Document:

exv10w05

 

Exhibit 10.05

FORM OF

MASTER TERMS AND CONDITIONS FOR WARRANTS

ISSUED BY SYMANTEC CORPORATION

          The purpose of this Master Terms and Conditions for Warrants (this “Master
Confirmation”), dated as of June 9, 2006, is to set forth certain terms and conditions for
warrant transactions that Symantec Corporation (“Issuer”) shall enter into with [Bank of
America, N.A/Citibank, N.A.] (“[BofA/Citibank]”), as initial purchaser. Each such
transaction (a “Transaction”) entered into between [BofA/Citibank] and Issuer that is to be
subject to this Master Confirmation shall be evidenced by a written confirmation substantially in
the form of Exhibit A hereto, with such modifications thereto as to which Issuer and
[BofA/Citibank] mutually agree (a “Confirmation”). This Master Confirmation and each
Confirmation together constitute a “Confirmation” as referred to in the Agreement specified below.

          This Master Confirmation and a Confirmation evidence a complete binding agreement between you
and us as to the terms of the Transaction to which this Master Confirmation and such Confirmation
relates. This Master Confirmation and each Confirmation hereunder, shall supplement, form a part
of, and be subject to an agreement in the form of the 1992 ISDA Master Agreement
(Multicurrency-Cross Border) as if we had executed an only agreement in such form on the Trade Date
of the first such Transaction between you and us, and such agreement shall be considered the
“Agreement” hereunder.

          The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Definitions”) as published by ISDA are incorporated into this Master Confirmation. For
the purposes of the Definitions, each reference herein or in any Confirmation hereunder to a
Warrant shall be deemed to be a reference to a Call Option or an Option, as context requires.

          THIS MASTER CONFIRMATION WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE. THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND
WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO,
THESE COURTS.

          1. In the event of any inconsistency between this Master Confirmation, on the one hand, and
the Definitions or the Agreement, on the other hand, this Master Confirmation will control for the
purpose of the Transaction to which a Confirmation relates. In the event of any inconsistency
between the Definitions, the Agreement and this Master Confirmation, on the one hand, and a
Confirmation, on the other hand, the Confirmation will govern. With respect to a Transaction,
capitalized terms used herein that are not otherwise defined shall have the meaning assigned to
them in the Confirmation relating to such Transaction.

          2. Each party will make each payment specified in this Master Confirmation or a Confirmation
as being payable by such party, not later than the due date for value on that date in the place of
the account specified below or otherwise specified in writing, in freely transferable funds and in
a manner customary for payments in the required currency.

          3. Confirmations and General Terms:

          This Master Confirmation and the Agreement, together with the Confirmation relating to a
Transaction, shall constitute the written agreement between Issuer and [BofA/Citibank] with respect
to such Transaction. Each Transaction to which a Confirmation relates is a Warrant Transaction,
which shall be considered a Share Option Transaction for purposes of the Definitions, and shall
have the following terms:

 

 

	 	 	 
	Components:

	 	Each Transaction will be divided into individual Components, each with the terms set forth in this Confirmation,
and, in particular, with the Number of Warrants and Expiration Date set forth in the Confirmation for such
Transaction. The payments and deliveries to be made upon settlement of each Transaction will be determined
separately for each Component or such Transaction as if each Component were a separate Transaction under the
Agreement.
	 
	 	 
	Warrant Style:

	 	American; provided that the Buyer agrees not to exercise any Warrants hereunder for a period of six months from the
Trade Date.
	 
	 	 
	Warrant Type:

	 	Call
	 
	 	 
	Seller:

	 	Issuer
	 
	 	 
	Buyer:

	 	[BofA/Citibank]
	 
	 	 
	Shares:

	 	The common stock, USD0.01 par value per share, of Issuer (Symbol: SYMC).
	 
	 	 
	Trade Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Effective Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Number of Warrants:

	 	For each Component, as set forth in the Confirmation for such Transaction.
	 
	 	 
	Multiple Exercise:

	 	Applicable
	 
	 	 
	Warrant Entitlement:

	 	One Share Per Warrant
	 
	 	 
	Minimum Number of Warrants:

	 	 0
	 
	 	 
	Maximum Number of Warrants:

	 	For any Transaction, the Number of Warrants for such Transaction.
	 
	 	 
	Strike Price:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Premium:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Premium Payment Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Exchange:

	 	Nasdaq National Market
	 
	 	 
	Related Exchanges:

	 	All Exchanges
	 
	 	 
	Calculation Agent:

	 	Buyer, which shall make all calculations, adjustments and determinations required pursuant to a Transaction and such
calculations, adjustments and determinations shall be binding absent manifest error.

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          4. Procedure for Exercise and Valuation:

	 	 	 
	In respect of any Component:
	 	 
	 
	 	 
	Expiration Time:

	 	The Valuation Time
	 
	 	 
	Expiration Date:

	 	As set forth in the Confirmation for such Transaction (or, if such date is not a Scheduled Trading Day, the next
following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that
date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day
that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component
of a Transaction hereunder; and provided, further, that if the Expiration Date has not occurred pursuant to the
preceding proviso as of the Final Disruption Date, the Final Disruption Date shall be the Expiration Date
(irrespective of whether such date is an Expiration Date in respect of any other Component for a Transaction).
Notwithstanding the foregoing and anything to the contrary in the Definitions, if a Market Disruption Event occurs
on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in
part, in which case the Calculation Agent shall make adjustments to the number of Warrants for the relevant
Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined
in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for
such Component. Section 6.6 of the Definitions shall not apply to any Valuation Date occurring on an Expiration
Date.
	 
