Exhibit 10.16
FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this “Amendment”), dated as
of March 14, 2007, is entered into by and between WELLS FARGO FOOTHILL, INC., a
California corporation, as arranger and administrative agent (in such capacity,
“Agent”) for the Lenders (as defined below), YOUBET.COM, INC., a Delaware
corporation (“Parent”), and UNITED TOTE COMPANY, a Montana corporation (“United
Tote”, and together with Parent, each individually a “Borrower”, and
individually and collectively, jointly and severally, the “Borrowers”).
RECITALS
A. Borrowers, the lenders signatory thereto (the “Lenders”) and Agent have
previously entered into that certain Credit Agreement dated as of July 27, 2006
(as the same has been or may be modified, supplemented, restated or amended from
time to time, the “Credit Agreement”), pursuant to which the Lenders have made
certain loans and financial accommodations available to Borrowers. Terms used
herein without definition shall have the meanings ascribed to them in the Credit
Agreement.
B. Certain Events of Default have occurred and are continuing under the Credit
Agreement due to: (i) the Borrowers’ failure to achieve, when measured for the
six month period ended December 31, 2006, the minimum EBITDA required under
Section 6.16(a) of the Credit Agreement; and (ii) the Borrowers’ failure to
achieve, when measured for the fiscal year of the Borrowers ended December 31,
2006, the minimum Free Cash Flow required under Section 6.16(b) of the Credit
Agreement (collectively, the “Known Existing Defaults”).
C. Borrowers have requested that Agent and the Lenders waive the Known Existing
Defaults and further amend the Credit Agreement, all of which Agent and the
Lenders are willing to do pursuant to the terms and conditions set forth herein.
D. Borrowers are entering into this Amendment with the understanding and
agreement that, except as specifically provided herein, none of Agent’s or any
Lender’s rights or remedies as set forth in the Credit Agreement are being
waived or modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Amendments to Credit Agreement.
(a) The definition of “EBITDA” set forth in Schedule 1.1 of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:

 

 

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“ ‘EBITDA’ means, with respect to any fiscal period, Parent’s and its
Subsidiaries’ consolidated net earnings (or loss) (as adjusted for non-cash
stock option expenses), minus extraordinary gains and interest income, plus
(i) interest expense, (ii) income taxes, (iii) depreciation and amortization for
such period, (iv) for any fiscal period ending on December 31, 2006, March 31,
2007, June 30, 2007, an aggregate amount of $4,330,705 on account of certain
expenses previously approved by Agent, and (v) for any fiscal period ending on
September 30, 2007, an aggregate amount of $3,194,509 on account of certain
expenses previously approved by Agent; in each case, determined on a
consolidated basis in accordance with GAAP.”
(b) Section 6.16(a) of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
“(a) Minimum EBITDA. Fail to achieve EBITDA, measured on a fiscal quarter-end
basis, of at least the required amount set forth in the following table for the
applicable period set forth opposite thereto:

      Applicable Amount   Applicable Period $2,000,000   For the 3 month period
ending September 30, 2006 $4,000,000   For the 6 month period
ending December 31, 2006 $6,000,000   For the 9 month period
ending March 31, 2007 $11,000,000   For the 12 month period
ending June 30, 2007 $11,000,000   For the 12 month period
ending September 30, 2007 $13,000,000   For the 12 month period
ending December 31, 2007 $13,000,000   For the 12 month period
ending March 31, 2008 $13,000,000   For the 12 month period
ending each fiscal quarter-end thereafter”

2. Waiver of Known Existing Defaults. Agent and the Lenders hereby waive
enforcement of their rights against Borrowers arising from the Known Existing
Defaults;

 

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provided, however, nothing herein shall be deemed a waiver with respect to any
other or future failure of Borrowers to comply fully with Section 6.16(a) and
Section 6.16(b) of the Credit Agreement. This waiver shall be effective only for
the specific defaults comprising the Known Existing Defaults, and in no event
shall this waiver be deemed to be a waiver of enforcement of Agent’s or any
Lender’s rights with respect to any other Defaults or Events of Default now
existing or hereafter arising. Nothing contained in this Amendment nor any
communications between any Borrower and Agent or any Borrower and any Lender
shall be a waiver of any rights or remedies Agent or any Lender has or may have
against any Borrower, except as specifically provided herein. Except as
specifically provided herein, Agent hereby reserves and preserves all of its and
the Lenders’ rights and remedies against each Borrower under the Credit
Agreement and the other Loan Documents.
3. Conditions Precedent to Effectiveness of this Amendment. This Amendment shall
not become effective until all of the following conditions precedent shall have
been satisfied in the sole discretion of Agent or waived by Agent:
(a) Amendment; Acknowledgement. Agent shall have received this Amendment fully
executed by all parties hereto.
(b) Representations and Warranties. The representations and warranties set forth
herein shall be true and correct.
4. Release; Covenant Not to Sue.
(a) Each Borrower hereby absolutely and unconditionally releases and forever
discharges Agent and each Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing
(each a “Released Party”), from any and all claims, demands or causes of action
of any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which such
Borrower has had, now has or has made claim to have against any such person for
or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Amendment, whether
such claims, demands and causes of action are matured or unmatured or known or
unknown. It is the intention of each Borrower in providing this release that the
same shall be effective as a bar to each and every claim, demand and cause of
action specified, and in furtherance of this intention it waives and
relinquishes all rights and benefits under Section 1542 of the Civil Code of the
State of California, which provides:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MIGHT HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

