Exhibit 10(r)
Loan Agreement dated February 26, 1996 among Xxxxxx Xxxxxx Inns,
Inc., as borrower, St. Clair Inn, Inc., Spring Lake Inn, Inc. and Xxxxxx
Xxxxxx Inn, Incorporated, as guarantors, and Great American Life Insurance
Company, as lender.
LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of February 26, 1996 among GREAT
AMERICAN LIFE INSURANCE COMPANY, an Ohio corporation (referred to herein as
the "Lender"), XXXXXX XXXXXX INNS, INC., a Michigan corporation (the
"Borrower"); ST. CLAIR INN, INC., a Michigan corporation, SPRING LAKE INN,
INC., a Michigan corporation; and XXXXXX XXXXXX INN, INCORPORATED, a
Michigan corporation (collectively the "Guarantors").
W I T N E S S E T H:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS
SECTION a. Defined Terms.
As used in this Loan Agreement, the following terms shall have the
following meanings (such meaning to be equally applicable to both the
singular and plural forms of terms):
"Accounts" mean any and all "accounts", as such term is defined in
Section 9-106 of the Code, including any and all rights and claims in, to
and under, all accounts, accounts receivable, contract rights and rights to
payment for merchandise, goods or commodities sold or leased or to be sold
or leased or for services rendered or to be rendered however evidenced and
all other forms of obligations for the payment of money, all guaranties and
security therefor, and letters of credit relating thereto.
"Act" means the Securities Act of 1933, as the same may be amended
from time to time.
"AFG" means American Financial Group, Inc., an Ohio Corporation.
"Affiliate" means, in relation to any Person, any Person which
(directly or indirectly) controls or is controlled by or is under common
control with such Person. For the purposes of this Loan Agreement, the term
"control," including with correlative meanings, the terms "controlled by"
and "under common control with," as used with respect to any Person, shall
mean the possession (directly or indirectly) of the power to direct or to
cause the direction of the management or the policies of such Person,
whether through the ownership of shares of any class and the capital of such
Person or by contract or otherwise.
"Agreement" means this Loan Agreement, including all Schedules,
Exhibits, and Supplements hereto, if any, as the same may from time to time
be amended, supplemented or otherwise modified.
"Assets to be Sold" means the commercial properties adjacent to the
St. Clair Inn, the marina slips adjacent to the Spring Lake Holiday Inn, and
the residential properties and undeveloped land adjacent to the Xxxxxx
Xxxxxx Inn, all as more particularly described on the attached Exhibit "C."
"Assignment of Franchise Agreements" means that certain Assignment
of Franchise Agreements, Management Agreements, Permits and Contracts dated
as of even date herewith, between each Operating Subsidiary and the Lender
substantially in the form of the attached Exhibit "D."
"Assignment of Life Insurance" means the Assignment of Life
Insurance Policies and Proceeds of even date herewith on the life of Xxxxxx
X. Xxxxxxxx by and between the Borrower and/or Operating Subsidiaries and
the Lender substantially in the form of Exhibit "E" attached hereto.
"Assignment of Meritage Note" means the assignment by the Borrower
to the Lender of its rights under the Meritage Note, the Meritage Pledge
Agreement and all collateral and security related thereto substantially in
the form of Exhibit "F" attached hereto.
"Books" means any and all books, records, ledger cards, files,
correspondence, computer programs, tapes, discs and related data processing
software that at any time evidence or contain information relating to any of
the Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon, and any and all other rights now or
hereafter arising out of any contract or agreement between an Operating
Subsidiary and any service bureau or computer or data processing company
charged with preparing or maintaining an Operating Subsidiary's books or
records or with credit reporting.
"Building Materials" means any and all building materials or items
of personal property used in connection with the development, construction
or renovation of any improvements.
"Business Day" means any day except a Saturday, Sunday or legal
holiday under the laws of the State of Ohio.
"Capital Expenditures" means in relation to the Borrower and its
Subsidiaries for any period, all expenditures by the Borrower and its
Subsidiaries paid or accrued for the lease, purchase, construction or use of
any property or assets the value of which, in accordance with GAAP, is
required to be (or is permitted to be, and the Borrower so elects)
capitalized on the consolidated balance sheet of the Borrower as of the end
of such period, including, without limitation, all amounts paid or accrued
by the Borrower and its Subsidiaries for such period with respect to
Capitalized Lease Obligations (excluding the interest component thereof).
"Capitalized Lease Obligations" means all lease obligations that, in
accordance with GAAP, should be capitalized. (A Capitalized Lease
Obligation shall be deemed incurred at the time a binding commitment to
purchase or lease the subject property or equipment shall become effective).
"Chattel Paper" means any and all "chattel paper", as such term is
defined in Section 9-105(1)(b) of the Code, including any and all writings
of whatever sort which evidence a monetary obligation and a security
interest in or lease of specific goods.
