Exhibit 10.5
MODIFICATION AGREEMENT
     THIS MODIFICATION AGREEMENT effective as of 4:00 p.m. (Baltimore time) on
June 30, 2006 (this “Agreement”) is made by and among MANUFACTURERS AND TRADERS
TRUST COMPANY (the “Bank”), UNITED TOTE COMPANY (the “Borrower”), and
YOUBET.COM, INC. (“Youbet”), and UT GAMING, INC. (“UT Gaming” and together with
Youbet, collectively, the “Guarantors” and individually, a “Guarantor”).
RECITALS
     A. Pursuant to a Credit Agreement dated September 5, 2003 (the “Closing
Date”), the Bank made available to the Borrower (a) an equipment line of credit
in the original maximum principal amount of $5,000,000 (the “Equipment Line of
Credit”), (b) a revolving credit facility in the original maximum principal
amount of $2,000,000 (the “Revolving Credit Facility”), and (c) a term loan in
the original principal amount of $580,000 (the “Term Loan”, which together with
the Equipment Line of Credit and the Revolving Credit Facility are hereinafter
referred to as the “Credit Facilities”) (such credit agreement, as the same may
from time to time be amended, restated, supplemented, or otherwise modified, is
hereinafter called the “Credit Agreement”). Pursuant to a First Amendment to
Credit Agreement dated as of April 23, 2004 (the “First Amendment”), a Second
Amendment to Credit Agreement dated as of June 13, 2005 (the “Second
Amendment”), and a Third Amendment to Credit Agreement dated as of August 22,
2005, (the “Third Amendment”), the Bank and the Borrower have previously agreed,
among other things, to temporarily increase the maximum amount of the Revolving
Credit Facility to $3,000,000, to increase the maximum principal amount of the
Equipment Line of Credit to $15,500,000, and to amend certain other terms and
conditions of the Credit Agreement.
     B. Pursuant to the terms of the Credit Agreement, the Bank’s obligation to
make loans under the Equipment Line of Credit (each, an “Equipment Loan”)
terminated on September 5, 2005. The Borrower’s obligation to repay each
Equipment Loan, together with interest thereon, is evidenced by a separate
promissory note in the principal amount of the applicable Equipment Loan and
made payable to the order of the Bank (each such promissory note, as the same
may from time to time be amended, restated, supplemented or otherwise modified,
being herein called an “Equipment Note”). The Borrower’s obligation to repay all
sums advanced to it from time to time under the Revolving Credit Facility,
together with interest thereon, is evidenced by the Borrower’s First Amended and
Restated Revolving Credit Note dated April 23, 2004, in the principal amount of
$3,000,000 and made payable to the order of the Bank (as the same may from time
to time be renewed, extended, modified, amended, replaced or restated, the
“Revolving Credit Note”). The Borrower’s obligation to repay the Term Loan, with
interest, is evidenced by the Borrower’s Libor Term Note dated the Closing Date
in the principal amount of $580,000 and made payable to the order of the Bank
(as the same may from time to time be amended, restated, supplemented or
otherwise modified, the “Term Note”). The Equipment Notes, the Revolving Credit
Note and the Term Note are sometimes hereinafter called collectively, the
“Notes”).

 

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     C. Subsequent thereto, the parties entered into an ISDA Master Agreement
dated as of March 24, 2005, to effectuate one or more interest rate hedging
agreements (the “ISDA Master Agreement”). As of the date hereof, there is one
Transaction (as defined therein) outstanding.
     D. To induce the Bank to make the Credit Facilities and other financial
accommodations available to the Borrower, the Guarantors agreed to
unconditionally and irrevocably guarantee the repayment in full of all sums due
by the Borrower to the Bank, pursuant to (a) a Continuing Guaranty dated
February 9, 2006 from Youbet, Inc to the Bank, and (b) a Continuing Guaranty
dated February 9, 2006 from UT Gaming, Inc. to the Bank (such guaranties, as the
same may from time to time be amended, restated, supplemented, or otherwise
modified, being hereinafter called collectively the “Guaranties”).
     E. The Borrower’s obligations in connection with the Credit Facilities are
secured by, among other things, the collateral (collectively, the “Collateral”)
granted and described in (a) that certain General Security Agreement dated as of
the Closing Date from the Borrower to the Bank (as the same may from time to
time be amended, restated, supplemented, or otherwise modified, the “Security
Agreement”), (b) that certain Securities Pledge Agreement dated as of the
Closing Date from the Borrower, United Tote Canada, Inc., and Dynatote of
Pennsylvania, Inc. (as the same may from time to time be amended, restated,
supplemented, or otherwise modified, the “Securities Pledge Agreement”),
(c) that certain Trademark Security Agreement dated as of the Closing Date from
the Borrower to the Bank (as the same may from time to time be amended,
restated, supplemented, or otherwise modified, the “Trademark Security
Agreement”) and (d) that certain Mortgage dated as of the Closing Date from the
Borrower to the Bank (as the same may from time to time be amended, restated,
supplemented, or otherwise modified, the “Mortgage”).
     F. As used herein, the term “Transaction Documents” means, collectively,
the Credit Agreement, the Notes, the ISDA Master Agreement and all Confirmations
executed pursuant thereto, the Guaranties, the Security Agreement, the
Securities Pledge Agreement, the Trademark Security Agreement, the Mortgage, and
all other documents now or hereafter executed and delivered to evidence, secure,
or guarantee, or in connection with, any or all of the Credit Facilities, and
the term “Obligations” means the unpaid principal balance of each of the Credit
Facilities, together with all accrued and unpaid interest thereon and all of the
other obligations owed by the Borrower to the Bank under and pursuant to the
Transaction Documents.
     G. Pursuant to Section 8 of the Credit Agreement, the Borrower agreed to
comply with and be bound by certain financial covenants set forth therein.
     H. Pursuant to Section 9 of the Credit Agreement, the parties agreed that
any of the following events or conditions, among others, shall constitute an
“Event of Default” thereunder:

