CERTIFICATE AND ARTICLES OF MERGER

                                       OF

                     CONTINENTAL EMBASSY ACQUISITIONS, INC.

                               A UTAH CORPORATION

                                      INTO

                     CONTINENTAL EMBASSY ACQUISITIONS, INC.

                             A DELAWARE CORPORATION

 

                       THE UNDERSIGNED CORPORATION DOES HEREBY CERTIFY:

 

         FIRST: That the name and state of incorporation of each of the

constituent corporations of the merger is as follows:

 

         NAME                                    STATE OF INCORPORATION

         Continental Embassy Acquisitions, Inc.       Utah

         Continental Embassy Acquisitions, Inc.       Delaware

 

         SECOND: That a plan of merger between the parties to the merger has

been approved and adopted, certified, executed and acknowledged by each of the

constituent corporations in accordance with the requirements of subsection (c)

of Section 252 of the General Corporation Law of the State of Delaware.

 

         THIRD: The name of the surviving corporation of the merger is

Continental Embassy Acquisitions, Inc., a Delaware corporation.

 

         FOURTH: That the Certificate of Incorporation of Continental Embassy

Acquisitions, Inc., a Delaware corporation, shall be the certificate of

incorporation of the surviving corporation.

 

         FIFTH: That the executed plan of merger is on file at the principal

place of business of the surviving corporation. The address of said principal

place of business is 311 South State Street, Suite 460, Salt Lake City, Utah

84111.

 

         SIXTH: That a copy of the plan of merger will be furnished on request

and without cost to any stockholder of any constituent corporation.

 

         SEVENTH: The authorized capital stock of the Utah corporation which is

a party to the merger is as follows:

 

------------------------- ------------- ----------------- ---------------------

      CORPORATION             CLASS       NO. OF SHARES    PAR VALUE PER SHARE

------------------------- ------------- ----------------- ---------------------

  Continental Embassy        Common        500,000,000            $.001

   Acquisitions, Inc.

------------------------- ------------- ----------------- ---------------------

 

         EIGHTH: The Plan of Merger shall be for the Utah corporation to be

merged into the Delaware corporation and the 515,000 outstanding shares of

common stock of the Utah corporation shall be automatically converted on a share

for share basis into shares of common stock of the Delaware corporation. The

1,000 shares of common stock of the Delaware corporation presently outstanding

shall be canceled in the merger.

 

         NINTH: The Utah corporation has 515,000 shares of common stock

outstanding, of which 284,469 (55.2%) shares voted in favor of the merger and no

shares voted against the merger. The Delaware corporation has 1,000 shares, of

common stock outstanding all of which were voted in favor of the merger.

 

 

                                      CONTINENTAL EMBASSY ACQUISITIONS, INC.,

                                      a Delaware corporation

 

                                      By:/S/ GLEN R. ULMER

                                          -----------------------------------

                                          Glen R.Ulmer, President and Secretary

 

                                      CONTINENTAL EMBASSY ACQUISITIONS, INC,

                                      a Utah corporation

 

 By /S/ SUZANNE SULLIVAN              By: /S/ GLEN R. ULMER

    --------------------                  ---------------------------------

     Suzanne Sullivan, Secretary          Glen R. Ulmer, President

 

 

 

 

                          CERTIFICATE OF INCORPORATION

                                       OF

                     CONTINENTAL EMBASSY ACQUISITIONS, INC.

 

         FIRST:   The name of this Corporation shall be:

 

                     CONTINENTAL EMBASSY ACQUISITIONS, INC.

 

         SECOND: Its registered office in the State of Delaware is to be located

at 1013 Centre Road, in the City of Wilmington, County of New Castle 19805 and

its registered agent at such address is Corporation Service Company.

 

         THIRD:   The purpose of the corporation shall be:

 

         To engage in any lawful act or activity for which corporations may be

         organized under the General Corporation Law of Delaware.

 

         FOURTH: The total number of shares of stock which the Corporation shaIl

have the authority to issue is:

 

         Fifty One Million (51,000,000) shares divided into Fifty Million

         (50,000,000) common shares with a par value of One-Tenth of One Cent

         ($.001) per share and One Million (1,000,000) Preferred shares with a

         par value of ($.001) per share.

 

         The Board of Directors is authorized, subject to limitations prescribed

         by law and the provisions of this Article, to provide for the issuance

         of the shares of preferred stock in series, and by filing a certificate

         pursuant to the applicable law of the State of Delaware, to establish

         from time to time the number of shares, to be included in each such

         series, and to fix the designations, powers, preferences and rights of

         the shares of each such series and the qualifications, limitations or

         restrictions thereof.