"Closing" has the meaning attributed thereto in Section 6.1 hereof.
"Code" means the Uniform Commercial Code as adopted in the State of
Michigan, as amended or supplemented from time to time.
"Collateral" means either the Hotel Collateral, the Loan B Personal
Property, or both, as appropriate.
"Consolidated Interest Expense" means with respect to the Borrower
for any period, interest accrued or payable by the Borrower and its
Subsidiaries during such period in respect of Total Debt determined on a
consolidated basis in accordance with GAAP.
"Debt Service" means for such period the sum (without duplication)
of
i. Consolidated Interest Expense plus scheduled principal
amortization of Total Debt (other than the final balloon
payments in connection with Indebtedness of the Borrower
unless past due, whether or not such payments are made, or
prepayments in connection with any Indebtedness).
"Default" means any of the events specified in Section hereof,
whether or not there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act.
"Default Rate" shall mean, with respect to the amount due and
payable under either of Loan A or Loan B, that rate which is Four Percent
(4%) in excess of the amount otherwise payable from time to time under the
respective Note related to the applicable Loan, and, with respect to any
other amounts otherwise due and payable under the terms of the Loan
Agreement or any other Loan Document, shall mean Five Percent (5%) above the
Prime Rate.
"Depot Building" means the building located at the Xxxxxx Xxxxxx Inn
Hotel and identified as parcel 6 on a survey dated February 7, 1996 prepared
by X.X. Xxxxxxxxx & Associates, Inc., a copy of which has been delivered to
Lender.
"Documents" mean any and all "documents", as such term is defined in
Section 9-105(1)(f) of the Code, and any and all documents of title, bills
of lading, dock warrants, dock receipts, warehouse receipts and other
similar documents, whether or not negotiable, including all documents which
purport to be issued by a bailee or agent and purport to cover goods in any
bailee's or agent's possession which are either identified or are fungible
portions of an identified mass, including such documents of title made
available to an Operating Subsidiary for the purpose of ultimate sale or
exchange of goods or for the purpose of loading, unloading, storing,
shipping, transshipping, manufacturing, processing or otherwise dealing with
goods in a manner preliminary to their sale or exchange.
"EBITDA" means with respect to the Borrower for any period, earnings
(or losses) before interest and income taxes of the Borrower and its
Subsidiaries for such period plus, to the extent deducted in computing such
earnings (or losses) before interest and income taxes, depreciation and
amortization expense, all as determined on a consolidated basis with respect
to the Borrower and its Subsidiaries in accordance with GAAP; provided,
however, EBITDA shall exclude earnings or losses resulting from (i)
cumulative changes in accounting practices, (ii) discontinued operations,
(iii) extraordinary items, (iv) net income of any entity acquired in a
pooling of interest transaction for the period prior to the acquisition, (v)
net income of a Subsidiary that is unavailable to the Borrower, and (vi) net
income from corporations, partnerships, associations, joint ventures or
other entities in which the Borrower or a Subsidiary has a minority interest
and which the Borrower does not control, except to the extent actually
received.
"Environmental Indemnity Agreement" means the Environmental
Indemnity Agreement between each Operating Subsidiary and the Lender in the
form of the attached Exhibit "G."
"Equipment" means any and all "equipment" as such term is defined in
Section 9-109(2) of the Code, including: (i) any and all furniture and
furnishings, including all office and hotel furniture, carpets, rugs and
other floor coverings, shades, venetian blinds, drapes, curtains,
tapestries, screens, works of art, pictures, paintings, tables, chairs,
desks, clocks, sofas, beds, dressers, cabinets, lamps, decorative lighting
fixtures and outdoor furniture; (ii) any and all operating equipment,
including washers, dryers, vacuum cleaners, stoves, ovens, ranges,
refrigerators, garbage disposals, minibars, microwave ovens, timers,
dishwashers, air conditioning equipment, beauty shop and xxxxxx equipment,
fire extinguishers, enunciator system and other fire and life safety
equipment; (iii) any and all office equipment, including all computers, fax
machines, safes and cash registers and all accounting, duplicating,
communication, switchboard and reservation equipment; (iv) any and all hotel
and restaurant equipment, including all chinaware, glassware, linens,
bedding, silverware, tableware, uniforms, kitchen utensils, janitor's
equipment, unlaid carpeting and mechanical stores, including any and all
such items bearing the name or identifying characteristics of any
franchisor; (v) any and all recreation and athletic equipment, including all
equipment used in connection with any gymnasium, sauna, hot tub, steam room
or swimming pool and game and sports equipment; (vi) any and all
entertainment equipment, including radios CD players, tape players,
phonograph sets, speakers, phonograph records, tapes, arcade games,
television sets, antennae and antenna systems, projection systems, intercoms
and public address systems; (vii) any and all automobiles, trucks, vans,
buses and other vehicles; (viii) any and all other trade fixtures,
apparatus, other equipment and tangible personal property used in connection
with the management, maintenance and operation of an Operating Subsidiary's
business; and (ix) any and all renewals or replacements of, additions to or
substitution for, the above-enumerated items.