  (i)   default, breach, failure or violation by the Borrower in the
performance, observance or compliance with any covenant, obligation, term or
condition contained in Section 7 or Section 8 of the Credit Agreement; and

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  (ii)   the occurrence of a “Change of Control” with respect to the Borrower.

As set forth in the Credit Agreement, “Change of Control” means “with respect to
any person, (i) a merger, consolidation, reorganization, recapitalization or
share or interest exchange, sale or transfer or any other transaction or series
of transactions in which the stockholders, managers, partners, owners or
interest holders immediately prior to such transaction or series of transactions
receive, in exchange for the stock or interests owned by them, cash, property or
securities of the resulting or surviving entity or any affiliate thereof, and as
a result thereof, persons who, individually or in the aggregate, were holders of
50% or more of its voting stock, securities or equity, partnership or ownership
interests immediately prior to such transaction or series of transactions hold
less than 50% of the voting stock, securities or other equity, partnership or
ownership interests of the resulting or surviving entity, or such affiliate
thereof, calculated on a fully diluted basis, or (ii) a direct or indirect sale,
transfer or other conveyance or disposition, in any single transaction or series
of transactions, of all or substantially all of such person’s assets.”
     I. On or about November 30, 2005, the Borrower, UT Group, LLC (the former
shareholder of the Borrower), Youbet and UT Gaming entered into a Stock Purchase
Agreement (the “Stock Purchase Agreement”), pursuant to which UT Gaming agreed
to purchase from UT Group, LLC 100% of the Borrower’s outstanding capital stock.
On February 10, 2006, the parties consummated said sale (the “Change of Control
Date”).
     J. Prior to the Change of Control Date, the Borrower notified the Bank of
the intended sale of its stock, and, notwithstanding the fact that such sale
would constitute a “Change of Control” thereby giving rise to an Event of
Default, requested that the Bank temporarily forbear from exercising its various
rights and remedies as a result of the occurrence of such Event of Default (the
“Acknowledged Default”).
     K. On February 9, 2006, the Bank, by a letter agreement with the Obligors,
agreed to forbear until April 30, 2006 (the “Original Forbearance Period”) from
exercising its various rights and remedies as a result of the Acknowledged
Default or any Event of Default arising as a result of a breach of Section 8 of
the Credit Agreement.
     L. Pursuant to Section 6 of the Credit Agreement, the Borrower is required
to deliver to the Bank each quarter a quarterly compliance certificate signed by
the Borrower’s chief financial officer or such other person responsible for the
financial management of the Borrower, (A) setting forth the computation required
to establish the Borrower’s compliance with each financial covenant during such
period, (B) stating that the signer of the certificate has reviewed the Credit
Agreement and the operations and conditions (financial or other) of the Borrower
during the relevant period, and (C) stating that no Event of Default has
occurred during this period, or if an Event of Default did occur, describing its
nature, the date(s) of its occurrence or period of existence and what action the
Borrower has taken with respect thereto.
     M. To date, the Bank has yet to receive the quarterly compliance
certificate due from the Borrower with respect to the quarterly period ending
March 31, 2006 (the “Additional Known Default”).

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     N. On April 19, 2006, the Bank issued a letter to Youbet wherein the Bank
agreed to extend the Original Forbearance Period through June 30, 2006 (the
Original Forbearance Period, as extended thereby, the “Forbearance Period”).
     O. The Bank asserts that certain other events of default have occurred
under certain of the covenants contained in the Credit Agreement, all as more
particularly identified in that certain letter dated May 22, 2006 from the Bank
to the Borrower, such additional defaults, together with (i) any additional
existing events of default under Section 6(a)(i), 6(a)(ii), 6(a)(iii), 6(e),
6(f), 8(a), and Additional Financial Covenants (§8) of the Credit Agreement,
(ii) the Acknowledged Default and Additional Known Default being hereinafter
referred to as the “Existing Defaults”).
     P. Upon expiration of the Forbearance Period, absent further agreement, the
Bank has the right to pursue its various rights and remedies under the
Transaction Documents.
     Q. Borrower and the Guarantors (hereinafter collectively referred to as the
“Obligors”) have now requested that the Bank, among other things, (a) waive the
Existing Defaults and, (b) modify certain other terms and conditions of the
Transaction Documents. The Bank is willing to grant the Obligors’ request,
subject to the terms and conditions hereinafter set forth.
     NOW, THEREFORE, in consideration of the premises and of the representations
and mutual agreements made herein and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS; EFFECTIVE DATE
     Section 1.1. Defined Terms. Capitalized terms used herein and in the
Preamble shall have the meanings given to such terms in the Recitals. All other
capitalized terms used herein and not defined shall have the meanings given to
such terms in the Credit Agreement.
     Section 1.2. Effective Date. This Agreement shall become effective as of
4:00 p.m. (Baltimore time) on June 30, 2006 (referred to herein as the
“Effective Date”) if and only if Obligors shall not have indefeasibly satisfied
in full all Obligations prior to that time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
     Section 2.1. Acknowledgments of the Borrower. The Borrower hereby
acknowledges that:
          a. The Recitals set forth above are true and complete in all respects
and are incorporated by reference herein.

