Exhibit 10.5
October 30, 2007
VIA FACSIMILE AND OVERNIGHT COURIER
XXXXXX.XXX, INC.
UNITED TOTE COMPANY, INC.
0000 Xx Xxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxx, CFO
Re: Waiver of Default and Side Letter Agreement
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
July 27, 2006 (as amended, restated, supplemented, or modified from time to
time, the "Credit Agreement"), by and among XXXXX FARGO FOOTHILL, INC., a
California corporation, as administrative agent (in such capacity, "Agent") and
as sole Lender (in such capacities, "Foothill"), XXXXXX.XXX, INC., a Delaware
corporation ("Administrative Borrower"), and UNITED TOTE COMPANY, INC., a
Montana corporation (together with Administrative Borrower, collectively, the
"Borrowers"). Initially capitalized terms used herein without definition shall
have the meaning set forth in the Credit Agreement.
Administrative Borrower has informed and represented to Agent that a
Default has occurred and is continuing under Section 7.3 of the Credit
Agreement due to the U.S. government's seizure of the following Deposit
Accounts (the "Seized Deposit Accounts") of IRG Services, Inc., a Nevada
corporation ("IRG"): (1) Deposit Account number 004961704894 maintained by IRG
at Bank of America, N.A.; (2) Deposit Account number 004971194122 maintained
by IRG at Bank of America, N.A.; and (3) Deposit Account number 004971194119
maintained by IRG at Bank of America, N.A. (collectively, the "Known Existing
Default").
The Borrowers have requested that Foothill waive the Known Existing
Default which Foothill is willing to do subject to the terms and conditions of
this waiver letter. Foothill hereby waives the Known Existing Default;
provided, that:
(1) The Borrowers shall pay Foothill a non-refundable accommodation
fee in the amount of One Hundred Thousand Dollars ($100,000) in consideration
of Foothill's execution of this waiver letter, which shall be fully earned,
non-refundable, and due and payable as of the date hereof;
(2) Within thirty days of the date of this waiver letter,
Administrative Borrower shall provide Agent with copies of Parent's and its
Subsidiaries Projections, in form and substance (including as to scope and
underlying assumptions) satisfactory to Agent, in its Permitted Discretion, for
the forthcoming 3 years, year by year, and for the forthcoming fiscal year,
month
XXXXXX.XXX, INC.
UNITED TOTE COMPANY, INC.
October 30, 2007
Page 2
by month, certified by the chief financial officer of Parent as being
such officer's good faith estimate of the financial performance of Parent and
its Subsidiaries during the period covered thereby.
(3) Notwithstanding anything contained in the Credit Agreement or any
Loan Document to the contrary, without the prior written consent of Agent, no
Borrower or Guarantor shall, directly or indirectly: (A) make or acquire any
Investment or incur any liabilities for or in connection with any Investment
in, or on behalf of, IRG, (B) make any distribution to, declare or pay any
dividends to, or otherwise make any intercompany transfers to, or on behalf of,
IRG, or (C) accept any Investments, dividends, distributions or any other
intercompany transfers from IRG; provided, however, that Administrative
Borrower may continue to make Investments in IRG in an amount not to exceed
Eighty Thousand Dollars ($80,000) in any two week period for the sole purposes
of funding payroll and operating obligations of IRG so long as on the fifth
Business Day of each month, Agent is provided with a schedule of all
Investments made by Administrative Borrower in IRG during the immediately
preceding month;
(4) Notwithstanding anything contained in the Credit Agreement or any
Loan Document to the contrary, including without limitation, Section 2.7(b) of
the Credit Agreement, Agent may send a notice to each Cash Management Bank
instructing such Cash Management Bank to, without further consent by any
Borrower or Guarantor, as applicable, forward, by daily sweep, all amounts in
the applicable Cash Management Account to the Agent's Account; and
(5) At all times after the date hereof, Borrowers shall maintain the
sum of (A) Excess Availability, plus (B) Qualified Cash at an amount equal to
no less than Four Million Dollars ($4,000,000).
Administrative Borrower and Agent agree to meet on or about ninety
(90) days from the date of this waiver to discuss further developments in the
investigation which gave rise to the seizure of the Seized Deposit Accounts.
The waiver set forth in this waiver letter shall be effective only for
the specific Known Existing Default referenced herein, and in no event shall
this waiver letter be deemed to be a waiver of enforcement of Foothill's rights
with respect to any other Defaults or Events of Default now existing or
hereafter arising, including, without limitation, the further seizure of any
other personal or real property of any Borrower or any Guarantor. Nothing
contained herein nor any communications between any Borrower or any Guarantor
and Foothill shall be a waiver of any rights or remedies Foothill has or may
have against any Borrower or any Guarantor, except as specifically provided
herein. Except as explicitly set forth herein, nothing contained herein shall
(i) amend, modify or alter any term or condition of the Credit Agreement or any
Loan Document or (ii) diminish, prejudice or waive any of Foothill's rights and
remedies under the Credit Agreement, any Loan Document or applicable law, and
Foothill hereby reserves all of such rights and remedies.
XXXXXX.XXX, INC.
UNITED TOTE COMPANY, INC.
October 30, 2007
Page 3
This waiver letter shall be effective only upon Borrowers accepting and
agreeing to all of the terms and conditions of this waiver letter by signing
this waiver letter where provided below and returning it to us.
This waiver agreement shall be construed under and governed by the
internal laws of the State of California, and may be executed in any number of
counterparts and by different parties on separate counterparts. Each of such
counterparts shall be deemed to be an original, and all of such counterparts,
taken together, shall constitute but one and the same agreement. Delivery of an
executed counterpart of this waiver agreement by telefacsimile or electronic
transmission of a "pdf" (or other such viewable, printable data file) shall be
equally effective as delivery of a manually executed original counterpart.
Very truly yours,
XXXXX FARGO FOOTHILL, INC.,
as Agent and as Lender
By: /s/ Xxxxxxx Xxxxxx
---------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President
ACKNOWLEDGED, ACCEPTED AND AGREED:
XXXXXX.XXX, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxx
----------------------------
Name: Xxxxx X. Xxxx
Title: Chief Financial Officer
UNITED TOTE COMPANY, INC.,
a Montana corporation
By: /s/ Xxxxx X. Xxxx
----------------------------
Name: Xxxxx X. Xxxx
Title: Chief Financial Officer
XXXXXX.XXX, INC.
UNITED TOTE COMPANY, INC.
October 30, 2007
Page 4
cc: SIDLEY AUSTIN LLP
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