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Each Borrower acknowledges that it may hereafter discover facts different from
or in addition to those now known or believed to be true with respect to such
claims, demands, or causes of action and agree that this instrument shall be and
remain effective in all respects notwithstanding any such differences or
additional facts. Each Borrower understands, acknowledges and agrees that the
release set forth above may be pleaded as a full and complete defense and may be
used as a basis for an injunction against any action, suit or other proceeding
which may be instituted, prosecuted or attempted in breach of the provisions of
such release.
(b) Each Borrower, on behalf of itself and its successors, assigns, and other
legal representatives, hereby absolutely, unconditionally and irrevocably,
covenants and agrees with and in favor of each Released Party above that it will
not sue (at law, in equity, in any regulatory proceeding or otherwise) any
Released Party on the basis of any claim released, remised and discharged by
such Borrower pursuant to the above release. If any Borrower or any of its
successors, assigns or other legal representations violates the foregoing
covenant, such Borrower, for itself and its successors, assigns and legal
representatives, agrees to pay, in addition to such other damages as any
Released Party may sustain as a result of such violation, all attorneys’ fees
and costs incurred by such Released Party as a result of such violation.
5. Representations and Warranties. Each Borrower represents and warrants as
follows:
(a) Authority. Each Borrower has the requisite corporate power and authority to
execute and deliver this Amendment, and to perform its obligations hereunder and
under the Loan Documents (as amended or modified hereby) to which it is a party.
The execution, delivery and performance by each Borrower of this Amendment have
been duly approved by all necessary corporate action, have received all
necessary governmental approval, if any, and do not contravene any law or any
contractual restriction binding on any Borrower. No other corporate proceedings
are necessary to consummate such transactions.
(b) Enforceability. This Amendment has been duly executed and delivered by each
Borrower. This Amendment and each Loan Document (as amended or modified hereby)
is the legal, valid and binding obligation of each Borrower, enforceable against
each Borrower in accordance with its terms, and is in full force and effect.
(c) Representations and Warranties. The representations and warranties contained
in each Loan Document (other than any such representations or warranties that,
by their terms, are specifically made as of a date other than the date hereof)
are correct in all material respects on and as of the date hereof as though made
on and as of the date hereof.
(d) No Default. Other than the Known Existing Defaults, no event has occurred
and is continuing that constitutes a Default or Event of Default.
6. Choice of Law. The validity of this Amendment, the construction,
interpretation, and enforcement hereof, and the rights of the parties hereto
with respect to all matters arising hereunder or related hereto shall be
determined under, governed by, and construed in accordance with the laws of the
State of California.
7. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties and separate counterparts, each of which when so
executed and delivered, shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Amendment by telefacsimile
shall be effective as delivery of a manually executed counterpart of this
Amendment.

 

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8. Reference to and Effect on the Loan Documents.
(a) Upon and after the effectiveness of this Amendment, each reference in the
Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to “the Credit Agreement”, “thereof” or words of like import referring
to the Credit Agreement, shall mean and be a reference to the Credit Agreement
as modified and amended hereby.
(b) Except as specifically amended in Section 1 of this Amendment, the Credit
Agreement and all other Loan Documents, are and shall continue to be in full
force and effect and are hereby in all respects ratified and confirmed and shall
constitute the legal, valid, binding and enforceable obligations of each
Borrower to Agent and Lenders without defense, offset, claim or contribution.
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Agent or any Lender under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
9. Ratification. Each Borrower hereby restates, ratifies and reaffirms each and
every term and condition set forth in the Credit Agreement, as amended hereby,
and the Loan Documents effective as of the date hereof.
10. Estoppel. To induce Agent and Lenders to enter into this Amendment and to
induce Agent and Lenders to continue to make advances to Borrowers under the
Credit Agreement, each Borrower hereby acknowledges and agrees that, after
giving effect to this Amendment, as of the date hereof, there exists no Default
or Event of Default and no right of offset, defense, counterclaim or objection
in favor of any Borrower as against Agent or any Lender with respect to the
Obligations.
11. Integration. This Amendment, together with the other Loan Documents,
incorporates all negotiations of the parties hereto with respect to the subject
matter hereof and is the final expression and agreement of the parties hereto
with respect to the subject matter hereof.
12. Severability. In case any provision in this Amendment shall be invalid,
illegal or unenforceable, such provision shall be severable from the remainder
of this Amendment and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
13. Submission of Amendment. The submission of this Amendment to the parties or
their agents or attorneys for review or signature does not constitute a
commitment by Agent or any Lender to waive any of their respective rights and
remedies under the Loan Documents, and this Amendment shall have no binding
force or effect until all of the conditions to the effectiveness of this
Amendment have been satisfied as set forth herein.

