EXHIBIT 10.9
[MBT CAPITAL - LETTERHEAD]
MDU Communications Inc.,
#000 - 00000 Xxxxxxxxxxx Xxx,
XXXXXXXX, X.X.,
X0X 0X0.
ATTENTION: XXXXXXX X. XXXXXX, DIRECTOR
Gentlemen:
This writing, when appropriately executed by the parties hereto, shall
constitute the Agreement in Principle amongst the parties pursuant to which it
is contemplated that MDU Communications Inc. (MDU) and MBT Capital (MBT) will
enter into a financing accommodation agreement (the Agreement) generally as
herein recited. Star Choice Communications Inc. (Star Choice) has agreed to
consent to the said contemplated arrangement and has, accordingly, verified that
consent by its execution hereof.
1. The term of the contemplated relationship shall be through to and
inclusive of the 26th day of August 2008;
2. The Agreement will be exclusive in nature and, except for certain
working capital lines of credit with a Canadian Chartered Bank and debt
arrangements previously approved by MBT -- such approval not to be
unreasonably withheld -- MDU will not be permitted to enter into any
debt arrangement except with MBT;
3. Subject to the subsequent direction and advice of legal and tax counsel
for MBT, the transactions contemplated by the Agreement will take the
form of a Leasing transaction as respecting the Set Top Boxes (the
boxes) to be acquired from either a manufacturer or from Star Choice
and as a Secured Debt transaction as respecting the advance made
directly to MDU on account of its costs of installing the Signal
Distribution System;
4. MDU undertakes to be responsible for every cost, of every nature, of
MBT directly, or indirectly, attributable to the effort of MBT
respecting the proposed arrangement and, with respect thereto, has made
a contribution of Ten Thousand Dollars ($10,000) towards the costs of
MBT in conducting its due diligence respecting the herein contemplated
transaction and MDU further undertakes to additionally deposit, from
time to time, such further sums as MBT shall reasonably require to
conclude its said due diligence efforts;
5. Additional to the aforesaid costs contribution, MDU agrees that upon
its acceptance of a commitment from MBT to consummate the Agreement,
MDU will deposit with MBT a drawing account of One Hundred and Fifty
Thousand Dollars ($150,000) as a good faith deposit from which MBT
shall pay for legal and tax opinions and documentation and all costs
relating thereto and MDU undertakes to additionally deposit, from time
to time, such further sums as MBT shall reasonably require to conclude
the said legal and tax opinions and documentation;
6. It is currently thought appropriate that MBT will agree to a one-time
Sale/Leaseback transaction with MDU pursuant to which MBT will acquire
the four thousand (4,000) boxes currently in the possession of active
subscribers and will pay MDU One Million Five Hundred and Twenty
Thousand Dollars ($1,520,000) therefor and will rent those boxes back
to MDU. MDU shall direct MBT to pay to Star Choice directly all sums
then owing to Star Choice from MDU from the proceeds of such sale;
7. Given that Star Choice is currently the provider of all programming
services to S.O. Subscribers and collects all of the charges relating
thereto, including the monthly rental charge relating to the box, and
given that Star Choice desires to remit monthly that portion if those
charges which are due to MDU to a single recipient, i.e. as opposed to
dividing the MDU share between MDU and its financing partner, it is
understood by MBT and MDU that MBT shall be designated as the recipient
of all moneys due to MDU and, upon its receipt of those moneys, MBT
shall deduct such sums as are properly due to it pursuant to the
Agreement and shall, in a timely fashion, remit the remaining balance,
if any, to MDU. Notwithstanding the provisions of this Paragraph (7) to
the contrary, MBT agrees that it will review annually the payment
procedure herein provided and, should it then be convinced that the
task of collecting and distributing the moneys from Star Choice might
better be a task handled by MDU, then it shall be at liberty to provide
that MDU shall thereupon be so designated and will instruct Star Choice
accordingly;
8. MDU agrees that it shall not permit at any time during the term of its
herein contemplated relationship with MBT the aggregate number of boxes
being defined as "second" boxes and "non-earning" boxes to exceed seven
per cent (7%) of the total number of boxes owned, from time to time, by