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          b. As of the date hereof, by virtue of the Acknowledged Default and
Additional Known Default, the Borrower is currently in default of its
Obligations under one or more of the Transaction Documents.
          c. As of June 20, 2006, the Borrower owed the Bank, (i) pursuant to
the terms of the Equipment Notes, $11,404,802.95, consisting of $11,369,309.61
in principal, $35,493.34 in accrued but unpaid interest, plus fees, costs and
other expenses, (ii) pursuant to the terms of the Revolving Credit Note,
$1,327,767.97, consisting of $1,320,992.12 in principal, $6,775.85 in accrued
but unpaid interest, plus fees, costs and other expenses and (iii) pursuant to
the terms of the Term Note, $501,931.76, consisting of $500,249.89 in principal,
$1,681.87 in accrued but unpaid interest, plus fees, costs and other expenses.
          d. The Borrower has no defenses, affirmative or otherwise, rights of
setoff, rights of recoupment, claims, counterclaims, actions or causes of action
of any kind or nature whatsoever against the Bank or any past, present or future
agent, attorney, legal representative, predecessor-in-interest, affiliate,
successor, assign, employee, director or officer of the Bank (collectively, the
“Bank Group”), directly or indirectly, arising out of, based upon, or in any
manner connected with, any transaction, event, circumstance, action, failure to
act, or occurrence of any sort or type, whether known or unknown, which
occurred, existed, was taken, permitted, or began prior to the execution of this
Agreement and accrued, existed, was taken, permitted or begun in accordance
with, pursuant to, or by virtue of the Obligations or any of the terms or
conditions of the Transaction Documents, or which directly or indirectly relate
to or arise out of or in any manner are connected with the Obligations or any of
the Transaction Documents; TO THE EXTENT ANY SUCH DEFENSES, AFFIRMATIVE OR
OTHERWISE, RIGHTS OF SETOFF, RIGHTS OF RECOUPMENT, CLAIMS, COUNTERCLAIMS,
ACTIONS OR CAUSES OF ACTION EXIST, SUCH DEFENSES, RIGHTS, CLAIMS, COUNTERCLAIMS,
ACTIONS AND CAUSES OF ACTION ARE HEREBY FOREVER WAIVED, DISCHARGED AND RELEASED.
          e. The Borrower has freely and voluntarily entered into this Agreement
after an adequate opportunity and sufficient period of time to review, analyze
and discuss all terms and conditions of this Agreement and all factual and legal
matters relevant hereto with counsel freely and independently chosen by them.
The Borrower further acknowledges that it has actively and with full
understanding participated in the negotiation of this Agreement after
consultation and review with its counsel and that this Agreement has been
negotiated, prepared and executed without fraud, duress, undue influence or
coercion of any kind or nature whatsoever having been exerted by or imposed upon
any party to this Agreement.
          f. As of the date hereof, there are no proceedings or investigations
pending or, so far as the Borrower knows, threatened against the Borrower,
before any court or arbitrator or any governmental, administrative or other
judicial authority or agency, in each case, which would prohibit or cause a
default under or in any way prevent the execution, delivery, performance,
compliance or observance of any of the terms or conditions of this Agreement.