"Event of Default" means any of the events specified in Section
hereof, provided that there has been satisfied any requirement in connection
with such event for the giving of notice, or the lapse of time, or the
happening of any further condition, event or act.
"Financing Statements" mean the UCC financing statements to be filed
in the offices listed on Schedule 1.1(a) hereto.
"Fixtures" mean any and all "fixtures", as such term is defined in
Section 9-313(1)(a) of the Code, (other than tenant improvements in or which
an Operating Subsidiary has at no time any right, title, claim, estate or
interest) located upon or within a Property or now or hereafter installed
in, or used in connection with a Property, including any and all machinery,
equipment, appliances and fixtures for generating or distributing air,
water, heat, electricity, light, fuel or refrigeration, for ventilating or
sanitary purposes, for the exclusion of vermin or insects or for the removal
of dust, refuse or garbage or for other purposes, all wall beds, wall safes,
built-in furniture and installations, furnishings, shelving, lockers,
partitions, vaults, elevators, dumbwaiters, awnings, mirrors, window shades,
screens, venetian blinds, draperies, drapery rods and brackets, screens,
floor coverings, carpets, light fixtures, fire hoses and brackets and boxes
for the same, fire sprinklers, alarm systems, plumbing, bathtubs, sinks,
basins, pipes, faucets, water closets, washers, dryers, tubs, trays and
other laundry equipment, ice boxes, refrigerators, heating units, stoves,
ovens, ranges, dishwashers, disposals, water heaters, incinerators,
telephone, sound, television and communication systems, fire and life safety
equipment, and athletic equipment and installations, in each case whether or
not permanently affixed to a Property, together with all substitutions,
replacements or additions.
"Franchise Agreements" means the License Agreement between Spring
Lake Inn, Inc. and Holiday Inns, Inc. dated July 26, 1983, as amended, and
any replacement or substitution thereof together with any other franchise,
management or other agreements covered by the Assignment of Franchise
Agreements.
"GAAP" means Generally Accepted Accounting Principles at the time in
effect.
"General Intangibles" mean any and all "general intangibles", as
such term is defined in Section 9-106 of the Code, including the following:
(i) any and all rights to payment of money other than Accounts, and all
rights in any returned, reclaimed and repossessed goods and all rights,
claims, titles, securities, security interests, liens and guaranties
evidencing, securing, guarantying payment of, relating to or otherwise with
respect to such rights to payment; (ii) any and all insurance policies
covering any assets and all rights and claims therein or thereunder,
including insurance against damage (including by fire or earthquake), loss,
casualty or liability (including environmental cleanup costs), title
insurance and builder's risk insurance, whether covering personal property,
real property or intangible rights, together with the proceeds, products,
renewals and replacements thereof, including prepaid and unearned premiums;
(iii) any and all compensation, awards and payments and relief given by any
Governmental Authority or other source, including as a result of damage to
any of the assets resulting from earthquake, flood, windstorm, emergency or
any other event or circumstance; (iv) any and all licensing agreements,
royalties, license fees, reservations, sales literature, telephone numbers,
deposits (including security and cleaning deposits and deposits collected
from tenants or lessees or guests and deposits collected from purchasers
pursuant to contracts for sale of a Property or any part thereof) or leases
of personal property, purchase and sale contracts for a Property and other
contracts, contract rights, undertakings, surety and other bonds, all forms
of obligations owing to an Operating Subsidiary or in which an Operating
Subsidiary may have an interest, any and all choses and things in action,
goodwill, catalogs, purchase orders, customer lists (including pertaining to
any mail order business operated by an Operating Subsidiary in conjunction
with a Property), invoices, purchase orders and tax and other refunds of
every kind and nature; (v) any contracts, agreements, rights or written
materials relating to the ownership, use, development, construction,
maintenance, operation, marketing, leasing, occupancy, sale or financing of
a Property, or any Operating Subsidiary's other assets, including
improvement plans and specifications, and architectural drawings and
agreements with contractors, subcontractors, suppliers, project managers and
supervisors, designers, architects, engineers, sales agents, leasing agents,
consultants and property managers; (vi) any lawsuit, claim or arbitration
proceeding against any Person or relating to any asset for any reason,
whether or not presently excluded by Section 9-104 of the Code; (vii) to the
maximum extent permitted by the applicable law of the State, any and all
licenses and other rights, privileges or permits issued by any Governmental
Authority from time to time, including building permits, excavation permits
or other consents relating to the construction, renovation, use or operation
of a Property, but excluding any asset that is a liquor license under
subsection (ix) below; (viii) any landlord's lien or innkeeper's lien or
similar right created by law, in equity or by contract; (ix) to the maximum
extent permitted by the applicable law of the State, any and all rights,
title and interest in any liquor license, or similar permit, consent,
certificate right or privileges necessary to permit an Operating Subsidiary
or any other Person carrying on business at a Property to own, sell, serve,
dispense and otherwise deal with alcoholic beverages; and (x) any and all
right, title and interest arising from any rejection under the Bankruptcy
Reform Act of 1978 (11 U.S.C. Sections 101-1330, as amended or supplemented
from time to time, and any successor statute, and all of the rules issued or
promulgated in connection therewith) of any lease under which an Operating
Subsidiary is the lessee by the lessor or any sublessor.