 

         FIFTH: The name and address of the incorporator is as follows:

 

                          Thomas G. Kimble

                          311 South State, Suite 440

                          Salt Lake City, Utah 84111

 

         SIXTH: The Board of Directors shall have the power to adopt, amend or

appeal the by-laws.

 

        SEVENTH: No director shall be personally liable to the Corporation or

its stockholders for monetary damages for any breach of fiduciary duty by such

director as a director. Notwithstanding the foregoing sentence, a director shall

be liable to the extent provided by applicable law, (i) for breach of the

director's duty of loyalty to the Corporation or its stockholders, (ii) for acts

or omissions not in good faith or which involve intentional misconduct or a

knowing violation of law, (iii) pursuant to Section 174 of the Delaware General

Corporation Law or (iv) for any transaction from which the director derived an

improper personal benefit. No amendment to or repeal of this Article Seventh

shall apply to or have any effect on the liability or alleged liability of any

director of the Corporation for or with respect to any acts or omissions of such

director occurring prior to such amendment.

 

         IN WITNESS WHEREOF, the undersigned, being the incorporator

hereinbefore named, has executed, signed and acknowledged this certificate of

incorporation this 10th day of November, 1995.

 

 

                                       /S/ THOMAS G. KIMBLE

                                       ------------------------------

                                       Thomas G. Kimble, Incorporator

 

 

 

 

                            CERTIFICATE OF AMENDMENT

                                       OF

                          CERTIFICATE OF INCORPORATION

                                       OF

                     CONTINENTAL EMBASSY ACQUISITIONS, INC.

                            (PURSUANT TO SECTION 242)

 

         Continental Embassy Acquisitions, Inc., a corporation organized and

existing under and by virtue of the General Corporation Law of the State of

Delaware,

 

        DOES HEREBY CERTIFY:

 

        1ST: That at a meeting of the Board of Directors of Continental Embassy

Acquisitions, Inc., resolutions were duly adopted setting forth a proposed

amendment of the Certificate of Incorporation of said corporation, declaring

said amendment to be advisable and advising the stockholders of said corporation

for consideration thereof. The resolution setting forth the proposed amendment

is as follows:

 

                  RESOLVED, that the Certificate of Incorporation of this

         Corporation be amended by changing the Article thereof numbered "FIRST"

         so that, as amended said Article shall be and read as follows:

 

         FIRST: The name of this Corporation shall be:

 

                           YOU BET INTERNATIONAL, INC.

 

        2ND. That thereafter, pursuant to resolution of its Board of Directors,

the stockholders of said corporation approved this amendment in accordance with

the General Corporation law of the State of Delaware wherein a majority of the

shares as required by statute in favor of the amendment.

 

        3RD. That said amendment was duly adopted in accordance with all

applicable provisions of the General Corporation Law of the State of Delaware.

 

        IN WITNESS WHEREOF, said Continental Embassy Acquisitions, Inc. has

caused this certificate to be signed by Glen R. Ulmer, its President and

Secretary, this 6th day of December, 1995.

 

                                 By:  /S/ GLEN R. ULMER

                                      ----------------------------------

                                      Glen R. Ulmer, President/Secretary

 

 

 

                               CERTIFICATE OF OWNERSHIP

                                     MERGING

                                YOU BET.COM INC.

                                      INTO

                           YOU BET INTERNATIONAL, INC.

 

         You Bet International, Inc., a corporation incorporated on the 13th day

of November, 1995 pursuant to the provisions of the General Corporation Law of

the State of Delaware;

 

         DOES HEREBY CERTIFY that this corporation owns 100% of the capital

stock of YOU BET.COM INC., a corporation incorparated on the 24th day of

December 1998, pursuant to the provisions of tha Delaware General Corporation

Law and that this corporation, by a resolution of its Board of Directors duly

adopted at a meeting held on the 19th day of January, 1999, determined to and

did merge into itself said YOU BET.COM INC. which resolution is in the following

words to wit:

 

         WHEREAS, this corporation lawfully owns 100% of the outstanding stock

of YOU BET.COM, INC. a corporation organized and existing under the laws of

Delaware, and

 

         WHEREAS this corporation desires to merge into itself YOU BET.COM INC.,

and to be possessed of all the estate, property, rights, privileges and

franchises of said corporation,

 

         NOW, THEREFORE, BE IT RESOLVED, that this corporation merge into itself

YOU BET.COM INC. and assumed all of its liabilities and obligations, and

 

         FURTHER RESOLVED, that each officer of this corporation be and hereby

is directed to make and execute a certificate of ownership setting forth a copy

of the resolution to merge YOU BET.COM INC. and assume its liabilities and

obligations, and the date of adoption thereof, and to file the same in the

office of the Secretary of State of Delaware, and certified copy thereof in the

office of the Recorder of Deeds of Kent County; and

 

         FURTHER RESOLVED, that the officers of the corporation be and they

hereby are authorized and directed to do all acts and things whatsoever, whether

within or without the State of Delaware; which may be in any way necessary or

proper to effect said merger.