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          g. There is no statute, rule, regulation, order or judgment, no
charter, by-law, operating agreement, or preference stock provision of the
Borrower, and no provision of any mortgage, indenture, contract or other
agreement binding on the Borrower or any of its properties which would prohibit
or cause a default under or in any way prevent the execution, delivery,
performance, compliance or observance of any of the terms or conditions of this
Agreement.
          h. The Borrower has not, voluntarily or involuntarily, granted any
liens or security interests to any creditor not previously disclosed to the Bank
in writing on or before the date of this Agreement or otherwise taken any action
or failed to take any action which could or would impair, change, jeopardize or
otherwise adversely affect the priority, perfection, validity or enforceability
of any liens or securing interests securing all or any portion of the
Obligations or the priority or validity of the Bank’s claims with respect to the
Obligations relative to any other creditor of the Borrower.
          i. The Borrower has the full legal right, power and authority to enter
into and perform its obligations under this Agreement and any other documents
executed in connection herewith (collectively, the “Modification Documents”),
and the execution and delivery of this Agreement and the other Modification
Documents by the Borrower and the consummation by the Borrower of the
transactions contemplated hereby and thereby and performance of its obligations
hereunder and thereunder have been duly authorized by all appropriate action
(corporate or otherwise).
          j. This Agreement and each of the other Modification Documents to
which the Borrower is party constitutes the valid, binding and enforceable
agreement of the Borrower, enforceable against the Borrower in accordance with
the terms thereof.
     Section 2.2. Acknowledgments of the Guarantors. The Guarantors hereby
acknowledge that:
          a. The Recitals set forth above are true and complete in all respects
and incorporated by reference herein.
          b. As of the date hereof, by virtue of the Acknowledged Defaults and
Additional Known Default, the Guarantors are currently in default of their
Obligations under the Transaction Documents.
          c. The Guarantors acknowledge that they have no defenses, affirmative
or otherwise, rights of setoff, rights of recoupment, claims, counterclaims,
actions or causes of action of any kind or nature whatsoever against the Bank or
any of the Bank Group, directly or indirectly, arising out of, based upon, or in
any manner connected with, any transaction, event, circumstance, action, failure
to act, or occurrence of any sort or type, whether known or unknown, which
occurred, existed, was taken, permitted, or began prior to the execution of this
Agreement and accrued, existed, was taken, permitted or begun in accordance
with, pursuant to, or by virtue of the Obligations or any of the terms or
conditions of the Transaction Documents, or which directly or indirectly relate
to or arise out of or in any manner are connected with the Obligations or any of
the Transaction Documents; TO THE EXTENT ANY SUCH DEFENSES,

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AFFIRMATIVE OR OTHERWISE, RIGHTS OF SETOFF, RIGHTS OF RECOUPMENT, CLAIMS,
COUNTERCLAIMS, ACTIONS OR CAUSES OF ACTION EXIST, SUCH DEFENSES, RIGHTS, CLAIMS,
COUNTERCLAIMS, ACTIONS AND CAUSES OF ACTION ARE HEREBY FOREVER WAIVED,
DISCHARGED AND RELEASED.
          d. The Guarantors have freely and voluntarily entered into this
Agreement after an adequate opportunity and sufficient period of time to review,
analyze and discuss all terms and conditions of this Agreement and all factual
and legal matters relevant hereto with counsel freely and independently chosen
by the Guarantors. The Guarantors further acknowledge that they have actively
and with full understanding participated in the negotiation of this Agreement
after consultation and review with their counsel and that this Agreement has
been negotiated, prepared and executed without fraud, duress, undue influence or
coercion of any kind or nature whatsoever having been exerted by or imposed upon
any party to this Agreement.
          e. As of the date hereof, there are no proceedings or investigations
pending or, so far as any Guarantor knows, threatened against any Guarantor,
before any court or arbitrator or any governmental, administrative or other
judicial authority or agency, in each case, which would prohibit or cause a
default under or in any way prevent the execution, delivery, performance,
compliance or observance of any of the terms or conditions of this Agreement.
          f. There is no statute, rule, regulation, order or judgment, no
charter , bylaw, or preference stock provision, and no provision of any
mortgage, indenture, contract or other agreement binding on any Guarantor or any
of its or their properties which would prohibit or cause a default under or in
any way prevent the execution, delivery, performance, compliance or observance
of any of the terms or conditions of this Agreement.
          g. No Guarantor has, voluntarily or involuntarily, granted any liens
or security interests to any creditor not previously disclosed to the Bank in
writing on or before the date of this Agreement or otherwise taken any action or
failed to take any action which could or would impair, change, jeopardize or
otherwise adversely affect the priority, perfection, validity or enforceability
of any liens or securing interests securing all or any portion of the
Obligations or the priority or validity of the Bank’s claims with respect to the
Obligations relative to any other creditor of any of the Guarantors.
          h. The Guarantors have the full legal right, power and authority to
enter into and perform their obligations under this Agreement and any other
Modification Documents, and the execution and delivery of this Agreement and the
other Modification Documents by the Borrower and the consummation by the
Borrower of the transactions contemplated hereby and thereby and performance of
its obligations hereunder and thereunder have been duly authorized by all
appropriate action (corporate or otherwise).
          i. This Agreement constitutes the valid, binding and enforceable
agreement of each Guarantor, enforceable against each Guarantor, in accordance
with its terms.

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ARTICLE III
COVENANTS AND AMENDMENTS
     In consideration of the Bank’s agreement to enter into this Agreement, the
Obligors hereby agree with the Bank as follows:
     Section 3.1. Amendments to Credit Agreement. The Credit Agreement is hereby
amended as follows:
          a. The definition of “Maturity Date” set forth in Section 1(cc)
thereof is hereby deleted in its entirety, and the following inserted in lieu
thereof:
               “cc. “Maturity Date “ means August 31, 2006”.
          b. The third sentence of Section 2(f) is hereby deleted, and the
following is inserted in lieu thereof:
“In addition, notwithstanding anything to the contrary contained herein or in
the Equipment Notes, the Revolving Note or the Term Note (each, a “Note” and
collectively, the “Notes”), immediately upon the occurrence of an Event of
Default, the interest rate payable on each of the Notes shall automatically
increase to the default rate provided in the applicable Note, or, if no such
default rate is specified, to a rate equal to 2.5 percentage points above the
otherwise applicable interest rate, and any judgment entered hereon or thereon
or otherwise in connection with any amounts due hereunder shall bear interest at
such default rate of interest.”
          c. The Section entitled “Additional Financial Covenants” in the
Schedule to the Credit Agreement is hereby deleted in its entirety.
          d. Section 8A. is hereby deleted, and the following is hereby inserted
in lieu thereof:
“A. The Borrower shall maintain Tangible Net Worth of not less than $7,600,000,
as measured quarterly at the end of each quarter.”
          e. Section 9(a)(ii) is amended by deleting therefrom the words “which
is not cured within fifteen (15) days of the date when the Borrower knew or
should have known of such default”.