	 	 
	Automatic Exercise:

	 	Applicable. The Warrants for any Transaction shall be deemed automatically exercised at the Expiration Time on the
Expiration Date for such Transaction if at such time the Warrants are In-the-Money. “In-the-Money” means, for any
Transaction, that the Reference Price is greater than the Strike Price for such Transaction.
	 
	 	 
	Reference Price:

	 	For any Valuation Date, the per Share volume-weighted average price as displayed under the heading “Bloomberg VWAP”
on Bloomberg page SYMC <equity> VAP SEC (or any successor thereto) in respect of the period from 9:30 a.m. to 4:00
p.m. (New York City time) on such Valuation Date (or if such volume-weighted average price is unavailable, the
market value of one Share on such Valuation Date, as determined by the Calculation Agent). Notwithstanding anything
to the contrary in the Definitions, if there is a Market Disruption Event on any Valuation Date, then the
Calculation Agent shall determine the Reference Price for such Valuation Date on the basis of its good faith
estimate of the market value for the relevant Shares on such Valuation Date.
	 
	 	 
	Valuation Time:

	 	As defined in Section 6.1 of the Definitions

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	Valuation Date:

	 	Each Exercise Date
	 
	 	 
	Final Disruption Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Market Disruption Event:

	 	The third and fourth lines of Section 6.3(a) of the Definitions are hereby amended by deleting the words “during the
one hour period that ends at the relevant Valuation Time” and replacing them with “at any time prior to the relevant
Valuation Time”.

          5. Settlement Terms:

	 	 	 
	In respect of any Component:
	 	 
	 
	 	 
	Net Share Settlement:

	 	On each Settlement Date, Issuer shall deliver to Buyer a number of Shares equal to the Net Share Amount for such
Settlement Date to the account specified by Buyer and cash in lieu of
any fractional shares valued at the Reference
Price for the Valuation Date corresponding to such Settlement Date. If, Buyer reasonably determines that, for any
reason, the Shares deliverable upon Net Share Settlement would not be immediately freely transferable by Buyer under
Rule 144(k) under the Securities Act of 1933, as amended (the “Securities Act”), then Buyer may elect to either (x)
accept delivery of such Shares notwithstanding any restriction on transfer or (y) have the provisions set forth in
Section 12(c) below apply.
	 
	 	 
	Net Share Amount:

	 	For any Settlement Date, a number of Shares, as calculated by the Calculation Agent, equal to the product of (i) the
number of Warrants being exercised or deemed exercised on the Exercise Date corresponding to such Settlement Date,
and (ii) the excess, if any, of the Reference Price for the Valuation Date corresponding to such Settlement Date
over the Strike Price for the relevant Transaction (such product, the “Net Share Settlement Amount”), divided by
such Reference Price.
	 
	 	 
	Settlement Currency:

	 	USD
	 
	 	 
	Failure to Deliver:

	 	Applicable
	 
	 	 
	Representation and Agreement:

	 	To the extent Seller is obligated to deliver Shares hereunder, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10,
9.11 and 9.12 of the Definitions will be applicable as if Physical Settlement were applicable to the Transaction;
provided that the Representation and Agreement contained in Section 9.11 of the Definitions shall be modified by
excluding any representations therein relating to restrictions, obligations, limitations or requirements under
applicable securities laws arising as a result of the fact that Seller is the issuer of the Shares.
	 
	 	 
	Maximum Delivery Amount:

	 	As set forth in the Confirmation for such Transaction

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          6. Dividends:

	 	 	 
	In respect of any Component:
	 	 
	 
	 	 
	Dividend Adjustments:

	 	Issuer agrees to notify Buyer promptly of the announcement of an ex-dividend date of any cash dividend by the
Issuer. If an ex-dividend date with respect to a cash dividend occurs at any time from but excluding the Trade Date
for such Transaction to and including the Expiration Date for such Transaction, then in addition to any adjustments
as provided under “Share Adjustments” below, the Calculation Agent shall make such adjustments to the Strike Price
for such Transaction as it deems appropriate to preserve for the parties the intended economic benefits of such
Transaction.
	 
	 	 
	 

	 	The Calculation Agent shall provide prompt notice of any such adjustments, including a schedule or other reasonably
detailed explanation of the basis for and determination of each adjustment.

          7. Share Adjustments:

	 	 	 
	Method of Adjustment:

	 	Calculation Agent Adjustment. For purposes hereof, the definition of “Potential Adjustment Event” shall not include
clause (iv) thereof.
	 
	 	 
	 

	 	In addition, unless the Issuer reasonably determines that any adjustment or action contemplated in clauses (i) and
(ii) below, would not result in violation of any applicable law, rule, regulation or requirement of the Exchange and
accordingly informs the Buyer and the Calculation Agent of such determination:
	 
	 	 
	 

	 	(i) notwithstanding any other right of the Calculation Agent to effect any adjustments hereunder, the Calculation
Agent shall not effect any adjustments to the Strike Price for any Transaction if, as a result of such an
adjustment, such Strike Price shall be equal to or less than the Relevant Price of Shares as of the Trade Date for
such Transaction, and instead shall adjust any other terms of such Transaction to reflect the fair value of such
adjustment; and
	 
	 	 
	 

	 	(ii) the occurrence of any action by the Issuer or any transaction involving the Issuer, which could reasonably be
expected to result in any adjustment to the Strike Price for any Transaction resulting in such Strike Price to be
equal to or less than the Relevant Price of Shares as of the Trade Date for such Transaction, shall constitute an
Additional Termination Event, with respect to which the Issuer shall be the sole Affected Party and such Transaction
shall be the sole Affected Transaction.