 

         FURTHER RESOLVED, that the name of the surviving corporation will be

amended to be YOUBET.COM, INC.

 

         IN WITNESS WHEREOF, said You Bet International, Inc. has caused this

certificate to be signed by Gary N. Jacobs, an authorized officer this 19th day

of January 1999.

 

                                            By:    /S/ GARY N. JACOBS

                                                   ---------------------------

                                                   Gary N. Jacobs

                                                   Secretary

 

 

 

 

                            CERTFFICATE OF OWNERSHIP

                                     MERGING

                                 YOU BET!, INC.

                                      INTO

                                YOUBET.COM, INC.

 

         Youbet.com, Inc., a corporation incorporated on the 13th day of

November, 1995 pursuant to the provisions of the General Corporation Law of the

State of Delaware.

 

         DOES HEREBY CERTIFY that this corporation owns 100% of the capital

stock of You Bet!, Inc., a corporation incorporated on the 19th day of May 1989,

pursuant to the provisions of the Delaware General Corporation Law and that this

corporation, by a resolution of its Board of Directors duly adopted at a meeting

held on the 19th day of January, 1999, determined to and did merge into itself

said You Bet!, Inc. which resolution is the following words to wit:

 

         WHEREAS this corporation lawfully owns 100% of the outstanding stock of

You Bet!, Inc., a corporation organized and existing under the Laws of Delaware,

and

 

         WHEREAS this corporation desires to merge into itself You Bet!, Inc.,

and to be possessed of all the estate, property, rights, privileges and

franchises of said corporation,

 

         NOW, THEREFORE BE IT RESOLVED, that this corporation merge into itself

You Bet!, Inc. and assume all of its liabilities and obligations, and

 

         FURTHER RESOLVED, that each officer of this corporation be and hereby

is directed to make and execute a certificate of ownership setting forth a copy

of the resolution to merge You Bet!, Inc. and assume its liabilities and

obligations and the date of adoption thereof, and to file the same in the office

of the Secretary of State of Delaware, and a certified copy thereof in the

office of the Recorder of Deeds of Kent County; and

 

         FURTHER RESOLVED, that the officers of this corporation be and they

hereby are authorized and directed to do all acts and things whatsoever, whether

within or without the State of Delaware; which may be in any way necessary or

proper to effect said merger.

 

         IN WITNESS WHEREOF, said Youbet.com, Inc. has caused this certificate

to be signed by Gary N. Jacobs, an authorized officer this 4th day of February,

1999

 

                                                  By: /S/ GARY N. JACOBS

                                                      -------------------------

                                                  Gary N. Jacobs

                                                  Secretary

 

 

 

                            CERTIFICATE OF OWNERSHIP

                                     MERGING

                         MIDDLEWARE TELECOM CORPORATION

                                      INTO

                                YOUBET.COM, INC.

 

YouBet.Com, Inc., a corporation incorporated on the 13th day of November, 1995

pursuant to the provisions of the General Corporation Law of the State of

Delaware;

 

         DOES HEREBY CERTIFY that this corporation owns 100% of the capital

stock of Middleware Telecom Corporation, a corporation incorporated on the 28th

day of May 1993, pursuant to the provisions of the California General

Corporation Law and that this corporation, by a resolution of its Board of

Directors duly adopted at a meeting held on the 19th day of January, 1999,

determined to and did merge into itself said Middleware Telecom Corporation

which resolution is in the following words to wit:

 

         WHEREAS this corporation lawfully owns 100% of the outstanding stock of

Middleware Telecom Corporation, a corporation organized and existing under the

laws of Califomia, and

 

         WHEREAS this corporation desires to merge into itself Middleware

Telecom Corporation, and to be possessed of all the estate, property, rights,

privileges and franchises of said corporation,

 

         NOW, THEREFORE BE IT RESOLYED, that this corporation merge into itself

Middleware Telecom Corporation and assune all of its liabilities and

obligations, and

 

         FURTHER RESOLVED, that each officer of this corporation be and hereby

is directed to make and execute a certificate of ownership setting forth a copy

of the resolution to merge Middleware Telecom Corporation and assume its

liabilities and obligations, and the date of adoption thereof, and to file the

same in the office of the Secretary of State of Delaware and the Secretary of

State of California and a certified copy thereof in the office of the Recorder

of Deeds of Kent County; and

 

         FURTHER RESOLVED, that the officers of this corporation be and they

hereby are authorized and directed to do all acts and things whatsoever, whether

within or without the State of Delaware and California; which may be in any way

nccessary or proper to effect said merger.