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          f. The following paragraph is hereby added to the end of Section 9(b):
     CONFESSION OF JUDGMENT. AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT, THE
BORROWER HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY THE BANK OR CLERK OF ANY
COURT OF RECORD TO APPEAR FOR IT IN ANY COURT OF RECORD AND TO CONFESS JUDGMENT
AGAINST IT WITHOUT PRIOR NOTICE OR A PRIOR HEARING, IN FAVOR OF THE BANK FOR AND
IN THE AMOUNT OF THE PRINCIPAL BALANCE OF THE NOTES THEN OUTSTANDING PLUS
INTEREST ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS THEN DUE AND PAYABLE
HEREUNDER, COSTS OF SUIT AND AN ATTORNEY’S FEE OF THE GREATER OF 10% OF SUCH
SUMS OR $1,000 (BUT NOT TO EXCEED THE MAXIMUM AMOUNT PERMITTED BY APPLICABLE
LAW). THE AUTHORITY AND POWER TO APPEAR FOR AND TO ENTER JUDGMENT AGAINST THE
BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY
IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
ENTERED PURSUANT THERETO. SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR
MORE OCCASIONS, FROM TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS
OFTEN AS THE BANK SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF WHICH THIS NOTE
SHALL BE A SUFFICIENT WARRANT. THE BORROWER HEREBY FOREVER WAIVES AND RELEASES
ALL ERRORS IN SAID PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY
AND ALL APPRAISEMENT, STAY OR EXCEPTION LAWS OF ANY STATE NOW IN FORCE OR
HEREAFTER ENACTED IN TRUST ON SUCH JUDGMENT THAT ACCRUE AT THE DEFAULT RATE.
     Section 3.2. Amendments to Equipment Notes. Each Equipment Line of Credit
Term Note is hereby amended as follows:
          a. The definition of “Maturity Date” as set forth in Section 1.i.
thereof is hereby deleted in its entirety, and the following inserted in lieu
thereof.
               “i. “Maturity Date” is August 31, 2006”.

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          b. Notwithstanding anything contained in Section 2.d. thereof to the
contrary, the Note shall mature and all sums due thereunder shall be due and
payable in full on the Maturity Date.
     Section 3.3. Amendments to Revolving Credit Note. The Revolving Credit Note
is hereby amended as follows:
          a. The following paragraph is hereby added at the end of the Revolving
Credit Note:
     11. CONFESSION OF JUDGMENT. AFTER MATURITY OF THIS NOTE (WHETHER BY
ACCELERATION, DECLARATION, EXTENSION OR OTHERWISE), THE BORROWER HEREBY
AUTHORIZES ANY ATTORNEY DESIGNATED BY THE BANK OR CLERK OF ANY COURT OF RECORD
TO APPEAR FOR IT IN ANY COURT OF RECORD AND TO CONFESS JUDGMENT AGAINST IT
WITHOUT PRIOR NOTICE OR A PRIOR HEARING, IN FAVOR OF THE BANK FOR AND IN THE
AMOUNT OF THE PRINCIPAL BALANCE OF THIS NOTE THEN OUTSTANDING PLUS INTEREST
ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS THEN DUE AND PAYABLE HEREUNDER,
COSTS OF SUIT AND AN ATTORNEY’S FEE OF THE GREATER OF 10% OF SUCH SUMS OR $1,000
(BUT NOT TO EXCEED THE MAXIMUM AMOUNT PERMITTED BY APPLICABLE LAW). THE
AUTHORITY AND POWER TO APPEAR FOR AND TO ENTER JUDGMENT AGAINST THE BORROWER
SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT
EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT
THERETO. SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS,
FROM TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS THE BANK
SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF WHICH THIS NOTE SHALL BE A
SUFFICIENT WARRANT. THE BORROWER HEREBY FOREVER WAIVES AND RELEASES ALL ERRORS
IN SAID PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY AND ALL
APPRAISEMENT, STAY OR EXCEPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER
ENACTED IN TRUST ON SUCH JUDGMENT THAT ACCRUE AT THE DEFAULT RATE.