MBT. In the event the said aggregate of second and non-earning boxes
exceed the seven per cent (7%) limit, then MDU will pay to the MBT
Security Deposit Account a further instalment of One Hundred Dollars
($100.00) for each box which then exceeds the seven per cent (7%)
limit;
9. The financings hereby contemplated will, in fact, be two (2) separate
transactions. Firstly, MBT will purchase the boxes directly from Star
Choice and will lease those boxes to MDU. With respect to the purchase
of the boxes by MBT from Star Choice, Star Choice agrees to convey to
MBT the warranty which it has received from the manufacturer. Secondly,
MBT will advance directly to MDU a sum equal to the difference between
Three Hundred and Eighty Dollars ($380.00) and the sum paid to Star
Choice for each box;
10. MBT shall be entitled to receive from MDU an equal and consecutive
monthly rental payment of Twelve Dollars and Eighty Cents ($12.80) on
account of each Lease and Advance to MDU for each S.O. Subscriber and
shall additionally receive One Dollar and Ten Cents ($1.10) each month
as an accumulating Security Deposit respecting each S.O. Subscriber;
11. The aforesaid Security Deposit shall accumulate and be held by MBT for
the account of MDU until the Security Deposit has accumulated to
Fifty-two Dollars and Eighty Cents ($52.80) per Subscriber and shall be
paid by MBT to MDU within sixty (60) days of the date when the said
balance of Fifty-two Dollars and Eighty Cents ($52.80) has been
accomplished. Notwithstanding anything in this Paragraph (11), or in
any other provision herein to the contrary, the Security Deposit which
was paid to MBT by MDU pursuant to Paragraph (8) hereof shall not be
paid to MDU until all Leases between MDU and MBT have been fully
completed and there is no longer any obligation of MDU to pay MBT any
sums of any nature;
12. Subject to appropriate notice by MDU to MBT and there being no event of
default then existing, MDU shall have the right to acquire each box
theretofore leased to MDU by MBT after forty-eight (48) months of
rentals of Twelve Dollars and Eighty Cents ($12.80) each have been
received by MBT and the purchase price of each box thereby acquired by
MDU from MBT shall be Twenty-five Dollars ($25.00);
13. In every instance herein and in any documentation and agreement
relating hereto or to the arrangement herein contemplated, it is
understood that all sums are net of any exigible tax or levy and such
taxes or levies are the responsibility and the obligation of MDU or of
the S.O. Subscriber, as the case may be;
14. In the event MDU shall acquire one or more boxes from MBT pursuant to
the purchase option aforesaid, then the entitlement of MBT to revenues
from the S.O. Subscriber then utilizing that box shall be reduced from
the Twelve Dollars and Eighty Cents ($12.80) aforementioned to Three
Dollars ($3.00) and such Three Dollar ($3.00) entitlement shall
continue for so long as that S.O. Subscriber shall remain an S.O.
Subscriber;
15. Given the term of the relationship herein contemplated, it will be
necessary that Star Choice and MBT enter into a Purchase/Supply
Agreement pursuant to which Star Choice will agree to the timely supply
of the boxes at a price as provided in the S.O. Agreement of August
27th, 1998 between Star Choice and MDU;
16. Star Choice agrees that its right of set-off or claim against MDU shall
not extend to those sums which are payable to MBT for the account of
MBT pursuant to the financings hereby contemplated. Subject to the
provisions of Paragraph (17) hereof to the contrary, MBT agrees to
return to Star Choice any funds paid to it by Star Choice which are in
excess of the payments provided to be paid by MDU to MBT provided that
such funds have not previously been paid to MDU and provided that Star
Choice has given MBT appropriate prior notice of its action in
exercising its alleged right of set-off or claim;
17. In the event that Star Choice terminates MDU as a Service Operator for
any reason whatsoever:
(a) Star Choice shall continue to pay to MBT all moneys which
would otherwise be due and payable to MDU but for the said
termination and MBT shall temporarily assume the
responsibility of MDU for the service and maintenance of the
"active" buildings then housing S.O. Subscribers from the
revenue stream exceeding the aggregate sums due and owing to
MBT pursuant to the financing contracts herein contemplated.