 

         IN WITNESS WHEREOF, said YouBet.Com, Inc. has caused this certificate

to be signed by Gary Jacobs, an authorized officer this 29 day of March, 1999.

 

                                                By:       /S/ GARY JACOBS

                                                   --------------------------

                                                          Gary Jacobs

                                                          Secretary

 

 

 

 

CERTIFICATE OF AMENDMENT

OF THE

CERTIFICATE OF INCORPORATION

OF

YOUBET.COM, INC.

 

Pursuant to Section 242 of the

General Corporation Law of the State of Delaware

 

YOUBET.COM, INC. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify as follows:

 

FIRST:                      The name of the Corporation is Youbet.com, Inc.

 

SECOND:                 The Certificate of Incorporation of the Corporation is hereby amended by adding the following Article NINTH:

 

NINTH: RESTRICTIONS ON TRANSFERS

 

9.1           DEFINITIONS.  As used in this Article NINTH, the following capitalized terms have the following meanings when used herein with initial capital letters (and any references to any portions of Treasury Regulation § 1.382-2T shall include any successor provisions):

 

5-percent Transaction” means any Transfer described in clause (a) or (b) of Section 9.2.

 

5-percent Stockholder” means a Person or group of Persons that is a “5-percent shareholder” of the Corporation pursuant to Treasury Regulation § 1.382-2T(g).

 

Agent” has the meaning set forth in Section 9.5.

 

Board of Directors” or “Board” means the board of directors of the Corporation.

 

Code” means the United States Internal Revenue Code of 1986, as amended from time to time, and the rulings issued thereunder.

 

Common Stock” means any interest in Common Stock, par value $0.001 per share, of the Corporation that would be treated as “stock” of the Corporation pursuant to Treasury Regulation § 1.382-2T(f)(18).

 

Corporation Security” or “Corporation Securities” means (i) shares of Common Stock, (ii) shares of Preferred Stock (other than preferred stock described in Section 1504(a)(4) of the Code), (iii) warrants, rights, or options (including options within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v)) to purchase Securities of the Corporation, and (iv) any Stock.

 

Effective Date” means the date of filing of this Certificate of Amendment of Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware.

 

Excess Securities” has the meaning given such term in Section 9.4.

 

Expiration Date” means the earlier of (i) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that this Article NINTH is no longer necessary for the preservation of Tax Benefits, (ii) the beginning of a taxable year of the Corporation to which the Board of Directors determines that no Tax Benefits may be carried forward or (iii) such date as the Board of Directors shall fix in accordance with Section 9.12 of this Article NINTH.

 

Percentage Stock Ownership” means the percentage Stock Ownership interest of any Person or group (as the context may require) for purposes of Section 382 of the Code as determined in accordance with the Treasury Regulation § 1.382-2T(g), (h), (j) and (k) or any successor provision.

 

Person” means any individual, firm, corporation, partnership, limited liability company or other legal entity, and includes any successor (by merger or otherwise) of such entity; provided, however, that a Person shall not mean a Public Group.

 

Pre-existing 5-percent Stockholder” means (i) any Person that has filed a Schedule 13D or 13G with respect to the Corporation on or before the Effective Date and (ii) any “5-percent owner” or “higher tier entity” of any Person described in clause (i) within the meaning of Treasury Regulation § 1.382-2T(f)(10) and 1.382-2T(f)(14).

 

Prohibited Distributions” means any and all dividends or other distributions paid by the Corporation with respect to any Excess Securities received by a Purported Transferee.

 

Prohibited Transfer” means any Transfer or purported Transfer of Corporation Securities to the extent that such Transfer is prohibited and/or void under this Article NINTH.

 

Public Group” has the meaning set forth in Treasury Regulation § 1.382-2T(f)(13).

 

Purported Transferee” has the meaning set forth in Section 9.4.

 

Securities” and “Security” each has the meaning set forth in Section 9.7.

 

Stock” means any interest that would be treated as “stock” of the Corporation pursuant to Treasury Regulation § 1.382-2T(f)(18).

 

Stock Ownership” means any direct or indirect ownership of Stock, including any ownership by virtue of application of constructive ownership rules, with such direct, indirect, and constructive ownership determined under the provisions of Section 382 of the Code and the regulations thereunder.

 

Tax Benefits” means the net operating loss carryforwards, capital loss carryforwards, general business credit carryforwards, alternative minimum tax credit carryforwards and foreign tax credit carryforwards, as well as any loss or deduction attributable to a “net unrealized built-in loss” of the Corporation or any direct or indirect subsidiary thereof, within the meaning of Section 382 of the Code.