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     Section 3.4. Amendments to Term Note. The Term Note is hereby amended as
follows:
          a. Section 1(i) of the Term Note is hereby deleted in its entirety,
and the following inserted in lieu thereof:
               “i. “Maturity Date” is August 31, 2006.”
          b. The following paragraph is hereby added at the end of the Term
Note:
     12. CONFESSION OF JUDGMENT. AFTER MATURITY OF THIS NOTE (WHETHER BY
ACCELERATION, DECLARATION, EXTENSION OR OTHERWISE), THE BORROWER HEREBY
AUTHORIZES ANY ATTORNEY DESIGNATED BY THE BANK OR CLERK OF ANY COURT OF RECORD
TO APPEAR FOR IT IN ANY COURT OF RECORD AND TO CONFESS JUDGMENT AGAINST IT
WITHOUT PRIOR NOTICE OR A PRIOR HEARING, IN FAVOR OF THE BANK FOR AND IN THE
AMOUNT OF THE PRINCIPAL BALANCE OF THIS NOTE THEN OUTSTANDING PLUS INTEREST
ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS THEN DUE AND PAYABLE HEREUNDER,
COSTS OF SUIT AND AN ATTORNEY’S FEE OF 10% OF SUCH SUMS OR $1,000 (BUT NOT TO
EXCEED THE MAXIMUM AMOUNT PERMITTED BY APPLICABLE LAW). THE AUTHORITY AND POWER
TO APPEAR FOR AND TO ENTER JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED
BY ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND
SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH
AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS, FROM TIME TO
TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS THE BANK SHALL DEEM
NECESSARY OR DESIRABLE, FOR ALL OF WHICH THIS NOTE SHALL BE A SUFFICIENT
WARRANT. THE BORROWER HEREBY FOREVER WAIVES AND RELEASES ALL ERRORS IN SAID
PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY AND ALL
APPRAISEMENT, STAY OR EXCEPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER
ENACTED IN TRUST ON SUCH JUDGMENT THAT ACCRUE AT THE DEFAULT RATE.

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     Section 3.5. Covenants of the Obligors.
          a. Inspection. During the period from the date hereof until all
Obligations have been repaid in full, the Borrower shall permit the Bank, by its
representatives and agents, upon one day’s prior notice and during normal
business hours, to perform inspections or field audits of any of the properties,
books and financial records of the Borrower to examine and make copies of the
books of accounts and other financial records of the Borrower, and to discuss
the affairs, finances and accounts of the Borrower with, and to be advised as to
the same by, the Borrower (or its representatives) at such reasonable times and
intervals as the Bank may designate. In connection with the foregoing, the Bank
and its representatives and agents, at the expense of the Borrower, shall have
the right to (i) enter any business premises of the Borrower or any other
premises where the Collateral and the records relating thereto may be located
and to audit, appraise, examine and inspect the Borrower’s records and to make
extracts therefrom and copies thereof, and (ii) verify under reasonable
procedures the validity, amount, quality, quantity, value and condition of, and
any other matter relating to Collateral, including contacting account debtors or
any person possessing any of such Collateral. The Borrower shall pay all
reasonable costs and expenses related to any field audits or inspections
performed by or on behalf of the Bank.
          b. Equipment Line of Credit Facility; Strict Compliance with
Transaction Documents. The Borrower acknowledges that the Bank is under no
obligation to make any further advances under the Equipment Line of Credit. The
Bank shall continue to make such advances under the Revolving Credit Facility,
up to the maximum amount at any one time outstanding not to exceed the Revolver
Borrowing Capacity (as defined in the Credit Agreement) subject to the terms and
conditions set forth in the Credit Agreement, as amended, only so long as the
Borrower shall be in strict compliance with the provisions of each of the
Transaction Documents and no Event of Default (as defined in the Credit
Agreement) or event which, with the passage of time or the giving of notice or
both, shall have occurred and be continuing.
          c. Swap Agreements. If not previously instructed by the Borrower to do
so, the Borrower hereby instructs the Bank to terminate all swap and other
interest rate hedging agreements between the Bank and the Borrower with respect
to, or executed in connection with, the Obligations. Any amounts owed to
Borrower as a result of such termination shall be applied to the remaining
balances due under one or more of the Equipment Notes (as selected by the Bank
in its discretion), and any amount applied to repay any portion of any Equipment
Note shall be applied to principal payments due under such Equipment Note in the
inverse order of their maturity. The Borrower recognizes that all rights and
obligations of the Bank and the Borrower under the ISDA Master Agreement and all
Confirmations executed pursuant thereto are now cancelled and terminated and the
Borrower hereby agrees not to make any claim against the Bank with respect to
any obligations of the Bank arising and to be performed by it thereunder.
          d. Borrower’s DDA Account. The Bank shall be under no obligation to
honor any presentments made on the Borrower’s DDA Account in the event there are
either insufficient or unavailable funds to cover those items. In such event,
such items will be dishonored and returned by the Bank with no liability to the
Bank whatsoever.