5

 

          8. Extraordinary Events:

	 	 	 
	Consequences of Merger Events:
	 	 
	 
	 	 
	   (a) Share-for-Share:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	   (b) Share-for Other:

	 	Cancellation and Payment (Calculation Agent Determination)
	 
	 	 
	   (c) Share-for-Combined:

	 	Cancellation and Payment (Calculation Agent Determination)
	 
	 	 
	Tender Offer:

	 	Applicable
	 
	 	 
	Consequences of Tender Offers:
	 	 
	 
	 	 
	   (a) Share-for-Share:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	   (b) Share-for-Other:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	   (c) Share-for-Combined:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Composition of Combined Consideration:

	 	Not Applicable
	 
	 	 
	Nationalization, Insolvency or Delisting:

	 	Cancellation and Payment (Calculation Agent Determination); provided that Insolvency shall not be applicable if
Issuer is a debtor (or similar participant) with respect to such Insolvency.
	 
	 	 
	 

	 	In addition to the provisions of Section 12.6(a)(iii) of the Definitions, it will also constitute a Delisting if the
Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any
of the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market System (or their
respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or
quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.

          9. Additional Disruption Events:

	 	 	 
	Change in Law:

	 	Applicable; provided that Section 12.9(a)(ii) of the Definitions is hereby amended by (i) replacing the phrase “the
interpretation” in the third line thereof with the phrase “or public announcement of the formal or informal
interpretation” and (ii) immediately following the word “Transaction” in clause (X) thereof, adding the phrase “in
the manner contemplated by the Hedging Party on the Trade Date”.
	 
	 	 
	Failure to Deliver:

	 	Applicable
	 
	 	 
	Insolvency Filing:

	 	Applicable, except if Issuer is a debtor (or similar participant) with respect to such Insolvency Filing.
	 
	 	 
	Hedging Disruption:

	 	Applicable

6

 

	 	 	 
	Increased Cost of Hedging:

	 	Applicable
	 
	 	 
	Hedging Party:

	 	For all applicable Additional Disruption Events, Buyer
	 
	 	 
	Determining Party:

	 	For all applicable Additional Disruption Events, Buyer

          10. Acknowledgements:

	 	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgments
	 	 
	Regarding Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable

          11. Representations, Warranties and Agreements:

          (a) In connection with this Master Confirmation, each Confirmation, each Transaction to which
a Confirmation relates and any other documentation relating to the Agreement, each party to this
Master Confirmation represents and warrants to, and agrees with, the other party that:

     (i) it is an “accredited investor” as defined in Section 2(a)(15)(ii) of the Securities
Act; and

     (ii) it is an “eligible contract participant” as defined in Section 1(a)(12) of the
Commodity Exchange Act, as amended (the “CEA”), and this Master Confirmation and
each Transaction hereunder are subject to individual negotiation by the parties and have not
been executed or traded on a “trading facility” as defined in Section 1a(33) of the CEA.

          (b) Issuer represents and warrants to, and agrees with, Buyer on the Trade Date of each
Transaction that:

     (i) IT UNDERSTANDS THAT SUCH TRANSACTION IS SUBJECT TO COMPLEX RISKS THAT MAY ARISE
WITHOUT WARNING AND MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR QUICKLY AND IN
UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND CONDITIONS AND ASSUME
(FINANCIALLY AND OTHERWISE) SUCH RISKS;

     (ii) each of its filings under the Securities Act, the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), or other applicable securities laws that are
required to be filed have been filed and that, as of the respective dates thereof and as of
the date of this representation, there is no misstatement of material fact contained therein
or omission of a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were made, not
misleading;

     (iii) it is not entering into any Transaction to create, and will not engage in any
other securities or derivatives transactions to create, actual or apparent trading activity
in the Shares (or any security convertible into or exchangeable for Shares) or to raise or
depress or to manipulate the price of the Shares (or any security convertible into or
exchangeable for Shares);

     (iv) it has not and will not directly or indirectly violate any applicable law
(including, without limitation, the Securities Act and the Exchange Act) in connection with
any Transaction under this Master Confirmation;

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     (v) for such Transaction, it shall maintain a number of authorized but unissued Shares
that are free from preemptive rights that at all times exceeds the sum of (x) the Maximum
Delivery Amount for such Transaction, plus (y) the aggregate number of Shares expressly
reserved for any other use (including, without limitation, Shares reserved for issuance upon
the exercise of options or convertible debt), whether expressed as caps or as numbers of
Shares reserved or otherwise, and, notwithstanding the provisions of Section 5(a)(ii) of the
Agreement, in the event of a failure by Issuer to comply with the agreement set forth in
this clause (v), there shall be no grace period for remedy of such failure;

     (vi) the Shares issuable upon exercise of all Warrants (the “Warrant Shares”)
have been duly authorized and, when delivered pursuant to the terms of such Transaction,
shall be validly issued, fully-paid and non-assessable, and such issuance of the Warrant
Shares shall not be subject to any preemptive or similar rights; and

     (vii) without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that Buyer is not making any representations or warranties with
respect to the treatment of the Transactions hereunder under FASB Statements 133, as
amended, or 150, EITF Issue No. 00-19 (or any successor issue statements) or under FASB’s
Liabilities & Equity Project.

          12. Miscellaneous:

          (a) Early Termination. The parties agree that Second Method and Loss will apply to
each Transaction under this Master Confirmation as such terms are defined under the Agreement.