 

Transfer” means, any direct or indirect sale, transfer, assignment, conveyance, pledge or other disposition or other action taken by a person, other than the Corporation, that alters the Percentage Stock Ownership of any Person or group.  A Transfer also shall include the creation or grant of an option (including an option within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v)).  For the avoidance of doubt, a Transfer shall not include the creation or grant of an option by the Corporation, nor shall a Transfer include the issuance of Stock by the Corporation.

 

Transferee” means any Person to whom Corporation Securities are Transferred.

 

Treasury Regulations” means the regulations, including temporary regulations or any successor regulations promulgated under the Code, as amended from time to time.

 

9.2           TRANSFER AND OWNERSHIP RESTRICTIONS.  In order to preserve the Tax Benefits, from and after the Effective Date of this Article NINTH any attempted Transfer of Corporation Securities prior to the Expiration Date and any attempted Transfer of Corporation Securities pursuant to an agreement entered into prior to the Expiration Date, shall be prohibited and void ab initio (a) if the transferor is a 5-percent Stockholder or (b) to the extent that, as a result of such Transfer (or any series of Transfers of which such Transfer is a part), either (1) any Person or group of Persons would become a 5-percent Stockholder or (2) the Percentage Stock Ownership in the Corporation of any 5-percent Stockholder would be increased.

 

9.3           EXCEPTIONS.

 

(a)           Notwithstanding anything to the contrary herein, if a Transfer by (but not to) a Pre-existing 5-percent Stockholder otherwise would be prohibited by Section 9.2, such Transfer shall not be prohibited under Section 9.2 if both of the following conditions are met: (i) such Transfer does not increase the Percentage Stock Ownership of any 5-percent Stockholder or create a new 5-percent Stockholder, in each case other than a Public Group (including a new Public Group created under Treasury Regulation § 1.382-2T(j)(3)(i)), and (ii) the Stock that is the subject of the Transfer was acquired by such Pre-existing 5-percent Stockholder prior to the Effective Date.

 

(b)           The restrictions set forth in Section 9.2 shall not apply to an attempted Transfer that is a 5-percent Transaction if the transferor or the Transferee obtains the written approval of the Board of Directors or a duly authorized committee thereof.  As a condition to granting its approval pursuant to this Section 9.3, the Board of Directors, may, in its sole discretion, require (at the expense of the transferor and/or the Transferee) an opinion of counsel selected by the Board of Directors that the Transfer shall not result in the application of any Section 382 of the Code limitation on the use of the Tax Benefits; provided that the Board may grant such approval notwithstanding the effect of such approval on the Tax Benefits if it determines that the approval is or is reasonably likely to be in the best interests of the Corporation. The Board of Directors may impose such conditions, if any, that it deems reasonable and appropriate in connection with such approval, including, without limitation, restrictions on the ability of any Transferee to Transfer Stock acquired through a Transfer.  Approvals of the Board of Directors hereunder may be given prospectively or retroactively.  The Board of Directors, to the fullest extent permitted by law, may exercise the authority granted by this Article NINTH through duly authorized officers or agents of the Corporation.  Nothing in this Section 9.3 shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law.

 

9.4           EXCESS SECURITIES.

 

(a)           No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of such a Prohibited Transfer (the “Purported Transferee”) shall not be recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Corporation Securities which are the subject of the Prohibited Transfer (the “Excess Securities”).  Until the Excess Securities are acquired by another person in a Transfer that is not a Prohibited Transfer, the Purported Transferee shall not be entitled with respect to such Excess Securities to any rights of stockholders of the Corporation, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, and the Excess Securities shall be deemed to remain with the transferor unless and until the Excess Securities are transferred to the Agent pursuant to Section 9.5 or until an approval is obtained under Section 9.3(b). After the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, the Corporation Securities shall cease to be Excess Securities.  For this purpose, any Transfer of Excess Securities not in accordance with the provisions of this Section 9.4 or Section 9.5 shall also be a Prohibited Transfer.

 

(b)           The Corporation may require as a condition to the registration of the Transfer of any Corporation Securities or the payment of any distribution on any Corporation Securities that the proposed Transferee or payee furnish to the Corporation all information reasonably requested by the Corporation with respect to all of the direct or indirect ownership interests in such Corporation Securities.  The Corporation may make such arrangements or issue such instructions to its stock transfer agent as may be determined by the Board of Directors to be necessary or advisable to implement this Article NINTH, including, without limitation, authorizing such transfer agent to require an affidavit from a Purported Transferee regarding such Person’s actual and constructive ownership of stock and other evidence that a Transfer will not be prohibited by this Article NINTH as a condition to registering any transfer.