"Governmental Authority" means any government, any federal, state,
local or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, quasi-judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranty" means each guaranty of the Loans by the Operating
Subsidiaries substantially in the form of the attached Exhibit "H" and
"Guarantees" means all Guarantees of the Operating Subsidiaries.
"Hereto," "herein," "hereof," "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular section
or other subdivision of this Agreement unless the context otherwise
indicates.
"Hotel Accounts" mean any and all "accounts", as such term is
defined in Section 9-106 of the Code, including any and all rights and
claims in, to and under, all accounts, accounts receivable, contract rights
and rights to payment for merchandise, goods or commodities sold or leased
or to be sold or leased or for services rendered or to be rendered, however
evidenced, including, without limitation, any of the room charges and other
consideration paid by any lodger or guest for the use or occupancy of any
guest room, banquet room, ballroom, recreational facility, parking structure
or other part of a Hotel Property, specifically, including, without
limitation, charges for any and all telephone calls, laundry and dry
cleaning, parking, valet, room service, use of rooms, banquet rooms and
movie or other entertainment, any office, copy, fax or other business
machinery, and all other forms of obligations for the payment of money owing
to an Operating Subsidiary arising out of the ownership and operation of a
Hotel Property, all guaranties and security therefor, and letters of credit
relating thereto.
"Hotel Collateral" means each of the following related to the
operation of the Hotel Properties: Equipment, Building Materials,
Inventory, Fixtures, Chattel Paper, Hotel Accounts, Instruments,
Intellectual Property, Documents, General Intangibles, Books, Landscaping,
and Proceeds.
"Hotel Property" shall mean each of the Spring Lake Holiday Inn,
Spring Lake, Michigan; the Xxxxxx Xxxxxx Inn, Port Huron, Michigan; and the
St. Clair Inn, St. Clair, Michigan and "Hotel Properties" shall mean all of
such properties.
"Indebtedness" means, as to the Borrower and the Operating
Subsidiaries, all obligations that, in accordance with generally accepted
accounting principles and practices, would be classified as liabilities upon
a balance sheet.
"Indebtedness for Borrowed Money" means, Indebtedness (i) in respect
of any money borrowed by Borrower and its Operating Subsidiaries; (ii) under
or in respect of any guaranty (whether direct or indirect) by Borrower and
its Operating Subsidiaries of any Indebtedness for borrowed money of any
other person; or (iii) evidenced by a loan or credit agreement, promissory
note, debenture, bond or guaranty.
"Instruments" means any and all "instruments", as such term is
defined in Section 9-105(1)(i) of the Code, including negotiable
instruments, certificated and uncertificated securities and every other
writing which evidences a right to the payment of money.
"Intellectual Property" means any and all of the following rights,
properties and assets: (i) any and all patents and patent applications,
domestic or foreign, all licenses relating to any of the foregoing and all
income and royalties with respect to any licenses (including such patents,
patent applications and patent licenses), all rights to xxx for past,
present or future infringement thereof, all rights arising therefrom and
pertaining thereto and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof; (ii) any and all copyrights
and applications for copyright, domestic or foreign, together with the
underlying works of authorship (including titles), whether or not the
underlying works of authorship have been published and whether said
copyrights are statutory or arise under the common law, and all other rights
and works of authorship, all rights, claims and demands in any way relating
to any such copyrights or works, including royalties and rights to xxx for
past, present or future infringement, and all rights of renewal and
extension of copyright; (iii) any and all state (including common law),
federal and foreign trademarks, service marks, logos and trade names, and
applications for registration of such trademarks, service marks, logos and
trade names, all licenses relating to any of the foregoing and all income
and royalties with respect to any licenses (including such marks, names,
applications and licenses), whether registered or unregistered and wherever
registered, all rights to xxx for past, present or future infringement or
unconsented use thereof, all rights arising therefrom and pertaining thereto
and all reissues, extensions and renewals thereof; (iv) any and all trade
secrets, confidential information, customer lists, license rights,
advertising materials, operating manuals, methods, processes, know-how,
sales literature, drawings, specifications, blue prints, descriptions,
inventions, name plates and catalogs; (v) any and all computer programs and
software (including all source codes and object codes in media of any type
or nature in which such source codes or object codes are reproduced, copied,
stored or maintained at any time or from time to time and all licenses and
other rights entitling an Operating Subsidiary to use, copy and reproduce
such object codes and source codes and an Operating Subsidiary's rights in
all licenses and other rights granted by an Operating Subsidiary to any
other Person to copy, use, sell, market or reproduce computer software and
such source codes and object codes); (vi) any and all rights, privileges and
claims, under any franchise agreements, and other contracts, agreements or
licenses permitting an Operating Subsidiary to use any General Intangible,
including any trademarks, trade names, logos or service marks owned by any
other Person; and (vii) the entire goodwill of or associated with the
businesses now or hereafter conducted by an Operating Subsidiary connected
with and symbolized by any of the aforementioned assets.