          (b) Alternative Calculations and Issuer Payment on Early Termination and on Certain
Extraordinary Events. If Issuer owes Buyer any amount in connection with a Transaction
hereunder pursuant to Section 12.7 or 12.9 of the Definitions (except in the case of an
Extraordinary Event in which the consideration or proceeds to be paid to holders of Shares as a
result of such event consists or could consist solely of cash) or pursuant to Section 6(d)(ii) of
the Agreement (except in the case of an Event of Default in which Issuer is the Defaulting Party or
a Termination Event in which Issuer is the Affected Party, other than an (x) Event of Default of
the type described in Section 5(a)(iii), (v), (vi) or (vii) of the Agreement or (y) a Termination
Event of the type described in Section 5(b)(i), (ii), (iii), (iv), or (v) of the Agreement that in
the case of either (x) or (y) resulted from an event or events outside Issuer’s control) (a
“Issuer Payment Obligation”), Issuer shall have the right, in its sole discretion, to
satisfy any such Issuer Payment Obligation by delivery of Termination Delivery Units (as defined
below) by giving irrevocable telephonic notice to Buyer, confirmed in writing within one Scheduled
Trading Day, between the hours of 9:00 a.m. and 4:00 p.m. New York time on the Closing Date or
Early Termination Date, as applicable (“Notice of Issuer Termination Delivery”). Within a
commercially reasonable period of time following receipt of a Notice of Issuer Termination
Delivery, Issuer shall deliver to Buyer a number of Termination Delivery Units having a cash value
equal to the amount of such Issuer Payment Obligation (such number of Termination Delivery Units to
be delivered to be determined by the Calculation Agent as the number of whole Termination Delivery
Units that could be sold over a commercially reasonable period of time to generate proceeds equal
to the cash equivalent of such payment obligation, and the date of such delivery, the
“Termination Payment Date”). In addition, if, in the reasonable opinion of counsel to
Issuer or Buyer, for any reason, the Termination Delivery Units deliverable pursuant to this
paragraph (b) would not be immediately freely transferable by Buyer under Rule 144(k)
under the
Securities Act, then Buyer may elect either to (x) accept delivery of such Termination Delivery
Units notwithstanding any restriction on transfer or (y) have the provisions set forth in paragraph
(c) below apply.

“Termination Delivery Unit” means (i) in the case of a Termination Event, an Event
of Default or an Extraordinary Event (other than an Insolvency, Nationalization, Merger
Event or Tender Offer), one Share or (ii) in the case of an Insolvency, Nationalization,
Merger Event or Tender Offer, a unit consisting of the number or amount of each type of
property received by a holder of one Share (without consideration of any requirement to pay
cash or other consideration in lieu of fractional amounts of any securities) in such
Insolvency, Nationalization, Merger Event or Tender Offer. If a Termination Delivery Unit
consists of property other than cash or New Shares and Issuer provides irrevocable written
notice to the Calculation Agent on or prior to the Closing Date that it elects to deliver
cash, New Shares or a combination thereof (in

8

 

such proportion as Issuer designates) in lieu of such other property, the Calculation Agent
will replace such property with cash, New Shares or a combination thereof as components of a
Termination Delivery Unit in such amounts, as determined by the Calculation Agent in its
discretion by commercially reasonable means, as shall have a value equal to the value of the
property so replaced. If such Insolvency, Nationalization, Merger Event or Tender Offer
involves a choice of consideration to be received by holders, such holder shall be deemed to
have elected to receive the maximum possible amount of cash.

     (c) Registration/Private Placement Procedures. (i) With respect to each Transaction,
the following provisions shall apply to the extent applicable as provided for above opposite the
caption “Net Share Settlement” in Section 5 or in paragraph (b) of this Section 12. If so
applicable, then, at the election of Issuer by notice to Buyer within one Exchange Business Day
after the relevant delivery obligation arises, but in any event at least one Exchange Business Day
prior to the date on which such delivery obligation is due, either (A) all Shares or Termination
Delivery Units, as the case may be, delivered by Issuer to Buyer shall be, at the time of such
delivery, covered by an effective registration statement of Issuer for immediate resale by Buyer
(such registration statement and the corresponding prospectus (the “Prospectus”)
(including, without limitation, any sections describing the plan of distribution) in form and
content commercially reasonably satisfactory to Buyer) or (B) Issuer shall deliver additional
Shares or Termination Delivery Units, as the case may be, so that the value of such Shares or
Termination Delivery Units, as determined by the Calculation Agent to reflect an appropriate
liquidity discount, equals the value of the number of Shares or Termination Delivery Units that
would otherwise be deliverable if such Shares or Termination Delivery Units were freely tradeable
(without prospectus delivery) upon receipt by Buyer (such value, the “Freely Tradeable
Value”); provided that the Buyer agrees that the value, credited to Issuer, of Shares
or Termination Delivery Units delivered pursuant to clause (B) above shall not be lower than 90% of
the market price of the Shares or such Termination Delivery Units at the time of such delivery;
provided, further that Issuer may not make the election described in this clause
(B) if, on the date of its election, it has taken, or caused to be taken, any action that would
make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale
by Issuer to Buyer (or any affiliate designated by Buyer) of the Shares or the exemption pursuant
to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares by Buyer (or any
such affiliate of Buyer); provided, further that, for the avoidance of doubt, the Seller
shall not be prohibited from delivering any Shares or Termination Delivery Units in accordance with
the private placement procedures described in paragraph (c)(iii) below if, at the time of such
delivery, the Seller would otherwise be unable to elect to deliver Shares or Termination Delivery
Units in a registered offering pursuant to paragraph (c)(ii) below. (For the avoidance of doubt,
as used in this paragraph (b) only, the term “Issuer” shall mean the Issuer and/or the issuer of
the relevant securities, as the context shall require.)