 

9.5           TRANSFER TO AGENT.  If the Board of Directors determines that a Transfer of Corporation Securities constitutes a Prohibited Transfer then, upon written demand by the Corporation sent within thirty days of the date on which the Board of Directors determines that the attempted Transfer would result in Excess Securities, the Purported Transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferee’s possession or control, together with any Prohibited Distributions, to an agent designated by the Board of Directors (the “Agent”). The Agent shall thereupon sell to a buyer or buyers, which may include the Corporation, the Excess Securities transferred to it in one or more arm’s-length transactions (on the public securities market on which such Excess Securities are traded, if possible, or otherwise privately); provided, however, that any such sale must not constitute a Prohibited Transfer and provided, further, that the Agent shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale within any specific time frame if, in the Agent’s discretion, such sale or sales would disrupt the market for the Corporation Securities or otherwise would adversely affect the value of the Corporation Securities. If the Purported Transferee has resold the Excess Securities before receiving the Corporation’s demand to surrender Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and shall be required to transfer to the Agent any Prohibited Distributions and proceeds of such sale, except to the extent that the Corporation grants written permission to the Purported Transferee to retain a portion of such sales proceeds not exceeding the amount that the Purported Transferee would have received from the Agent pursuant to Section 9.6 if the Agent rather than the Purported Transferee had resold the Excess Securities.

 

9.6           APPLICATION OF PROCEEDS AND PROHIBITED DISTRIBUTIONS.  The Agent shall apply any proceeds of a sale by it of Excess Securities and, if the Purported Transferee has previously resold the Excess Securities, any amounts received by it from a Purported Transferee, together, in either case, with any Prohibited Distributions, as follows: (a) first, such amounts shall be paid to the Agent to the extent necessary to cover all of its costs and expenses incurred in connection with its duties hereunder; (b) second, any remaining amounts shall be paid to the Purported Transferee, up to the amount paid by the Purported Transferee for the Excess Securities (or the fair market value at the time of the Transfer, in the event the purported Transfer of the Excess Securities was, in whole or in part, a gift, inheritance or similar Transfer) which amount shall be determined at the sole discretion of the Board of Directors; and (c) third, any remaining amounts shall be paid to one or more organizations qualifying under section 501(c)(3) of the Code (or any comparable successor provision) selected by the Board of Directors. The Purported Transferee of Excess Securities shall have no claim, cause of action or any other recourse whatsoever against any transferor of Excess Securities.  The Purported Transferee’s sole right with respect to such shares shall be limited to the amount payable to the Purported Transferee pursuant to this Section 9.6.  In no event shall the proceeds of any sale of Excess Securities pursuant to this Section 9.6 inure to the benefit of the Corporation or the Agent, except to the extent used to cover costs and expenses incurred by Agent in performing its duties hereunder.

 

9.7           MODIFICATION OF REMEDIES FOR CERTAIN INDIRECT TRANSFERS.  In the event of any Transfer which does not involve a transfer of securities of the Corporation within the meaning of Delaware law (“Securities,” and individually, a “Security”) but which would cause a 5-percent Stockholder to violate a restriction on Transfers provided for in this Article NINTH, the application of Section 9.5 and Section 9.6 shall be modified as described in this Section 9.7.  In such case, no such 5-percent Stockholder shall be required to dispose of any interest that is not a Security, but such 5-percent Stockholder and/or any Person whose ownership of Securities is attributed to such 5-percent Stockholder shall be deemed to have disposed of and shall be required to dispose of sufficient Securities (which Securities shall be disposed of in the inverse order in which they were acquired) to cause such 5-percent Stockholder, following such disposition, not to be in violation of this Article NINTH. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision, and such number of Securities that are deemed to be disposed of shall be considered Excess Securities and shall be disposed of through the Agent as provided in Sections 9.5 and 9.6, except that the maximum aggregate amount payable either to such 5-percent Stockholder, or to such other Person that was the direct holder of such Excess Securities, in connection with such sale shall be the fair market value of such Excess Securities at the time of the purported Transfer. All expenses incurred by the Agent in disposing of such Excess Stock shall be paid out of any amounts due such 5-percent Stockholder or such other Person.  The purpose of this Section 9.7 is to extend the restrictions in Sections 9.2 and 9.5 to situations in which there is a 5-percent Transaction without a direct Transfer of Securities, and this Section 9.7, along with the other provisions of this Article NINTH, shall be interpreted to produce the same results, with differences as the context requires, as a direct Transfer of Corporation Securities.