Star Choice and MBT agree to use their respective best efforts
to immediately appoint a replacement Service Operator or to
have either Star Choice or MBT assume the Service Operator
function directly;
(b) Star Choice shall have the right of first refusal to receive
an assignment of the rights of MDU pursuant to the Purchase
Option provided in Paragraph (12) hereof. Additionally, Star
Choice shall have an option to purchase all boxes then owned
by MBT and the purchase price therefor shall then be
negotiated by Star Choice and MBT;
(c) In the event Star Choice shall not exercise its option to
purchase all of the boxes then owned by MBT as hereinbefore
provided by Paragraph 17(b) above, then Star Choice and MBT
shall use their best efforts to negotiate the sale to the
replacement Service Operator appointed by Star Choice and MBT
of any non-revenue generating boxes then owned by MBT;
18. Notwithstanding anything hereinbefore written to the contrary, MDU
agrees with MBT to cause the following matters to be accomplished prior
to the closing date of the initial transaction herein contemplated:
(a) MDU will grant MBT the right of two (2) nominees to be
appointed to its Board and to its Advisory Committee;
(b) MDU will appoint an MBT nominee as its Assistant Comptroller
to have unfettered access to the books and records of MDU with
the specific understanding that should that nominee believe it
would be in the best interest of MBT to be aware of certain
happenings or circumstances, then that nominee shall be at
liberty to advise MBT accordingly;
(c) MDU will immediately prepare a revised Business Plan
consistent with the format heretofore suggested by MBT and
will deliver same to MBT with the executed copy of this
Agreement in Principle;
(d) MDU agrees to permit MBT representatives to review its
insurance files, its Minute Book, its Financial Records, its
Personnel Files, its MIS programs and all Contract Files
whatsoever nature to permit MBT to conduct such due diligence
as it shall deem necessary or appropriate to make a final
affirmative or negative decision respecting the relationship
herein contemplated and MDU will permit MBT free access to all
corporate matters and co-operate fully and timely in providing
such access and records;
19. Notwithstanding any other provision of this Agreement in Principle, the
parties agree:
(a) MBT shall have no recourse against Star Choice for the
obligations of MDU hereunder other than as specifically set
out in Paragraph (17) herein;
(b) The obligations of Star Choice hereunder are subject to the
further review and approval of legal counsel, lenders and
financial advisors of Star Choice. Star Choice shall be
afforded the same rights of due diligence afforded MBT in
Paragraph 18(d) herein;
20. MDU shall be responsible for every cost, of every nature, of Star
Choice, directly or indirectly, attributable to the effort of Star
Choice respecting the proposed arrangements.
This Agreement may be executed in any number of counterparts and all
these counterparts shall for all purposes constitute one agreement, binding on
the parties, notwithstanding that all parties are not signatory to the same
counterpart.
If the foregoing accords with your records and recollection of the
agreements heretofore reached, this document requires to be executed and
returned on or before December 2nd, 1999.
Yours very truly,
MBT CAPITAL
/s/ X.X. Xxxxx
X.X. Xxxxx
ACKNOWLEDGED AND AGREED
this ___ day of ____________, 1999.
MDU COMMUNICATIONS INC. STAR CHOICE COMMUNICATIONS, INC.
----------------------------------- Per
Xxxx Xxxxxxxx, President -----------------------------------
Its
---------------------------------- Per
Xxxxxxx X. Xxxxxx, Director -----------------------------------
Its
[MBT CAPITAL - LETTERHEAD]
MDU Communications Inc.
#000 - 00000 Xxxxxxxxxxx Xxx
XXXXXXXX, Xxxxxxx Xxxxxxxx
X0X 0X0
ATTENTION: XXXXXXX X. XXXXXX, DIRECTOR
Gentlemen:
This writing, when appropriately executed by the parties hereto, shall
constitute the Agreement in Principle between the parties pursuant to which it
is contemplated that MDU Communications Inc. (MDU) and MBT Capital, Inc. (MBT)
will enter into a financing accommodation agreement (the Agreement) generally as
herein recited when read in conjunction with the Agreement in Principle made the
18th day of November, 1999 amongst MDU, MBT and Star Choice Communications, Inc.
and such Agreement in Principle is, by this reference, made a part hereof.