 

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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.

              YOUBET.COM, INC.,
a Delaware corporation
 
       
 
  By:   /s/ Gary W. Sproule
 
       
 
  Name:   Gary W. Sproule
 
       
 
  Title:   Chief Financial Officer
 
       
 
            UNITED TOTE COMPANY,
a Montana corporation
 
       
 
  By:   /s/ Gary W. Sproule
 
       
 
  Name:   Gary W. Sproule
 
       
 
  Title:   Chief Financial Officer
 
       
 
            WELLS FARGO FOOTHILL, INC.,
a California corporation, as Agent and as a Lender
 
       
 
  By:   /s/ Michael Ackad
 
       
 
  Name:   Michael Ackad
 
       
 
  Title:   Senior Vice President
 
       

 

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ACKNOWLEDGEMENT BY GUARANTORS
Dated as of March 14, 2007
Each of the undersigned, being a Guarantor (each a “Guarantor” and collectively,
the “Guarantors”) under that certain General Continuing Guaranty, dated as of
July 27, 2006, and made in favor of Agent for the benefit of the Lenders
(“Guaranty”), hereby acknowledges and agrees to the foregoing First Amendment to
Credit Agreement and Waiver (the “Amendment”) and confirms and agrees that the
Guaranty is and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects except that, upon the effectiveness of,
and on and after the date of the Amendment, each reference in such Guaranty to
the Credit Agreement (as defined in the Amendment), “thereunder”, “thereof” or
words of like import referring to the “Credit Agreement”, shall mean and be a
reference to the Credit Agreement as amended or modified by the Amendment.
Although Agent has informed each Guarantor of the matters set forth above, and
each Guarantor has acknowledged the same, each Guarantor understands and agrees
neither Agent nor any Lender has any duty under the Credit Agreement, the
Guaranty or any other agreement with any Guarantor to so notify any Guarantor or
to seek such an acknowledgement, and nothing contained herein is intended to or
shall create such a duty as to any advances or transaction hereafter.
Each Guarantor hereby absolutely and unconditionally releases and forever
discharges each Released Party, from any and all claims, demands or causes of
action of any kind, nature or description, whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise, which such
Guarantor has had, now has or has made claim to have against any such person for
or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date hereof, whether such
claims, demands and causes of action are matured or unmatured or known or
unknown. It is the intention of each Guarantor in providing this release that
the same shall be effective as a bar to each and every claim, demand and cause
of action specified, and in furtherance of this intention it waives and
relinquishes all rights and benefits under Section 1542 of the Civil Code of the
State of California, which provides:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MIGHT HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”
Each Guarantor acknowledges that it may hereafter discover facts different from
or in addition to those now known or believed to be true with respect to such
claims, demands, or causes of action and agree that this instrument shall be and
remain effective in all respects notwithstanding any such differences or
additional facts. Each Guarantor understands, acknowledges and agrees that the
release set forth above may be pleaded as a full and complete defense and may be
used as a basis for an injunction against any action, suit or other proceeding
which may be instituted, prosecuted or attempted in breach of the provisions of
such release. Each Guarantor, on behalf of itself and its successors, assigns,
and other legal representatives, hereby absolutely, unconditionally and
irrevocably, covenants and agrees with and in favor of each Released Party above
that it will not sue (at law, in equity, in any regulatory proceeding or
otherwise) any Released Party on the basis of any claim released, remised and
discharged by such Guarantor pursuant to the above release. If any Guarantor or
any of its successors, assigns or other legal representations violates the
foregoing covenant, such Guarantor, for itself and its successors, assigns and
legal representatives, agrees to pay, in addition to such other damages as any
Released Party may sustain as a result of such violation, all attorneys’ fees
and costs incurred by such Released Party as a result of such violation.

 

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              IRG US HOLDINGS CORP.,
a Delaware corporation
 
       
 
  By:   /s/ Gary W. Sproule 
 
       
 
  Name:   Gary W. Sproule
 
       
 
  Title:   Chief Financial Officer
 
       
 
            IRG SERVICES, INC.,
a Nevada corporation
 
       
 
  By:   /s/ Gary W. Sproule
 
       
 
  Name:   Gary W. Sproule
 
       
 
  Title:   Vice President
 
       
 
            UT GAMING, INC.,
a Delaware corporation
 
       
 
  By:   /s/ Gary W. Sproule
 
       
 
  Name:   Gary W. Sproule
 
       
 
  Title:   Chief Financial Officer
 
       

 

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