 

9.8           LEGAL PROCEEDINGS; PROMPT ENFORCEMENT.  If the Purported Transferee fails to surrender the Excess Securities or the proceeds of a sale thereof to the Agent within thirty days from the date on which the Corporation makes a written demand pursuant to Section 9.5 (whether or not made within the time specified in Section 9.5), then the Corporation shall promptly take all cost effective actions which it believes are appropriate to enforce the provisions hereof, including the institution of legal proceedings to compel the surrender.  Nothing in this Section 9.8 shall (a) be deemed inconsistent with any Transfer of the Excess Securities provided in this Article NINTH being void ab initio, (b) preclude the Corporation in its discretion from immediately bringing legal proceedings without a prior demand or (c) cause any failure of the Corporation to act within the time periods set forth in Section 9.5 to constitute a waiver or loss of any right of the Corporation under this Article NINTH.  The Board of Directors may authorize such additional actions as it deems advisable to give effect to the provisions of this Article NINTH.

 

9.9           LIABILITY.  To the fullest extent permitted by law, any stockholder subject to the provisions of this Article NINTH who knowingly violates the provisions of this Article NINTH and any Persons controlling, controlled by or under common control with such stockholder shall be jointly and severally liable to the Corporation for, and shall indemnify and hold the Corporation harmless against, any and all damages suffered as a result of such violation, including but not limited to damages resulting from a reduction in, or elimination of, the Corporation’s ability to utilize its Tax Benefits, and attorneys’ and auditors’ fees incurred in connection with such violation.

 

9.10           OBLIGATION TO PROVIDE INFORMATION.  As a condition to the registration of the Transfer of any Stock, any Person who is a beneficial, legal or record holder of Stock, and any proposed Transferee and any Person controlling, controlled by or under common control with the proposed Transferee, shall provide such information as the Corporation may request from time to time in order to determine compliance with this Article NINTH or the status of the Tax Benefits of the Corporation.

 

9.11           LEGENDS.  The Board of Directors may require that any certificates issued by the Corporation evidencing ownership of shares of Stock that are subject to the restrictions on transfer and ownership contained in this Article NINTH bear the following legend:

 

“THE CERTIFICATE OF INCORPORATION, AS AMENDED (THE “CERTIFICATE OF INCORPORATION”), OF THE CORPORATION CONTAINS RESTRICTIONS PROHIBITING THE TRANSFER (AS DEFINED IN THE CERTIFICATE OF INCORPORATION) OF COMMON STOCK OF THE CORPORATION (INCLUDING THE CREATION OR GRANT OF CERTAIN OPTIONS, RIGHTS AND WARRANTS) WITHOUT THE PRIOR AUTHORIZATION OF THE BOARD OF DIRECTORS OF THE CORPORATION (THE “BOARD OF DIRECTORS”) IF SUCH TRANSFER AFFECTS THE PERCENTAGE OF STOCK OF THE CORPORATION (WITHIN THE MEANING OF SECTION 382 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER), THAT IS TREATED AS OWNED BY A FIVE PERCENT SHAREHOLDER UNDER THE CODE AND SUCH REGULATIONS. IF THE TRANSFER RESTRICTIONS ARE VIOLATED, THEN THE TRANSFER WILL BE VOID AB INITIO AND THE PURPORTED TRANSFEREE OF THE STOCK WILL BE REQUIRED TO TRANSFER EXCESS SECURITIES (AS DEFINED IN THE CERTIFICATE OF INCORPORATION) TO THE CORPORATION’S AGENT.  IN THE EVENT OF A TRANSFER WHICH DOES NOT INVOLVE SECURITIES OF THE CORPORATION WITHIN THE MEANING OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE (“SECURITIES”) BUT WHICH WOULD VIOLATE THE TRANSFER RESTRICTIONS, THE PURPORTED TRANSFEREE (OR THE RECORD OWNER) OF THE SECURITIES WILL BE REQUIRED TO TRANSFER SUFFICIENT SECURITIES PURSUANT TO THE TERMS PROVIDED FOR IN THE CORPORATION’S CERTIFICATE OF INCORPORATION TO CAUSE THE FIVE PERCENT STOCKHOLDER TO NO LONGER BE IN VIOLATION OF THE TRANSFER RESTRICTIONS. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO THE HOLDER OF RECORD OF THIS CERTIFICATE A COPY OF THE CERTIFICATE OF INCORPORATION, CONTAINING THE ABOVE-REFERENCED TRANSFER RESTRICTIONS, UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS.”

 

The Board of Directors may also require that any certificates issued by the Corporation evidencing ownership of shares of Stock that are subject to conditions imposed by the Board of Directors under Section 9.3 of this Article NINTH also bear a conspicuous legend referencing the applicable restrictions.