1. The Agreement will anticipate that MDU will cause the installation of
boxes with S.O. subscribers which could aggregate One Hundred and Fifty
Thousand (150,000) or more transactions;
2. As an inducement to cause MBT to enter into the Agreement, MDU has
granted the right to MBT to acquire a one-third (1/3) undivided
interest in the rights of MDU to share in the value of the Subscriber
List created by MDU by virtue of the financing arrangement hereby
contemplated;
3. In consideration of the right granted to MBT to acquire an undivided
interest in the Subscriber List (as hereinbefore provided), MDU agrees
that it shall not sell or encumber its rights to that list, in any way
whatsoever, without first obtaining the approval of MBT and MDU agrees
it is acting as trustee for MBT with respect to the interest of MBT in
the said Subscriber List;
4. The right of MBT to acquire the one-third (1/3) undivided interest in
the MDU rights respecting the aforementioned Subscriber List shall be
exercised by MBT giving MDU forty-eight (48) hours prior notice of its
intention to exercise its right and by paying to MDU, on Closing, a
purchase price being the product of ten cents ($0.10) multiplied by the
number of then active S.O. Subscribers on the said list.
If the foregoing accords with your records and recollection of the
agreements heretofore reached, this documents requires to be executed and
returned on or before December 2nd 1999.
Yours very truly,
MBT CAPITAL
X.X. Xxxxx
ACKNOWLEDGED AND AGREED
this ___ day of ____________, 1999.
MDU COMMUNICATIONS INC.
/s/ XXXX XXXXXXXX
--------------------------------
Xxxx Xxxxxxxx, President
--------------------------------
Xxxxxxx X. Xxxxxx, Director
ASSIGNMENT AGREEMENT
This assignment agreement made as of the 14th day of January, 2000.
AMONG:
MerBanco Capital Inc.
(hereinafter "MerBanco")
OF THE FIRST PART
- and -
3678652 Canada Inc.
(hereinafter called "3678652")
OF THE SECOND PART
- and -
MBT Capital
(hereinafter called "MBT")
OF THE THIRD PART
- and -
Gibralt Capital Corporation
(hereinafter called "Gibralt")
OF THE FOURTH PART
WHEREAS MBT and MDU Communications Inc. ("MDU") entered into an offer
to finance dated November 18, 1999 and an addendum thereto dated November 22,
1999 (collectively, the "Offer to Finance");
AND WHEREAS MerBanco, 3678652 and MBT desire to assign all of their
respective rights and interests under the Offer of Finance to Gibralt in
accordance with the provisions hereof;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the sum
of Two Dollars ($2.00) paid by each of the parties hereto to each of the other
parties hereto (the receipt and sufficiency whereof is hereby acknowledged by
each of them) and other good and valuable consideration, the parties hereto
covenant and agree as follows:
1. MerBanco, 3678652 and MBT hereby assign, transfer, convey and set over
unto Gibralt the Offer of Finance and all of their respective rights
and interests therein and thereto.
2. Gibralt hereby assumes all of the obligations and responsibilities of
MBT under the Offer to Finance and agrees to be bound by all of the
provisions thereof as if Gibralt were the original party to the Offer
to Finance in place of MBT.
3. The parties hereto on behalf of themselves, and their respective
successors and assigns, hereby covenant and agree, without further
consideration, to do all lawful acts and things and execute such other
lawful assignments, documents, assurances, applications and other
instruments as may reasonably be required by Gibralt, its successors
and assigns to obtain any and all rights under the Offer of Finance and
to vest the same in Gibralt, its successors and assigns.
4. This agreement may be executed in several counterparts, each of which
shall be deemed an original and all of which shall together constitute
one in the same instrument.
5. This agreement shall be governed and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada
applicable therein.
IN WITNESS WHEREOF the parties hereto have executed this
agreement as of the day and year first above written.
MerBanco Capital Inc.
Per: /s/
-------------------------
3678652 Canada Inc.
Per: /s/
-------------------------
MBT Capital
Per: /s/ X.X. Xxxxx
-------------------------
Gibralt Capital Corporation
Per: /s/ Xxxxxx Xxxxxx
-------------------------