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          e. Modification Fee. To induce the Bank to enter into this Agreement,
the Borrower has agreed to pay to the Bank a modification fee in the amount of
$150,000 (the “Modification Fee”), which fee shall be deemed fully earned and
non-refundable as of the Effective Date. One half of such Modification Fee shall
be paid to the Bank by not later than 4:00 p.m., Baltimore time, on the
Effective Date, and the remaining half of such Modification Fee shall be due and
payable no later than 4:00 p.m. (Baltimore time) on August 1, 2006, unless the
Obligations are repaid in full prior to such time.
          f. Additional Fees and Other Payments Due. On the date hereof, the
Borrower shall (a) pay to the Bank all past-due payments of principal and/or
interest, if any, and (b) pay to the Bank and to its counsel all Enforcement
Costs due under Section 6.10(a) hereof. On the Effective Date, the Bank shall
pay to the Bank $75,000 of the Modification Fee due on said date pursuant to
Section 3.5(e) hereof.
          g. Commitment and Mandatory Prepayment. Unless the Borrower delivers
to the Bank, prior to 12:00 p.m., Baltimore time, on July 31, 2006, an
Acceptable Commitment (as hereinafter defined), the Borrower shall pay to the
Bank, not later than 4:00 p.m., Baltimore time, on August 1, 2006, a mandatory
prepayment in the amount of $500,000, which prepayment shall be applied to the
Obligations in such order and manner as the Bank shall determine in its
discretion. As used herein, the term “Acceptable Commitment” means a commitment
letter from a bank or other financial institution acceptable to the Bank,
committing to lend to the Borrower an amount sufficient to repay in full all of
the Borrower’s Obligations, which commitment letter shall (1) contemplate a
closing not later than August 31, 2006, and (2) be non-contingent except for
ordinary and customary closing conditions.
ARTICLE IV
DEFAULT WAIVER PROVISIONS
     Section 4.1. Waiver. The Bank hereby agrees to waive the Existing Defaults.
Nothing herein shall be construed to impair the Bank’s ability to exercise any
available remedies with respect to (a) any future Event of Default, or (b) any
existing Event of Default not previously identified in writing to the Bank.
     Section 4.2. Other Obligations. All of the Obligations under the
Transaction Documents, except to the extent modified or altered by the terms of
this Agreement, shall remain in full force and effect and unchanged.
ARTICLE V
RELEASES
     Section 5.1. Releases and Waivers.
          a. The Obligors hereby knowingly and voluntarily forever release,
acquit and discharge the Bank and the Bank Group from and of any and all claims
that the Bank or any

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member of the Bank Group is in any way responsible for the past, current or
future condition or deterioration of the business operations and/or financial
condition of the Obligors, and from and of any and all claims that the Bank or
any member of the Bank Group breached any agreement to loan money, to execute
and/or terminate a Rate Protection Transaction, or make other financial
accommodations available to the Obligors or to fund any operations of the
Borrower at any time. The Obligors also hereby knowingly and voluntarily forever
release, acquit and discharge the Bank and the Bank Group, from and of any and
all other claims, damages, losses, actions, counterclaims, suits, judgments,
obligations, liabilities, defenses, affirmative defenses, setoffs, and demands
of any kind or nature whatsoever, in law or in equity, whether presently known
or unknown, which any of the Obligors may have had, or may now have (regardless
of when asserted or brought), by reason of any matter, course or thing
whatsoever relating to, arising out of, based upon, or in any manner connected
with, any transaction, event, circumstance, action, failure to act, or
occurrence of any sort or type, whether known or unknown, which occurred,
existed, was taken, permitted, begun, or otherwise related or connected to or
with any or all of the Obligations, this Agreement, or any of the Transaction
Documents, and/or any direct or indirect action or omission of the Bank and/or
any of the Bank Group. The Obligors further agree that from and after the date
hereof, they will not assert to any person or entity that any deterioration of
the business operations or financial condition of the Obligors was caused by any
breach or wrongful act of the Bank or any of the Bank Group which occurred prior
to the date hereof.
          b. Upon the indefeasible payment in full of all sums due to the Bank
and satisfaction of all of the Obligors’ other Obligations, the Bank shall, at
the Obligors’ sole cost and expense, release its liens on all collateral pledged
or given to secure said Obligations and, in connection therewith, forever
release, acquit and discharge the Obligors from and of any and all other future
claims, suits, actions, obligations and liabilities of any kind or nature
whatsoever arising out of or relating to or due in connection with the
Transaction Documents.
ARTICLE VI
MISCELLANEOUS
     Section 6.1. Headings. Descriptive headings are for convenience only and
will not control or affect the meaning or construction of any provision of this
Agreement.
     Section 6.2. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and each of their respective
heirs, personal representatives, successors and assigns.
     Section 6.3. Time of Essence. Time is of the essence of this Agreement.
     Section 6.4. Counterparts. This Agreement may be executed in any number of
duplicate originals or counterparts, each of such duplicate originals or
counterparts shall be deemed to be an original and all taken together shall
constitute but one and the same instrument. The parties further agree that
facsimile signatures shall be binding on all parties and have the same force and
effect as original signatures.

