Exhibit 10.23
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of
March 28, 2008, 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. In connection
with the Credit Agreement, Borrowers, the Lenders and Agent entered into that
certain Waiver of Default and Side Letter Agreement dated October 30, 2007 (the
“Waiver”). Terms used herein without definition shall have the meanings ascribed
to them in the Credit Agreement.
B. Borrowers have requested that Agent and the Lenders further amend the Credit
Agreement and the Waiver, 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 or the Waiver
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 “Base Rate Margin” set forth in Schedule 1.1 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:
“ ’Base Rate Margin’ means one and one-half percent (1.50%) per annum at all
times.”

 

 

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(b) The definition of “EBITDA” set forth in Schedule 1.1 of the Credit Agreement
is hereby amended and restated to read in its entirety as follows:
“ ‘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
(without duplication) (i) interest expense, (ii) income taxes,
(iii) depreciation and amortization for such period, (iv) non-cash write downs
of long-lived assets including without limitation, intangible assets and
goodwill, and (v) if such fiscal period includes the fiscal quarter ended
December 31, 2007, an aggregate amount of $6,028,000 on account of certain
expenses incurred during that fiscal quarter and previously approved by Agent;
in each case, determined on a consolidated basis in accordance with GAAP.”
(c) With respect to Section 2.2 of the Credit Agreement, and in addition to the
equal monthly principal installments required therein, Borrowers shall make
principal payments on the Term Loan in the respective amounts of $1,000,000 on
the date of this Amendment, $1,000,000 on July 1, 2008, $1,000,000 ON
September 1, 2008 and $500,000 on December 1, 2008 (which principal payments
will be applied to the foregoing equal monthly principal installments in the
inverse order of their maturity).
(d) With respect to Section 2.13 of the Loan Agreement, no Borrower may exercise
any further LIBOR option.
(e) The first sentence of Section 3.4 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
“This Agreement shall continue in full force and effect for a term ending on
January 31, 2009 (the ‘Maturity Date‘).”
(f) In addition to the reports required in Section 5.2 of the Credit Agreement
as set forth in Schedule 5.2 thereto, Borrowers shall, on a weekly basis,
provide Agent with reports of Borrowers’ and their Subsidiaries’ cash and Cash
Equivalents in form satisfactory to Agent.
(g) Section 6.16(a) of the Credit Agreement is hereby amended and restated to
read in its entirety 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       $9,000,000   For the 12 month
period
ending December 31, 2007 $9,000,000   For the 12 month period
ending March 31, 2008 $11,000,000   For the 12 month period
ending June 30, 2008 $12,000,000   For the 12 month period
ending September 30, 2008 $13,000,000   For the 12 month period
ending December 31, 2008”

 

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(h) Borrowers will not be required to comply with the requirement in
Section 6.16(b) of the Credit Agreement of achieving Free Cash Flow of at least
$1,000,000 for the fiscal year ended December 31, 2007 (it being understood and
agreed that such requirement will apply to each subsequent fiscal year).
(i) Section 6.16(c) of the Credit Agreement is hereby amended and restated to
read in its entirety as follows:
“(c) Leverage Ratio. Have a Leverage Ratio, measured on a fiscal quarter-end
basis, of more than the applicable ratio set forth in the following table for
the applicable date set forth opposite thereto:

      Applicable Ratio   Applicable Date       1.50:1.0   December 31, 2007
1.50:1.0   March 31, 2008 1.10:1.0   June 30, 2008 1.00:1.0   September 30, 2008
1.00:1.0   December 31, 2008”

2. Amendment to Waiver. Paragraph (5) of the Waiver (requiring Borrowers to
maintain certain Excess Availability and Qualified Cash) is hereby deleted in
its entirety.
3. Amendment Fee. Borrowers shall pay Agent an amendment fee equal to $50,000
which will be due and payable by Borrowers, and fully earned by Agent, on the
date of this Amendment.
4. 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.

 

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5. 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.”
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.
6. 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.

 

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(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. After giving effect to this Amendment, no event has occurred and
is continuing that constitutes a Default or Event of Default.
7. 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.
8. 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.
9. 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 Sections 1 and 2 of this Amendment, the
Credit Agreement, the Waiver 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.
10. Ratification. Each Borrower hereby restates, ratifies and reaffirms each and
every term and condition set forth in the Credit Agreement and the Waiver, as
amended hereby, and the other Loan Documents effective as of the date hereof.

 

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11. 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.
12. 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.
13. 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.
14. 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.
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/ James Burk         Name:   James Burk        Title:   CFO       
UNITED TOTE COMPANY,
a Montana corporation
      By:   /s/ Gary Sproule         Name:   Gary Sproule        Title:   CEO   
    WELLS FARGO FOOTHILL, INC.,
a California corporation, as Agent and as Lender
      By:   /s/ Michael Ganann         Name:   Michael Ganann        Title:  
Vice President     

 

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ACKNOWLEDGEMENT BY GUARANTORS
Dated as of March 28, 2008
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 Second 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.”

 

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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.

            IRG US HOLDINGS CORP.,
a Delaware corporation
      By:   /s/ Gary Sproule         Name:   Gary Sproule        Title:   CFO   
 

            IRG SERVICES, INC.,
a Nevada corporation
      By:   /s/ Gary Sproule         Name:   Gary Sproule        Title:   Vice
President     

            UT GAMING, INC.,
a Delaware corporation
      By:   /s/ Gary Sproule         Name:   Gary Sproule        Title:   CEO   
 

 

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