     (ii) If Issuer makes the election described in clause (c)(i)(A) above:

     (A) Buyer (or an Affiliate of Buyer designated by Buyer) shall be afforded a reasonable
opportunity to conduct a due diligence investigation with respect to Issuer that is
customary in scope for underwritten offerings of equity securities and that yields results
that, with respect to registered offerings and customary standards of disclosure relating
thereto, are commercially reasonably satisfactory to Buyer or such Affiliate, as the case
may be, in its discretion; and

     (B) Buyer (or an Affiliate of Buyer designated by Buyer) and Issuer shall enter into an
agreement (a “Registration Agreement”) on commercially reasonable terms in
connection with the public resale of such Shares or Termination Delivery Units, as the case
may be, by Buyer or such Affiliate substantially similar to underwriting agreements
customary for underwritten offerings of equity securities, in form and substance
commercially reasonably satisfactory to Buyer or such Affiliate and Issuer, which
Registration Agreement shall include, without limitation, provisions substantially similar
to those contained in such underwriting agreements relating to the indemnification of, and
contribution in connection with the liability of, Buyer and its Affiliates and Issuer, shall
provide for the payment by Issuer of all reasonable out-of-pocket expenses in connection
with such registration, including all registration costs and all fees and expenses of
counsel for Buyer, and shall provide for the delivery of accountants’ “comfort letters” to
Buyer or such Affiliate with respect to the financial statements and certain financial
information contained in or incorporated by reference into the Prospectus.

     (iii) If Issuer makes the election described in clause (c)(i)(B) above:

9

 

     (A) Buyer (or an Affiliate of Buyer designated by Buyer) and any potential
institutional purchaser of any such Shares or Termination Delivery Units, as the case may
be, from Buyer or such Affiliate identified by Buyer shall be afforded a commercially
reasonable opportunity to conduct a due diligence investigation in compliance with
applicable law with respect to Issuer customary in scope for private placements of equity
securities (including, without limitation, the right to have made available to them for
inspection all financial and other records, pertinent corporate documents and other
information reasonably requested by them), subject to execution by such recipients of
customary confidentiality agreements reasonably acceptable to Issuer;

     (B) Buyer (or an Affiliate of Buyer designated by Buyer) and Issuer shall enter into an
agreement (a “Private Placement Agreement”) on commercially reasonable terms in
connection with the private placement of such Shares or Termination Delivery Units, as the
case may be, by Issuer to Buyer or such Affiliate and the private resale of such shares by
Buyer or such Affiliate, substantially similar to private placement purchase agreements
customary for private placements of equity securities, in form and substance commercially
reasonably satisfactory to Buyer and Issuer, which Private Placement Agreement shall
include, without limitation, provisions substantially similar to those contained in such
private placement purchase agreements relating to the indemnification of, and contribution
in connection with the liability of, Buyer and its Affiliates and Issuer, shall provide for
the payment by Issuer of all reasonable out-of-pocket expenses in connection with such
resale, including all fees and expenses of counsel for Buyer, shall contain representations,
warranties and agreements of Issuer reasonably necessary or advisable to establish and
maintain the availability of an exemption from the registration requirements of the
Securities Act for such resales, and shall use best efforts to provide for the delivery of
accountants’ “comfort letters” to Buyer or such Affiliate with respect to the financial
statements and certain financial information contained in or incorporated by reference into
the offering memorandum prepared for the resale of such Shares; and

     (C) Issuer agrees that any Shares or Termination Delivery Units so delivered to Buyer,
(i) may be transferred by and among Buyer and its affiliates, and Issuer shall effect such
transfer without any further action by Buyer and (ii) after the minimum “holding period”
within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such
Shares or any securities issued by Issuer comprising such Termination Delivery Units, Issuer
shall promptly remove, or cause the transfer agent for such Shares or securities to remove,
any legends referring to any such restrictions or requirements from such Shares or
securities upon delivery by Buyer (or such affiliate of Buyer) to Issuer or such transfer
agent of seller’s and broker’s representation letters customarily delivered by Buyer in
connection with resales of restricted securities pursuant to Rule 144 under the Securities
Act, without any further requirement for the delivery of any certificate, consent,
agreement, opinion of counsel, notice or any other document, any transfer tax stamps or
payment of any other amount or any other action by Buyer (or such affiliate of Buyer).

          (d) Make-whole Shares. If (x) Issuer elects to deliver Termination Delivery Units
pursuant to paragraph (b) of this Section 12 or (y) Issuer makes the election described in clause
(c)(i)(B) of paragraph (c) of this Section 12, then in either case Buyer or its affiliate may sell
(which sale shall be made in a commercially reasonable manner) such Shares or Termination Delivery
Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange
Business Day following delivery of such Shares or Termination Delivery Units, as the case may be,
and ending on the Exchange Business Day on which Buyer completes the sale of all such Shares or
Termination Delivery Units, as the case may be, or a sufficient number of Shares or Termination
Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the
amount of the Issuer Payment Obligation (in the case of clause (x), or in the case that both clause
(x) and clause (y) apply) or the Freely Tradeable Value (in the case that only clause (y) applies)
(such amount of the Issuer Payment Obligation or Freely Tradeable Value, as the case may be, the
“Required Proceeds”); provided that the Buyer shall use its reasonable efforts to
ensure that any resale hereunder shall be conducted on the terms as favorable to the Seller as
commercially practicable at the time of such resale, and provided, further that the
Buyer agrees that the proceeds credited to the Issuer as a result of any sale of Shares of
Termination Delivery Units hereunder shall not be lower than 90% of the market price of the Shares
or such Termination Delivery Units at the time of such sale. If any of such delivered Shares or
Termination Delivery Units remain after such realized net proceeds exceed the Required Proceeds,
Buyer

10

 

shall return such remaining Shares or Termination Delivery Units to Issuer. If the Required
Proceeds exceed the realized net proceeds from such resale, Issuer shall transfer to Buyer by the
open of the regular trading session on the Exchange on the Exchange Trading Day immediately
following the last day of the Resale Period the amount of such excess (the “Additional
Amount”), in the Issuer’s discretion, in cash or in a number of additional Shares or
Termination Delivery Units (“Make-whole Shares”) in an amount that, based on the Relevant
Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of
computing such Relevant Price), has a dollar value equal to the Additional Amount. The Resale
Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by
this Section 12(d). This provision shall be applied successively until the Additional Amount is
equal to zero, subject to Section 12(e).

