EXHIBIT 10.9
STARNET [LOGO]
SYSTEMS INTERNATIONAL, INC.
Xxxxxx Xxxxx
President and
Chief Operating Officer
June 23, 2000
Xxxxxxx Bay, Limited
____________________
____________________
Gentlemen:
This letter sets forth the commitment between Xxxxxxx Bay, Ltd, a
corporation organized under the laws of the Federation of St. Kitts & Nevis
("Lender"), and Starnet Systems International, Inc., a corporation
organized under the laws of the Country of Antigua and Barbuda
("Borrower"). This letter sets forth (i) the general economic terms of the
transaction, and (ii) specific conditions of Xxxxxx's commitment. All
dollar amounts, unless indicated otherwise, are in US Dollars. The terms
and conditions are as follows:
1. LOAN: Xxxxxx will lend the sum of not more than One Million Five
Hundred Thousand Dollars ($ 1,500,000) to Borrower, and
Xxxxxxxx agrees to repay the Loan in accordance with the
terms and conditions set forth in this letter agreement (the
"Loan"). Advances against the Loan amount shall be
disbursed in accordance with the schedule attached hereto as
Exhibit A.
2. TRANSACTION
TERMS: Borrower will repay the Loan in accordance with the
following schedule:
a. For so long as any principal is outstanding,
interest payments on the outstanding amount of
the Loan shall accrue at the rate of eight
percent per annum (8 %), with interest in arrears
due and payable on the first day of each month
during the term hereof.
b. Unless sooner paid in connection with the
conversion of the Loan to common stock in the
publicly traded parent of Xxxxxxxx, as
contemplated hereunder, the entire balance of the
principal amount of the Loan will be due and
payable on December 31, 2001. If participation
in the Offering, as defined below, is not offered
to Lender within one hundred twenty (120) days
following execution of this letter agreement,
Xxxxxx shall have the right to then declare the
Loan to be immediately due and payable.
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3. USE OF LOAN
PROCEEDS. The Loan shall be used exclusively for all costs involved in
the purchase, shipment, installation and configuring of the
equipment identified on Schedule B attached hereto and
incorporated herein by this reference, excluding , however,
the equipment identified as "optional" on such schedule (the
"Listed Equipment"). Borrower will satisfy the reasonable
requests of Xxxxxx in order to demonstrate that the Loan
proceeds are being used as contemplated hereunder. Advances
of the Loan which are received by Borrower shall be retained
by Xxxxxxxx in a segregated account at a mutually agreeable
financial institution and withdrawals from such account
shall be made for the sole purpose of making payment for the
costs and expenses related to the Listed Equipment, as set
forth above. No such payments shall be made by Borrower
unless and until Xxxxxxxx has delivered to Lender
documentary evidence confirming that the expenditure relates
to some or all of the Listed Equipment.
4. SECURITY
INTEREST: The Lender shall have the right to obtain a perfected
security interest in the Listed Equipment as and when it is
purchased with the Loan proceeds, as additional security for
the timely repayment of the Loan. Borrower shall execute
all documents necessary to reasonably satisfy Lender that
such security interests are effectively perfected under
applicable law.
5. EQUITY CONVERSION
EFFORTS. Borrower will use commercially reasonable efforts to provide
to Lender, within sixty (60) days following execution of
this Agreement, the opportunity for Lender, in its sole
discretion, to satisfy the Loan by the issuance of common
stock in the publicly-traded corporate parent of Borrower
("Parent"), with the objective of offering the opportunity
to Lender by way of a private placement of equity in Parent
together with other third party investors, on the same terms
and conditions as are offered to such third parties (the
"Offering"). Borrower shall cause such Offering to be in a
total amount, when including the value of the Loan, of not
less than Four Million Dollars ($4,000,000). Borrower
understands and agrees that this Letter Agreement is not an
offering of common stock in Parent, which can only be done
in accordance with all applicable laws and regulations. The
conversion option, if available, shall be priced for each
advance based on the average closing trading price of
Parent's common stock on the twenty trading days immediately
proceeding the date of such advance. Xxxxxxxx has received
an expression of interest from a third party to complete an
offering of common stock in Parent. Xxxxxx agrees that
Parent is not committed to accept such offer, but Xxxxxxxx
has undertaken for the benefit of Lender, as explained
above, to cause Parent to use commercially reasonable
efforts to provide an opportunity for Lender to convert the
Loan to common stock in Parent in accordance with this
Letter Agreement and otherwise on terms acceptable to Parent.
