this Section 1(C)(A), “delivered to the Executive” shall be deemed to have been made if the Company delivers said payments via wire transfer to an escrow or client funds account held on the Executive’s behalf by the law firm of Funkhouser Vegosen Liebman & Dunn Ltd. (“Escrow Agent”). In the event such an escrow payment is made, Escrow Agent shall hold all funds in escrow pending expiration of the seven (7) day revocation period described in Section 19 below. If the Executive does not revoke his acceptance of this Agreement prior to expiration of said revocation period, then Escrow Agent shall release the funds to the Executive, provided that no funds will be released unless and until Escrow Agent receives written confirmation from the Executive, and Escrow Agent has confirmed that the Company has received a copy of such confirmation, that no such revocation has occurred, and provided further that it is understood and agreed that such funds will not bear interest. In the event that the Executive revokes this Agreement pursuant to Section 19 below, Escrow Agent shall return all funds to the Company without interest within one (1) business day of notification from the Company to Escrow Agent that revocation has occurred. In no case will Escrow Agent deliver any funds to the Executive absent legally binding confirmation that the Executive has not revoked this Agreement per Section 19 below.

2.  Interim and Final Compensation . Until the Separation Date, the Company shall (A) continue to employ the Executive as its Chief Executive Officer and (B) compensate him and provide him with his benefits pursuant to his Employment Agreement. On the Separation Date, the Company shall pay the Executive as follows (all amounts are gross amounts, and shall be reduced by required legal deductions, if any):

	1)		unpaid salary due him through the Separation Date, and a payment equal to the amount the Executive would have been paid had he remained in the employ of the Company until December 31, 2007 (i.e., twenty-nine thousand eight hundred sixty and 69/100 dollars {$29,860.69}),
	2)		his earned and unused vacation pay and PTO through the Separation Date which, as of October 31, 2007, is eighty-five thousand and no/100 dollars ($85,000),
	3)		his unreimbursed business expenses through the Separation Date, and

4)

a bonus for 2007 in the amount of one hundred thirty-eight thousand eight hundred fifty-two and 25/100 dollars ($138,852.25).

In addition, on the Separation Date, the Company shall provide the Executive an opportunity to purchase the technological and peripheral devices he used in connection with his employment (the “Devices”) at an agreed upon price. The parties understand and agree that the Executive may retain any Devices so purchased, without having them stripped out other than for trade secrets and proprietary information of the Company. Executive shall return to the Company all Devices not so purchased, which are listed on Exhibit “A,” and Executive will provide the Company with access to the Devices as deemed reasonably necessary by the Company to remove such trade secrets and proprietary information of the Company. Nothing contained in this Agreement shall affect the Executive’s right to receive through the Separation Date his 401(k) plan benefits under the Company’s 401(k) plan, and the Company shall, promptly after the Separation Date, roll over such benefits to an individual retirement account that the Executive designates.

3.  Effect of Premature Termination . The parties understand and agree that if prior to the Separation Date (A) the Company terminates the Executive’s employment for a reason other than for “Cause” as defined in the Employment Agreement, or (B) the Executive terminates his employment for “Good Reason” as defined in the Employment Agreement, such event shall have no impact whatsoever on the Executive’s entitlement to any of the payments and benefits due him, and the rights he has, under this Agreement, the Company shall not be relieved from its obligations to provide Executive with and honor the same, and the last day of Executive’s employment with the Company shall be deemed to be the Separation Date. In the event the Executive dies or becomes disabled prior to the Separation Date, he shall, in lieu of the terms of this Agreement, retain those rights provided to him in Section 7(b) of the Employment Agreement, including and the Nine Million Dollar ($9,000,000) life insurance policy provided for in Section 4(a) of his Employment Agreement (as amended by Section 2 of the Second Amendment thereto). Executive acknowledges that the Company’s obligation to make any premium payments on Executive’s insurance policies will terminate upon payment to Executive of the corresponding amounts set forth in Section 5(A) below.

4.  Compensation and Benefits .

(A)  Compensation and Benefits . The Executive and the Company acknowledge and agree that, subject to the remaining provisions of this Agreement, the payments set forth in this Section are required to be made to Executive under his Employment Agreement as a result of the termination of his employment with “Cause.” Accordingly, on the Effective Date, the Company will pay the Executive the following (all amounts are gross amounts, and shall be reduced by required legal deductions, if any):

1)

two (2) years of severance pay totaling eight hundred twenty thousand nine hundred twenty-two and 70/100 dollars ($820,922.70);