          (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the
Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection
with any Transaction in excess of the Maximum Delivery Amount for such Transaction. Issuer
represents and warrants (which shall be deemed to be repeated on each day that the Transaction is
outstanding) that the Maximum Delivery Amount for all Transactions hereunder is equal to or less
than the number of authorized but unissued Shares of the Issuer that are not reserved for future
issuance in connection with transactions in the Shares (other than all Transactions hereunder) on
the date of the determination of the Maximum Delivery Amount for all Transactions hereunder (such
Shares, the “Available Shares”). In the event Issuer shall not have delivered the full
number of Shares otherwise deliverable as a result of this Section 12(e) (the resulting deficit,
the “Deficit Shares”), Issuer shall be continually obligated to deliver, from time to time
until the full number of Deficit Shares have been delivered pursuant to this paragraph, Shares
when, and to the extent, that (i) Shares are repurchased, acquired or otherwise received by Issuer
or any of its subsidiaries after the Trade Date for the relevant Transaction (whether or not in
exchange for cash, fair value or any other consideration), (ii) authorized and unissued Shares
reserved for issuance in respect of other transactions prior to such date which prior to the
relevant date become no longer so reserved and (iii) Issuer additionally authorizes and unissued
Shares that are not reserved for other transactions. Issuer shall immediately notify Buyer of the
occurrence of any of the foregoing events (including the number of Shares subject to clause (i),
(ii) or (iii) and the corresponding number of Shares to be delivered) and promptly deliver such
Shares thereafter.

          (f) Set-Off and Netting. Both parties waive any rights to set-off or net amounts due
either party with respect to any Transaction hereunder against amounts due to either party from the
other party under any other agreement between the parties.

          (g) Status of Claims in Bankruptcy. Buyer acknowledges and agrees that this Master
Confirmation, together with any Confirmation, is not intended to convey to Buyer rights with
respect to any Transaction that are senior to the claims of common stockholders in any U.S.
bankruptcy proceedings of Issuer; provided that nothing herein shall limit or shall be
deemed to limit Buyer’s right to pursue remedies in the event of a breach by Issuer of its
obligations and agreements with respect to any Transaction; and provided, further,
that nothing herein shall limit or shall be deemed to limit Buyer’s rights in respect of any
transactions other than the Transactions.

          (h) No Collateral. Notwithstanding any provision of this Master Confirmation, any
Confirmation or the Agreement, or any other agreement between the parties, to the contrary, the
obligations of Issuer under the Transactions are not secured by any collateral. Without limiting
the generality of the foregoing, if this Master Confirmation, the Agreement or any other agreement
between the parties includes an ISDA Credit Support Annex or other agreement pursuant to which
Issuer collateralizes obligations to Buyer, then the obligations of Issuer hereunder shall not be
considered to be obligations under such Credit Support Annex or other agreement pursuant to which
Issuer collateralizes obligations to Buyer, and any Transactions hereunder shall be disregarded for
purposes of calculating any Exposure, Market Value or similar term thereunder.

          (i) Assignment of Share Delivery to Affiliates. Buyer has the right to assign any or
all of its rights and obligations under a Transaction to deliver or accept delivery of Shares to
any of its Affiliates; provided that Issuer shall have recourse to Buyer in the event of
failure by the assignee to perform any of such obligations hereunder. Notwithstanding the
foregoing, the recourse to Buyer shall be limited to recoupment of Issuer’s monetary damages and
Issuer hereby waives any right to seek specific performance by Buyer of its obligations

11

 

hereunder. Such failure after any applicable grace period shall be deemed to be an Additional
Termination Event, such Transaction shall be the only Affected Transaction and Buyer shall be the
only Affected Party.

          (j) Limit on Beneficial Ownership. Notwithstanding any other provisions hereof, Buyer
may not exercise any Warrant hereunder, Automatic Exercise shall not apply with respect thereto,
and any delivery pursuant to Section 12(b) shall not be made, to the extent (but only to the
extent) that the receipt of any Shares upon such exercise or delivery would result in Buyer
directly or indirectly beneficially owning (as such term is defined for purposes of Section 13(d)
of the Exchange Act) at any time in excess of 4.9% of the outstanding Shares. Any purported
delivery hereunder shall be void and have no effect to the extent (but only to the extent) that
such delivery would result in Buyer directly or indirectly so beneficially owning in excess of 4.9%
of the outstanding Shares. If any delivery owed to Buyer hereunder is not made, in whole or in
part, as a result of this provision, Issuer’s obligation to make such delivery shall not be
extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event
later than one Business Day after, Buyer gives notice to Issuer that such delivery would not result
in Buyer directly or indirectly so beneficially owning in excess of 4.9% of the outstanding Shares.

          (k) Transfer. Notwithstanding any provision of the Agreement to the contrary, Buyer
may, subject to applicable law, freely transfer and assign all of its right and obligations under
any Transaction without the consent of Seller.

          (l) Severability; Illegality. If compliance by either party with any provision of a
Transaction would be unenforceable or illegal, (i) the parties shall negotiate in good faith to
resolve such unenforceability or illegality in a manner that preserves the economic benefits of the
transactions contemplated hereby and (ii) the other provisions of the Transaction shall not be
invalidated, but shall remain in full force and effect.