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     Section 6.5. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland.
     Section 6.6. Severability. In case one or more provisions contained in this
Agreement shall be invalid, illegal, or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining provisions
contained herein shall remain effective and binding and shall not be affected or
impaired thereby.
     Section 6.7. Amendments. This Agreement may be amended, modified or
supplemented only by written agreement signed by all parties hereto. No
provision of this Agreement may be waived except in writing signed by the party
against whom such waiver is sought to be enforced.
     Section 6.8. Entire Agreement. This Agreement, each of the documents to be
executed pursuant to the terms hereof, and the Transaction Documents set forth
the entire agreement and understanding of the parties hereto with respect to
payment and performance of the Obligations, superseding all prior
representations, understandings and agreements, whether written or oral.
     Section 6.9. Enforcement Costs. The Borrower agrees to pay to the Bank, on
the date hereof (and, if incurred after the date hereof, to the Bank or as the
Bank may direct, within 10 days after receipt of an invoice therefor), all
unpaid out-of-pocket fees, costs and expenses incurred by or on behalf of the
Bank in connection with (a) the original closing of the Credit Facilities, and
the negotiation and execution of the Forbearance Agreement, (b) the preparation,
negotiation, execution and delivery of this Agreement and any and all of the
other documents related hereto, and (c) the enforcement, preservation, or
collection of the Obligations and/or this Agreement, including, without
limitation, reasonable attorneys fees and expenses, and recordation and filing
fees and taxes (collectively, the “Enforcement Costs”). The Borrower agrees to
pay directly to Ober, Kaler, Grimes & Shriver, the Bank’s counsel, on the date
hereof, all fees and expenses incurred in connection with the events leading up
to and the negotiation and execution of this Agreement and all of the other
documents related hereto. If any such Enforcement Cost is not paid when due, the
Bank is hereby authorized, in its sole discretion, (a) to make an advance to pay
such Enforcement Costs, or (b) to offset the amount due against the Borrower’s
Checking Account, (as defined in the Credit Agreement). Such Enforcement Costs
shall be deemed to be part of the Obligations and be secured by all Collateral
pledged to secure the Obligations.
     Section 6.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THEY MAY BE PARTIES, ARISING
OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT (B) ANY OF THE OTHER
DOCUMENTS EXECUTED BY THEM IN CONNECTION HEREWITH, (C) ANY OF THE OBLIGATIONS,
AND/OR (D) ANY OF THE TRANSACTION DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT
THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL
PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE
NOT PARTIES TO THIS AGREEMENT.

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     THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE PARTIES
HERETO, AND EACH OF THE PARTIES HERETO HEREBY REPRESENT AND WARRANT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY NOTIFY OR NULLIFY ITS EFFECT. EACH
OF THE PARTIES HERETO FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY
TO DISCUSS THIS WAIVER WITH COUNSEL.
     Section 6.11. Termination of Automated Borrowing Functions. Anything herein
or in the Credit Agreement or the other Transaction Documents to the contrary
notwithstanding, the Borrower hereby agrees with the Bank that (a) the Borrower
shall give the Bank not less than three (3) Business Days (and in all events by
not later than 2:00 p.m., Baltimore time, on August 28, 2006) prior written
notice of its intent to repay the Obligations and to terminate the Revolving
Credit Facility; (b) three (3) Business Days prior to the termination of the
Revolving Credit Facility, the Bank shall be entitled to terminate all automated
borrowing functions, and (c) from and after the termination of said automated
borrowing functions, the Bank shall be under no obligation to make any further
advances to pay instruments presented against or to be presented against the
Checking Account prior to the Maturity Date, and any further advances will be
made (subject to all of the conditions precedent set forth in the Credit
Agreement), only upon the Bank’s receipt of the Borrower’s written request
therefore, such request to be received by the Bank not later than 2:00 p.m.,
Baltimore time, three (3) Business Days prior to the proposed payoff date with
such advance to be effective as of the next Business Day.
     Section 6.12. No Novation. This Agreement is only an agreement amending
certain provisions of the Transaction Documents. All of the provisions of the
Transaction Documents are incorporated herein by reference and shall continue in
full force and effect as amended hereby. The Obligors agrees that it is their
intention that nothing herein shall be construed to extinguish, release or
discharge or constitute, create or effect a novation of, or an agreement to
extinguish, any of the obligations, indebtedness and liabilities of any of the
Obligors or any other party under the provisions of the Transaction Documents
(as amended hereby).
[Signatures on Succeeding Page]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, as of the day and year first above written.

              WITNESS:   MANUFACTURERS AND TRADERS TRUST COMPANY
 
           
 
           
/s/ Theresa E. Hardee
  By:   /s/ Linda J. Weinberg (SEAL)
 
           
 
      Name: Linda J. Weinberg    
 
      Title: Administrative Vice President    
 
           
 
                UNITED TOTE COMPANY    
 
           
 
           
/s/ Jae Yu
  By:   /s/ Gary W. Sproule (SEAL)
 
           
 
      Name: Gary W. Sproule    
 
      Title: Chief Financial Officer    
 
           
 
                YOUBET.COM, INC    
 
           
 
           
/s/ Jae Yu
  By:   /s/ Gary W. Sproule (SEAL)
 
           
 
      Name: Gary W. Sproule    
 
      Title: Chief Financial Officer    
 
           
 
                UT GAMING, INC    
 
           
 
           
/s/ Jae Yu
  By:   /s/ Gary W. Sproule (SEAL)
 
           
 
      Name: Gary W. Sproule    
 
      Title: Chief Financial Officer    

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