	2)		the following bonus compensation he would have received had he remained in the employ of the Company for two (2) additional years: four hundred ten thousand forty-six and 13/100 dollars ($410,046.13);
	3)		fifteen thousand nine hundred sixty and no/100 dollars (15,960.00), which represents an amount equal to the estimated cost of providing the Executive and his family with medical insurance for two (2) years;
	4)		ten thousand nine hundred twenty and no/100 dollars ($10,920), which represents an amount equal to the estimated cost of Exe-U-Care reimbursements for the Executive and his family for two (2) years;
	5)		three thousand two hundred seventy-six and no/100 dollars ($3,276.00), which represents an amount equal to the estimated cost of group life insurance for the Executive for two (2) years;
	6)		thirty thousand five hundred ninety-four and 20/100 dollars ($30,594.20), which represents an amount equal to the cost of the premiums for term life insurance on the Executive for two (2) years;
	7)		three thousand seven hundred eighty and no/100 dollars ($3,780.00), which represents an amount equal to the estimated cost of short-term and long-term disability insurance for the Executive for two (2) years;
	8)		forty-three thousand one hundred sixty-two and 70/100 dollars ($43,162.70), which represents the amount to compensate the Executive for the loss of 401(k) contributions for two (2) years;
	9)		twelve thousand six hundred and no/100 dollars ($12,600.00), which represents the Executive’s automobile allowance for two (2) years;
	10)		fourteen thousand and no/100 dollars ($14,000), which represents the Executive’s financial and tax planning reimbursement for two (2) years;
	11)		seven thousand and no/100 dollars ($7,000), which represents the Executive’s club dues and assessments for two (2) years; and
	12)		six thousand and no/100 dollars ($6,000), which represents the Executive’s outplacement services reimbursement for two (2) years.

Except as otherwise provided in this Agreement, and except for any rights Executive has under Sections 3(c) and 4(e) of the Employment Agreement, which rights are unaffected by this Agreement and which shall survive the termination of the Executive’s employment with the Company, the payments listed in Sections 5(A)(1)-(12) above shall constitute full payment of all present or future monies owed to Executive under the Employment Agreement (including Section 7 thereof), and Executive acknowledges that he is not entitled to any additional sums under the Employment Agreement.

(B)  Stock Options . The parties acknowledge and agree that the Executive was granted the following stock options pursuant to the Company’s 1998 Stock Option Plan and that said options are fully vested and unaffected by this Agreement and shall survive the termination of the Executive’s employment with the Company:

	1)		four hundred thousand (400,000) options having an exercise price equal to the closing price of the Company’s Common Stock on March 11, 2002 at a price of fifty cents ($.50) per share;
	2)		three hundred fifty thousand (350,000) options having an exercise price equal to the closing price of the Company’s Common Stock on September 1, 2002 at a price of fifty-seven cents ($.57) per share; and
	3)		nine hundred fifty thousand (950,000) options having an exercise price equal to the closing price of the Company’s Common Stock on November 21, 2003 at a price of two dollars and 23/100 ($2.23) per share.

(C)  Documents . On the Effective Date, the Company shall deliver to the Executive the following documents:

	1)		An original of the agreed upon press release, in the form attached hereto as Exhibit “A,” that the Company and the Executive shall issue to the media through Beacon Advisors on the Effective Date immediately after the payments set forth in Section 5 have been made to the Executive.
	2)		An original of the agreed upon statement, in the form attached hereto as Exhibit “B,” that the Executive will send to all employees of the Company via e-mail on the Effective Date immediately after the press release has been distributed.
	3)		Twelve (12) originals of an agreed upon favorable letter of reference, in the form attached hereto as Exhibit “C,” printed on Company stationery, signed as indicated on the letter, and dated as of the Effective Date.

5.  Additional Consideration . The Executive and the Company acknowledge and agree that some of the payments called for under his Employment Agreement are contingent on the occurrence of certain events, and/or are not due to Executive in a lump sum as of the Effective Date. The Executive and the Company likewise acknowledge that in this Agreement the Executive has agreed to forego rights to certain payments and other rights he could otherwise have claimed under the Employment Agreement.

6.  Executive’s Covenants . Until the Separation Date, the provisions of Sections 5 and 6 of the Employment Agreement shall remain in full force and effect. After the Separation Date, the Executive agrees to continue to be bound by the provisions contained in Sections 5 and 6 of his Employment Agreement, according to their terms.

7.  Releases . In return for the mutual promises and waivers of claims contained in this Agreement, the sufficiency of which consideration is hereby acknowledged, the Company and the Executive agree as follows:

(A)  Release of the Company . Except for any vested benefits to which the Executive is entitled under this Agreement, the Company’s 401(k) plan, and applicable law, except for the Executive’s right to continue or convert his insurance benefits under applicable law and the Company’s plans, and except for the Company’s breach of this Agreement, to the maximum extent permitted by applicable law, the Executive RELEASES and FOREVER DISCHARGES the Company and its affiliated companies, including their and the Company’s parents, subsidiaries, divisions, partners, joint venturers, sister corporations, and as intended third-party beneficiaries, their predecessors, successors, heirs and assigns, and their and the Company’s past, present and future owners, directors, officers, members, agents, attorneys, employees, representatives, trustees, administrators, fiduciaries and insurers, jointly and severally, in their individual, fiduciary and corporate capacities (the Company and all of the foregoing being hereinafter collectively referred to as the “Company Releasees”), of and from, and does hereby WAIVE , any and all rights, contracts, notes, torts, claims, grievances, arbitrations, damages, actions, causes of action, and suits, whether or not now known, suspected, or claimed, which he ever had, now has or claims, or might hereafter have or claim against the Company Releasees, and each of them, relating to, directly or indirectly, any matter or thing occurring, in whole or in part, fr