          (m) Waiver of Trial by Jury. EACH OF ISSUER AND BUYER HEREBY IRREVOCABLY WAIVES (ON
ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS TRANSACTION OR THE ACTIONS OF BUYER OR ITS
AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

          (n) Confidentiality. Notwithstanding any provision in this Master Confirmation, any
Confirmation or the Agreement, in connection with Section 1.6011-4 of the Treasury Regulations, the
parties hereby agree that each party (and each employee, representative, or other agent of such
party) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment
and U.S. tax structure of the Transaction and all materials of any kind (including opinions or
other tax analyses) that are provided to such party relating to such U.S. tax treatment and U.S.
tax structure, other than any information for which nondisclosure is reasonably necessary in order
to comply with applicable securities laws.

          (o) Securities Contract; Swap Agreement. The parties hereto intend for: (i) each
Transaction hereunder to be a “securities contract” and a “swap agreement” as defined in the
Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”), and the
parties hereto to be entitled to the protections afforded by, among other Sections, Sections
362(b)(6), 555 and 560 of the Bankruptcy Code; (ii) a party’s right to liquidate a Transaction and
to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with
respect to the other party to constitute a “contractual right” as described in the Bankruptcy Code;
(iii) any cash, securities or other property provided as performance assurance, credit support or
collateral with respect to a Transaction to constitute “margin payments” and “transfers” under a
“swap agreement” as defined in the Bankruptcy Code; and (iv) all payments for, under or in
connection with a Transaction, all payments for the Shares and the transfer of such Shares to
constitute “settlement payments” and “transfers” under a “swap agreement” as defined in the
Bankruptcy Code.

          (p) Additional Termination Event. If at any time Buyer reasonably determines that it
is advisable to terminate a portion of the Transaction so that Buyer’s related hedging activities
will comply with

12

 

applicable securities laws, rules or regulations, an Additional Termination Event shall occur
in respect of which (1) Issuer shall be the sole Affected Party and (2) the Transaction shall be
the sole Affected Transaction.

          (q) Effectiveness. If, prior to the Effective Date for any Transaction, Buyer
reasonably determines that it is advisable to cancel such Transaction because of concerns that
Buyer’s related hedging activities could be viewed as not complying with applicable securities
laws, rules or regulations, such Transaction shall be cancelled and shall not become effective, and
neither party shall have any obligation to the other party in respect of such Transaction.

          (r) Amendment. The Buyer agrees with the Seller, upon the Seller’s request, to enter,
at any time during the period commencing on the Effective Date for any Transaction and ending on
and including the 13th day following such Effective Date, into a new confirmation providing for an
increase to the initial aggregate Number of Warrants for such Transaction issued under the
Confirmation for such Transaction in the amount equal up to 10% of the initial aggregate Number of
Warrants for such Transaction, on the same pricing terms as those contained in the confirmation
relating to such original Number of Warrants (such additional Confirmation to provide for the
payment by Buyer to Seller of the additional premium related thereto).

          13. Addresses for Notice:

	 	 	 	 	 	 	 
	 

	 	If to [BofA/Citibank]:
	 	[                    ]	 	 
	 

	 	 	 	[                    ]	 	 
	 

	 	 	 	[                    ]	 	 
	 

	 	 	 	Attention:
	 	[                    ]
	 

	 	 	 	Facsimile:
	 	[                    ]
	 

	 	 	 	Telephone:
	 	[                    ]
	 
	 	 	 	 	 	 
	 

	 	with a copy to:
	 	[                    ]	 	 
	 

	 	 	 	[                    ]	 	 
	 

	 	 	 	[                    ]	 	 
	 

	 	 	 	Attention:
	 	[                    ]
	 

	 	 	 	Facsimile:
	 	[                    ]
	 

	 	 	 	Telephone:
	 	[                    ]
	 
	 	 	 	 	 	 
	 	 	If to Issuer:	 	Symantec Corporation
	 	 	 	 	20330 Stevens Creek Blvd.
	 	 	 	 	Cupertino, CA 95014
	 

	 	 	 	Attention:
	 	Treasurer
	 

	 	 	 	Telephone:
	 	(408) 517-8000
	 
	 	 	 	 	 	 
	 	 	with a copy to:	 	Fenwick & West
	 	 	 	 	801 California St.
	 	 	 	 	Mountain View, CA 94041
	 	 	 	 	Attn: Dan Winnike

          14. Accounts for Payment:

	 	 	 	 	 	 	 
	 	 	To [BofA/Citibank]:	 	[Account Information]  
	 
	 	 	 	 	 	 
	 	 	To Issuer:	 	To be advised.

          15. Delivery Instructions:

          Unless otherwise directed in writing, any Share to be delivered hereunder shall be
delivered as follows:

13

 

	 	 	 	 	 	 	 
	 	 	To [BofA/Citibank]:	 	To be advised.  
	 
	 	 	To Issuer:	 	To be advised.

14

 

	 	 	 	 	 	 	 
	 	 	Yours sincerely,	 	 
	 
	 	 	 	 	 	 
	 	 	[Bank of America, N.A./Citibank, N.A.]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: [Respective Officer of Bank of
America, N.A. or Citibank, N.A., as
appropriate]	 	 
	 

	 	 	 	Title: [Title of Respective Officer of
Bank of America, N.A. or Citibank, N.A., as appropriate]
	 	 

Confirmed as of the

date first above written:

SYMANTEC CORPORATION

	 	 	 	 	 
	By:

	 	/s/ James A. Beer	 	 
	 

	 	 	 	 
	 

	 	Name: James A. Beer
	 	 
	 	 	Title: Executive Vice President and Chief Financial Officer

 

 

EXHIBIT A

FORM OF WARRANT

See attached Schedule A for completion of terms

CONFIRMATION

	 	 	 
	Date:

	 	June 12, 2006
	 
	 	 
	To:

	 	Symantec Corporation (“Issuer”)
	 
	 	 
	Telefax No.:

	 	(408) [___-___]
	 
	 	 
	Attention:

	 	Treasurer
	 
	 	 
	From:

	 	[Bank of America, N.A/Citibank, N.A.] (“[BofA/Citibank]”)
	 
	 	 
	Telefax No.:

	 	[Telefax No.]