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6. EXCLUSIVE USE OF STARNET
SOFTWARE. In partial consideration for the obligations of Borrower
undertaken herein, Xxxxxx agrees, on its own behalf, and on
behalf of all entities involved in the ownership and
operation of the sites set forth on Schedule C (the
"Exclusive Sites") attached hereto and incorporated herein,
that all such operations for a period of three (3) years
following the date of deployment of the Listed Equipment in
Gibraltar, shall exclusively use Starnet software for all
such gaming operations, on terms which are the same as those
currently in effect. In the event Starnet is not offering
the type of gaming software which Lender desires to operate
in connection with the Exclusive Sites at any time during
such three (3) year period, Starnet will be provided with a
right of first opportunity to provide such software on terms
otherwise offered to Lender, so long as Starnet can satisfy
the timetable offered by the proposed other provider of such
software.
7. MORE DEFINITIVE
AGREEMENTS. Either party shall have the right to request the other to
further document the agreements made herein. If any party
makes any such request, each party shall proceed in good
faith to negotiate, complete and execute such agreements as
shall be appropriate to further document the agreements made
herein. The more definitive agreements shall contain terms,
conditions and covenants as may be agreed upon between the
parties, including those set forth herein, and such
additional terms, conditions and covenants as the parties
may agree and as shall be customary for transactions of the
type provided for under this agreement.
8. NON-DISCLOSURE
AND PUBLICITY. Neither party shall issue any press release, publicity
statement or other public notice, or otherwise disclose in
any manner to any third party relating to the subject of
this letter agreement without the prior written consent of
the other party, except that the parties may disclose this
agreement and its terms to their respective advisors and
attorneys who also agree to maintain such confidentiality.
Notwithstanding the above and with the agreement that
disclosure will not affect the parties' obligation to
maintain confidentiality, the parties are allowed to
disclose this agreement and such of its terms which a party
in good faith concludes is required or which is requested by
any recognized stock exchange to which a party is subject to
be so disclosed and then to the extent of such requirement
or request for disclosure. In such event, the parties shall
endeavor to coordinate all publicity relating to the
agreements described in this letter agreement.
9. EXPENSES. Each party shall pay its own expenses. Each party
represents that it has not engaged or authorized any broker,
finder or similar agent who would be entitled to a
commission or other fee in respect of the subject
transaction. Xxxxxx and Xxxxxxxx agree to indemnify and
hold harmless the other from any and all claims, charges,
commissions, fees or obligations which would be
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due to any consultant or similar agent engaged by each of
them in connection with the transaction contemplated
hereunder, unless otherwise agreed in writing between Xxxxxx
and Xxxxxxxx.
10. ASSIGNABILITY.
Neither party shall assign, transfer or otherwise convey its
interests in this letter or in any of the definitive
agreements which may be contemplated hereunder, provided
that Xxxxxx may sell and assign the Loan to an affiliate of
Lender which is wholly owned by the same ultimate owner as
Lender.
11. EFFECT OF LETTER;
ENFORCEABILITY.
THIS LETTER AGREEMENT IS INTENDED TO BIND BOTH PARTIES IN
ACCORDANCE WITH THE TERMS HEREOF. THE PARTIES DO UNDERSTAND
THAT SUCH OBLIGATIONS ARE INTENDED TO BE BINDING
OBLIGATIONS. NO OTHER AGREEMENTS, UNDERSTANDINGS OR
ARRANGEMENTS HAVE BEEN MADE BETWEEN THE PARTIES WITH RESPECT
TO THE SUBJECT MATTER HEREOF WHICH ARE NOT INCORPORATED HEREIN.
If this letter agreement accurately reflects the intent of the
parties, kindly indicate your agreement with the foregoing by executing a
counterpart of this letter.
Sincerely,
Starnet Systems International, Inc.
_____________________________
By: Xxxxxx Xxxxx, President
Intending to be legally bound hereby, acknowledged
and agreed this _______ day of June, 2000.
Xxxxxxx Bay, Ltd.
By: ____________________________________
Its: ____________________________________
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SCHEDULE A
Schedule of Advances
Amount Time
1. Initial Advance $500,000 Execution of
Letter Agreement
2. Additional Advances Balance of Loan In increments not later
10 days prior to the
date on which amounts
are due for the Listed
Equipment.
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SCHEDULE B
Schedule of Listed Equipment
Omitted
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SCHEDULE C
List of Currently Operated Sites
xxxx://xxx.xxxxxxxxxx.xxx/
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xxxx://xxx.xxxxxxxxxxx.xxx/
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xxxx://xxx.xxxxxxxxxx.xxx/
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