"Inventory" means any and all "inventory", as such term is defined
in Section 9-109(4) of the Code, (including goods in transit) in all of its
forms, including: (i) any and all goods held by an Operating Subsidiary for
sale or lease or other disposition or otherwise used in connection with a
Property, including those held for display or demonstration or out on lease
or consignment or to be furnished under a contract of service or so leased
or furnished or provided for the use of the guests of a Property, whether or
not for a separate fee; (ii) any and all operating supplies used at or in
the operation of a Property, including upholstery supplies, cleaning
supplies, office supplies, paint supplies, laundry supplies, janitorial
supplies, inventories of food, beverages, recreational supplies and any
other supplies used or consumed in or in connection with any Property or an
Operating Subsidiary's business, and to the maximum extent permitted by
applicable law of the State, liquor, wine and spirits; (iii) any and all raw
materials, work in process, finished goods and materials used or consumed in
the manufacture, packing, shipping, advertising, selling, leasing,
furnishing or production of the aforementioned goods or otherwise used or
consumed in the operation of a Property or an Operating Subsidiary's
business and the resulting product or mass, including all supplies of food,
foodstuffs and beverages and contents and minibars; (iv) all repossessed,
returned, rejected, reclaimed and replevied goods of the kind described in
clauses (i) through (iii); and (v) all additions and accessions to any of
the foregoing, and all other similar items hereafter acquired by an
Operating Subsidiary by way of substitution, replacement, return,
repossession or otherwise.
"Landscaping" means any and all trees, plants and other items of
landscaping and decoration owned or leased by an Operating Subsidiary to the
extent that the same are not part of a Property under the applicable law of
the State.
"Lien" means any mortgage, pledge, hypothecation, assignment,
security interest, lien, charge or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as a conditional sale or title retention agreement, and the filing
of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Life Insurance" means those policies of insurance on the life of
Xxxxxx X. Xxxxxxxx listed on the attached Exhibit "Q" having a death benefit
of not less than Five Million One Hundred Thousand and 00/100 Dollars
($5,100,000.00).
"Loan A" means the Twelve Million and 00/100 Dollars
($12,000,000.00) loan secured by the Loan A Collateral.
"Loan A Collateral" means the Loan A Mortgages, a perfected first-
priority security interest in the Hotel Collateral and the Assignment of
Franchise Agreements.
"Loan A Mortgages" mean a first-priority mortgage, substantially in
the form of the attached Exhibit "I", on the real estate underlying each
Hotel Property more particularly described on the attached Exhibit "J."
"Loan B" means the Three Million and 00/100 Dollars ($3,000,000.00)
loan secured by the Loan B Collateral.
"Loan B Collateral" means the Loan B Mortgages, a perfected first-
priority security interest in the Loan B Personal Property, a perfected
second-priority security interest in the Hotel Collateral, the Assignment of
Life Insurance, the Assignment of Meritage Note and the Pledge Agreement.
"Loan B Mortgages" mean first-priority mortgages, substantially in
the form of the attached Exhibit "K" on the Assets to be Sold and second-
priority mortgages, substantially in the form of the attached Exhibit "L" on
the real estate underlying each Hotel Property more particularly described
on the attached Exhibit "J."
"Loan B Personal Property" means each of the following located on or
created by or in connection with any of the Assets to be Sold: Equipment,
Building Materials, Inventory, Fixtures, Chattel Paper, Accounts,
Instruments, Intellectual Property, Documents, General Intangibles, Books,
Landscaping, and Proceeds.
"Loans" mean Loan A and Loan B to be made by the Lender to the
Borrower under this Agreement.
"Loan Documents" mean the instruments delivered or to be delivered
from time to time in connection with the Loans, including without
limitation, this Agreement, the Notes, the Guarantees, the Assignment of
Life Insurance, the Security Agreements, the Pledge Agreement, the
Assignment of Meritage Note, the Meritage Certificate, the Environmental
Indemnity Agreement, the Assignment of Franchise Agreements, the UCC
Financing Statements, the Loan A Mortgages and the Loan B Mortgages.