 

9.12           AUTHORITY OF BOARD OF DIRECTORS.

 

(a)           The Board of Directors shall have the power to determine all matters necessary for assessing compliance with this Article NINTH, including, without limitation, (i) the identification of 5-percent Stockholders, (ii) whether a Transfer is a 5-percent Transaction or a Prohibited Transfer, (iii) the Percentage Stock Ownership in the Corporation of any 5-percent Stockholder, (iv) whether an instrument constitutes a Corporation Security, (v) the amount (or fair market value) due to a Purported Transferee pursuant to Section 9.6, and (vi) any other matters which the Board of Directors determines to be relevant; and the good faith determination of the Board of Directors on such matters shall be conclusive and binding for all the purposes of this Article NINTH. In addition, the Board of Directors may, to the extent permitted by law, from time to time establish, modify, amend or rescind by-laws, regulations and procedures of the Corporation not inconsistent with the provisions of this Article NINTH for purposes of determining whether any Transfer of Corporation Securities would jeopardize the Corporation’s ability to preserve and use the Tax Benefits and for the orderly application, administration and implementation of this Article NINTH.

 

(b)           Nothing contained in this Article NINTH shall limit the authority of the Board of Directors to take such other action to the extent permitted by law as it deems necessary or advisable to protect the Corporation and its stockholders in preserving the Tax Benefits.  Without limiting the generality of the foregoing, in the event of a change in law making one or more of the following actions necessary or desirable, the Board of Directors may, by adopting a written resolution, (i) accelerate or extend the Expiration Date, (ii) modify the ownership interest percentage in the Corporation or the Persons or groups covered by this Article NINTH, (iii) modify the definitions of any terms set forth in this Article NINTH or (iv) modify the terms of this Article NINTH as appropriate, in each case, in order to prevent an ownership change for purposes of Section 382 of the Code as a result of any changes in applicable Treasury Regulations or otherwise; provided, however, that the Board of Directors shall not cause there to be such acceleration, extension or modification unless it determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the Tax Benefits or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefits. Stockholders of the Corporation shall be notified of such determination through a filing with the Securities and Exchange Commission or such other method of notice as the Secretary of the Corporation shall deem appropriate.

 

(c)           In the case of an ambiguity in the application of any of the provisions of this Article NINTH, including any definition used herein, the Board of Directors shall have the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge.  In the event this Article NINTH requires an action by the Board of Directors but fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Article NINTH.  All such actions, calculations, interpretations and determinations which are done or made by the Board of Directors in good faith shall be conclusive and binding on the Corporation, the Agent, and all other parties for all other purposes of this Article NINTH.  The Board of Directors may delegate all or any portion of its duties and powers under this Article NINTH to a committee of the Board of Directors as it deems necessary or advisable and, to the fullest extent permitted by law, may exercise the authority granted by this Article NINTH through duly authorized officers or agents of the Corporation.  Nothing in this Article NINTH shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law.

 

9.13           RELIANCE.  To the fullest extent permitted by law, the Corporation and the members of the Board of Directors shall be fully protected in relying in good faith upon the information, opinions, reports or statements of the chief executive officer, the chief financial officer, the chief accounting officer or the corporate controller of the Corporation or of the Corporation’s legal counsel, independent auditors, transfer agent, investment bankers or other employees and agents in making the determinations and findings contemplated by this Article NINTH, and the members of the Board of Directors shall not be responsible for any good faith errors made in connection therewith. For purposes of determining the existence and identity of, and the amount of any Corporation Securities owned by any stockholder, the Corporation is entitled to rely on the existence and absence of filings of Schedule 13D or 13G under the Securities and Exchange Act of 1934, as amended (or similar filings), as of any date, subject to its actual knowledge of the ownership of Corporation Securities.

 

9.14           BENEFITS OF THIS ARTICLE NINTH.  Nothing in this Article NINTH shall be construed to give to any Person other than the Corporation or the Agent any legal or equitable right, remedy or claim under this Article NINTH.  This Article NINTH shall be for the sole and exclusive benefit of the Corporation and the Agent.

 

9.15           SEVERABILITY.  The purpose of this Article NINTH is to facilitate the Corporation’s ability to maintain or preserve its Tax Benefits.  If any provision of this Article NINTH or the application of any such provision to any Person or under any circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Article NINTH.

 

9.16           WAIVER.  With regard to any power, remedy or right provided herein or otherwise available to the Corporation or the Agent under this Article NINTH, (1) no waiver will be effective unless expressly contained in a writing signed by the waiving party; and (2) no alteration, modification or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.

 

THIRD:                     The amendment to the Certificate of Incorporation of the Corporation effected by this Certificate was duly authorized by the Board of Directors and the stockholders of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed and acknowledged by its Secretary on this 1st day of June, 2009.

 

 

YOUBET.COM, INC.

 

 

/s/ Daniel Perini

By:

Daniel Perini

Title:

Secretary