Transaction Reference Number: [Transaction Reference Number]

     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced Transaction entered into on the Trade Date specified below
between you and us. This Confirmation supplements, forms a part of, and is subject to the Master
Terms and Conditions for Warrants Issued by Symantec Corporation dated as of June 9, 2006 and as
amended from time to time (the “Master Confirmation”) between you and us.

     1. The definitions and provisions contained in the Definitions (as such term is defined in the
Master Confirmation) and in the Master Confirmation are incorporated into this Confirmation. In
the event of any inconsistency between those definitions and provisions and this Confirmation, this
Confirmation will govern.

     2. The particular Transaction to which this Confirmation relates shall have the following
terms:

	 	 	 
	Trade Date:

	 	June 12, 2006
	 
	 	 
	Effective Date:

	 	June 16, 2006
	 
	 	 
	Strike Price:

	 	[     ]
	 
	 	 
	Premium:

	 	[     ]
	 
	 	 
	Premium Payment Date:

	 	June 16, 2006
	 
	 	 
	Final Disruption Date:

	 	[     ]
	 
	 	 
	Maximum Delivery Amount:

	 	[     ]

For each Component of the Transaction, the Number of Warrants and Expiration Date are as set forth
below.

A-1

 

	 	 	 	 	 
	Component Number	 	Number of Warrants	 	Expiration Date
	1.
	 	[     ]
	 	[     ]
	2.
	 	[     ]
	 	[     ]
	3.
	 	[     ]
	 	[     ]
	4.
	 	[     ]
	 	[     ]
	5.
	 	[     ]
	 	[     ]
	6.
	 	[     ]
	 	[     ]
	7.
	 	[     ]
	 	[     ]
	8.
	 	[     ]
	 	[     ]
	9.
	 	[     ]
	 	[     ]
	10.
	 	[     ]
	 	[     ]
	11.
	 	[     ]
	 	[     ]
	12.
	 	[     ]
	 	[     ]
	13.
	 	[     ]
	 	[     ]
	14.
	 	[     ]
	 	[     ]
	15.
	 	[     ]
	 	[     ]
	16.
	 	[     ]
	 	[     ]
	17.
	 	[     ]
	 	[     ]
	18.
	 	[     ]
	 	[     ]
	19.
	 	[     ]
	 	[     ]
	20.
	 	[     ]
	 	[     ]
	21.
	 	[     ]
	 	[     ]
	22.
	 	[     ]
	 	[     ]
	23.
	 	[     ]
	 	[     ]
	24.
	 	[     ]
	 	[     ]
	25.
	 	[     ]
	 	[     ]
	26.
	 	[     ]
	 	[     ]
	27.
	 	[     ]
	 	[     ]
	28.
	 	[     ]
	 	[     ]
	29.
	 	[     ]
	 	[     ]
	30.
	 	[     ]
	 	[     ]
	31.
	 	[     ]
	 	[     ]
	32.
	 	[     ]
	 	[     ]
	33.
	 	[     ]
	 	[     ]
	34.
	 	[     ]
	 	[     ]
	35.
	 	[     ]
	 	[     ]
	36.
	 	[     ]
	 	[     ]
	37.
	 	[     ]
	 	[     ]
	38.
	 	[     ]
	 	[     ]
	39.
	 	[     ]
	 	[     ]
	40.
	 	[     ]
	 	[     ]

A-2

 

     3. Issuer hereby agrees (a) to check this Confirmation promptly upon receipt so that errors or
discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing
correctly sets forth the terms of the agreement between us with respect to the particular
Transaction to which this Confirmation relates, by manually signing this Confirmation and providing
any other information requested herein or in the Master Confirmation and immediately returning an
executed copy to Confirmation Unit via [___]. Hard copies should be returned to
[___].

	 	 	 	 	 	 	 
	 	 	Yours sincerely,	 	 
	 
	 	 	 	 	 	 
	 	 	[Bank of America, N.A./Citibank, N.A.]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

	 	 
	 

	 	 	 	Name: [Respective Officer of Bank of
America, N.A. or Citibank, N.A., as
appropriate]	 	 
	 

	 	 	 	Title: [Title of Respective Officer
of Bank of America, N.A. or Citibank,
N.A., as appropriate]	 	 

Confirmed as of the

date first above written:

SYMANTEC CORPORATION

	 	 	 	 	 
	By:

	 	/s/ James A. Beer
 

	 	 
	 

	 	Name: James A. Beer	 	 
	 	 	Title: Executive Vice President and Chief Financial Officer

 

 

SCHEDULE A

	 	 	 
	Strike Price:

	 	USD 27.3175
	 
	 	 
	Premium:

	 	An aggregate premium of approximately $326 million was paid by Bank of America, N.A. and Citibank, N.A.
to the company in connection with the warrant transactions.
	 
	 	 
	Final Disruption Date:

	 	September 9, 2011 or September 12, 2013, as appropriate.
	 
	 	 
	Maximum Deliver Amount:

	 	Two times the aggregate Number of Warrants for all Expiration Dates.
	 
	 	 
	Number of Warrants:

	 	An aggregate of 28,762,305 warrants or 26,147,550 warrants, as appropriate.
	 
	 	 
	Expiration Date:

	 	The period July 5, 2011 to August 29, 2011 or July 8, 2013 to August 30, 2013, as appropriate.exv10w5

 

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”).

 

 

     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

2

 

	 	(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.

5

 

          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,

6

 

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.

7

 

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”.

8

 

          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”.

9

 

          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.

10

 

     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.

11

 

     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.

12

 

          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

13

 

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.

15

 

     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]

16

 

     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	 	 

17

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