"Meritage" means Meritage Hospitality Group Incorporated, a Florida
corporation.
"Meritage Certificate" means the Certificate and Agreement of
Meritage in the form of the attached Exhibit "M" dated as of the Closing
Date.
"Meritage Note" means the Ten Million Five Hundred Thousand and
00/100 Dollars ($10,500,000.00) Secured Promissory Note dated September 19,
1995 payable by Meritage to the Borrower.
"Meritage Pledge Agreement" means the Stock Pledge Agreement dated
September 19, 1995 between Meritage and the Borrower, as amended by a First
Amendment to the Stock Pledge Agreement dated February 26, 1996 pursuant to
which Meritage pledged to the Borrower One Million Five Hundred Thousand
(1,500,000) shares of Borrower's common stock.
"Mortgages" mean collectively the Loan A Mortgages and the Loan B
Mortgages.
"Notes" mean the promissory notes made by the Borrower to the order
of the Lender, executed pursuant hereto in substantially the form of Exhibit
"A" attached hereto with respect to Loan A and in substantially the form of
Exhibit "B" attached hereto with respect to Loan B and any promissory note
made by the Borrower in exchange or substitution for the Notes; and "Note"
means any of the Notes.
"Operating Subsidiaries" means each of the Guarantors.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Reform Act" means the Employee Retirement Income Security
Act of 1974, as it may be amended from time to time.
"Permitted Lien" means:
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business that are not yet due and
payable;
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to
participate in any fund in connection with workmen's compensation,
unemployment insurance, old age pensions or other social security
programs;
(iii) Encumbrances consisting of zoning restrictions, ease-
ments or other restrictions on the use of real property, none of
which materially impairs the use of such property by an Operating
Subsidiary in the operation of its business, and none of which is
violated in any material respect by existing or proposed structures
or land use;
(iv) Liens in favor of the Lender; and
(v) Liens set forth on Schedule 1.1(b) hereof.
"Person" means any individual, corporation, partnership, joint
venture, joint-stock company, trust, unincorporated organization, or
government or any agency or political subdivision thereof.
"Plan" means a defined benefit plan as defined in the Pension Reform
Act.
"Pledge Agreement" means the Pledge Agreement between the Borrower
and the Lender in the form of the attached Exhibit "N" pursuant to which the
stock of each of the Operating Subsidiaries is pledged to the Lender as
collateral for Loan B.
"Prime Rate" means the rate of interest announced from time to time
by The Provident Bank, Cincinnati, Ohio, as its prime rate.
"Proceeds" means any and all proceeds whether receivable or received
from or upon the sale, lease, license, collection, use, exchange or other
disposition, whether voluntary or involuntary, of any Collateral including
"proceeds" as defined in Section 9-306 of the Code, any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to or for the account
of an Operating Subsidiary from time to time with respect to any of the
Collateral, any and all payments (in any form whatsoever) made or due and
payable to an Operating Subsidiary from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting
under color of governmental authority), any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral or
for or on account of any damage or injury to or conversion of any Collateral
by any Person, and all proceeds of such proceeds.
"Prohibited Transaction" has the meaning attributed thereto in the
Pension Reform Act.
"Property" shall mean each of the Hotel Properties and the Assets to
be Sold and "Properties" shall mean all of the Hotel Properties and the
Assets to be Sold.
"Relevant Reference Period" means, with respect to a Computation
Date, the period of four (4) consecutive fiscal quarters ending on such
Computation Date.
"Reportable Event" means any of the events set forth in Section
4043(b) of the Pension Reform Act or the regulations thereunder, other than
any such event for which the Thirty (30) day notice requirement under the
Pension Reform Act has been waived in regulations issued by the PBGC.
"SEC" means the Securities and Exchange Commission, as from time to
time constituted, created under the Act.
"Security" has the meaning attributed thereto in Section 2(l) of the
Act.
"Security Agreements" mean each of the Security Agreements of even
date between the Lender, as secured party, and the Operating Subsidiaries
substantially in the form of Exhibit "O" attached hereto pursuant to which
the Operating Subsidiaries shall grant a security interest in the Collateral
to the Lender.
"Special Dividend" means a dividend of Zero and 50/100 Dollars
($0.50) per share of the Borrower's Common Stock payable on or about March
30, 1996 to the Borrower's shareholders of record as of March 15, 1996.
"State" shall mean the State of Michigan.
"Stock Purchase Agreement" means that certain Stock Purchase and
Sale Agreement by and among Meritage Hospitality Group Incorporated, Xxxxxx
Xxxxxx Inns, Inc., Xxxxxx X. Xxxxxxxx and Innkeepers Management Company
dated September 19, 1995.
"Subsidiary" means any corporation in which a majority of the
outstanding shares are owned or controlled, directly or indirectly, by any
Person.
"Total Debt" means with respect to the Borrower at any time, all
Indebtedness of the Borrower and its Subsidiaries as determined on a
consolidated basis in accordance with GAAP.
"Total Revenues from Hotel Operations" means all revenue generated
by the Hotel Properties in the normal course of business, including, but not
limited to, those arising from room rentals, retail space rentals, vending
machine commissions, food and beverage service and telephone charges.
"UCC Financing Statements" means the financing statements executed
by an Operating Subsidiary and to be filed in order to perfect the security
interest granted to the Lender under the Security Agreements.
SECTION b. Accounting Terms.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.
SECTION c. Use of Defined Terms.
All terms defined in this Agreement shall have their defined
meanings when used in the Notes and the other Loan Documents, unless the
context otherwise indicates or requires.
ARTICLE 2.
LOAN TERMS AND AMOUNT
SECTION a. Commitment.
Subject to the terms and conditions of this Agreement, the Lender
agrees to make the Loans to the Borrower.
SECTION b. Use of Proceeds.
The proceeds of the Loans shall be used exclusively for the
following purposes: (i) to pay off the existing first mortgage loans
secured by the Hotel Properties in the amount not to exceed Eleven Million
Two Hundred Thirty Two Thousand and 00/100 Dollars ($11,232,000) plus
interest accrued on such loans after February 10, 1995; (ii) to fund up to
One Million and 00/100 Dollars ($1,000,000) in Capital Expenditures on the
Hotel Properties; (iii) up to One Million Five Hundred Ten Thousand Seventy
Five and 00/100 Dollars ($1,510,075) may be used to pay the Special
Dividend; (iv) up to One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000) may be used to pay costs and expenses incurred by the Borrower
or which the Borrower is responsible to pay or reimburse on behalf of others
relating to the transactions through which Meritage became the controlling
shareholder of the Borrower as described on the attached Schedule ; (v) up
to Two Hundred Fifty Thousand and 00/100 Dollars ($250,000) may be used to
pay the costs, fees and expenses incurred by the Borrower in connection with
the Loans, including, but not limited to, title insurance fees, survey
costs, closing costs and legal fees; and (vi) up to One Hundred Fifty Five
Thousand and 00/100 Dollars ($155,000) may be used to pay real estate taxes
incurred in connection with the Loans.
SECTION c. Holdback for Environmental Cleanup.
At the Closing, the Lender shall withhold One Hundred Twenty Five
Thousand and 00/100 ($125,000) of the proceeds of Loan B pending the
satisfactory completion of certain environmental remediation work at the
Spring Lake Holiday Inn. The Borrower covenants and agrees to complete such
work as soon as possible but in any event prior to September 30, 1996 and
provide to Lender evidence satisfactory to the Lender that all required work
has been completed and that such property requires no further cleanup under
the terms of any applicable environmental laws. Upon receipt of such
evidence together with evidence that the Borrower has paid all costs and
expenses incurred in connection with such work, the Lender shall disburse
such One Hundred Twenty Five Thousand and 00/100 Dollars ($125,000) to
Borrower.
SECTION d. Notes; Interest Rates.
The Loans shall be evidenced by two promissory notes of the
Borrower. The promissory note with respect to Loan A shall be in the
principal amount of Twelve Million and 00/100 Dollars ($12,000,000.00) and
shall be substantially in the form of Exhibit "A" attached hereto. The
promissory note with respect to Loan B shall be in the principal amount of
Three Million and 00/100 Dollars ($3,000,000.00) and shall be substantially
in the form of Exhibit "B" attached hereto. Each Note shall bear interest
at the rate provided for in such note.
In the event that the Borrower shall be in default under the terms
of the covenants contained in Section 4.2(d) or 4.2(e) hereof and until such
time as the Borrower shall demonstrate to the Lender that it is then in
compliance with such covenants, the interest rate payable with respect to
Loan A shall be equal to the Prime Rate plus Three Percent (3%) and the
interest rate payable with respect to Loan B shall be equal to the Prime
Rate plus Ten Percent (10%); provided, however, nothing contained in this
Section 2.4 or elsewhere in this Loan Agreement shall prevent the Lender
from exercising any other rights available to it hereunder, including, but
not limited to, the imposition of the Default Rate or the acceleration of
the maturity of all amounts payable hereunder.
SECTION e. Payments of Interest and Principal.
Interest accrued on the unpaid principal amount of the Notes and the
principal of such Notes shall be due and payable as provided therein.
SECTION f. Prepayment.
The Borrower may, at its option, upon notice to the Lender, as
provided in this Section 2.6, prepay the Notes at any time, as a whole or in
part at the principal amount so to be prepaid, together with accrued
interest thereon to the date fixed for such prepayment together with the
premium, if any, relating to such prepayment provided for below.
Subject to the terms of this Section 2.6, Borrower may, at its
option, voluntarily prepay all or any part of Loan A at any time, or from
time to time, without premium or penalty.
Subject to the terms of this Section 2.6, Borrower may, at its
option, voluntarily prepay Loan B in whole at any time, or in part in
increments of One Hundred Thousand and 00/100 Dollars ($100,000.00) from
time to time upon payment of all accrued interest on the amount so prepaid
plus a prepayment premium of Ten Percent (10%) of the principal amount so
prepaid; provided, however, no premium shall be payable if the Lender
requires and the Lender shall have the right to require such prepayment from
the proceeds of (i) the refinancing of Loan A for an amount in excess of the
principal balance thereof at the time of such prepayment, (ii) the sale of
any of the Assets to be Sold, (iii) any sale of or payment from the Life
Insurance, (iv) any payment on the Meritage Note, (v) the sale of the Depot
Building, or (vi) any tax refund received by Borrower for 1995. Proceeds
from the sale of any of the Assets to be Sold shall, at the option of the
Lender, be applied to prepay all or a portion of the amounts due under Loan
B without premium or penalty. If the Lender requires the Borrower to use
such proceeds to prepay Loan B, the balance of the proceeds, if any, may be
used, at the option of the Lender to prepay all or a portion of Loan A or to
make Capital Expenditures. If the Lender elects not to require the Borrower
to use such proceeds to prepay Loan B, such proceeds may be used, at the
option of the Borrower, to prepay all or a portion of Loan A or to make
Capital Expenditures on the Hotel Properties. If the Borrower or the Lender
shall receive or be entitled to receive any payments on the Life Insurance
or the Meritage Note, such payments shall, at the option of the Lender, be
applied to prepay all or a portion of the amounts due under Loan B without
premium or penalty. If the Lender requires the Borrower to use such
proceeds to prepay Loan B, the balance of such proceeds, if any, may be
used, at the option of the Lender, to prepay all or a portion of Loan A or
to make Capital Expenditures. If the Lender elects not to require the
Borrower to use such proceeds to prepay Loan B, such proceeds may be used,
at the option of the Borrower, to prepay all or a portion of Loan A, to make
Capital Expenditures on the Hotel Properties or for working capital
purposes. If the Borrower receives or is entitled to receive any cash
compensation for the sale of the Depot Building, or any form of tax refund
for 1995, such payments shall be applied to prepay all or a portion of the
amounts due under Loan B without premium or penalty. Notwithstanding any
other provision of this Agreement or any of the other Loan Documents, in the
event of any prepayment because of foreclosure of the Mortgages or other
judicial sale of the Collateral, there shall be due and payable a prepayment
premium in the amount of ten percent (10%) of the amount prepaid.
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, the Lender shall not be required to release or
subordinate any of the second mortgages on the Hotel Properties unless the
Lender is satisfied in its sole and absolute discretion that it otherwise
has sufficient collateral for Loan B.
The Borrower shall give written notice to the Lender of any intended
prepayment under either of the Notes not less than Thirty (30) days before
the date fixed for prepayment, specifying
the date fixed for such prepayment, the principal amount of the Note to be
prepaid, and the premium, if any, and accrued interest applicable to such
prepayment. Upon the giving of such notice, the unpaid principal amount of
the Note to be prepaid, together with the premium, if any, and accrued
interest thereon, shall become due and payable on the date fixed for such
prepayment. If after giving notice to the Lender, Borrower fails to make
the prepayment of which it gives notice to the Lender, Borrower shall pay an
administrative fee equal to the greater of One Percent (1%) of the intended
prepayment or the amount of the prepayment premium payable with respect to
such prepayment within Three (3) days after the date fixed for such
prepayment, which payment shall reinstate the Loan which was to have been
prepaid in accordance with the terms and provisions of the applicable Note
and this Agreement and shall not constitute a Default or Event of Default
hereunder.
Any amounts prepaid with respect to Loan A or Loan B shall be
applied to the payments due under such Loans in the inverse order of
maturity.
SECTION g. Manner of Payments; Computation of Interest.
Interest on the Notes shall be calculated on the basis of a three
hundred sixty (360) day year composed of twelve (12) months each having
thirty (30) days.
All payments (including prepayments) by the Borrower on account of
principal or, premium, if any, and interest on, the Notes shall be made to
the Lender at the address specified in Section 7.6 hereof (or at such other
place as the Lender shall notify the Borrower in writing), in lawful money
of the United States of America and in immediately available funds.
If any payment to be made under the Notes becomes due on a day that
is not a Business Day, such payment may be made on the next succeeding
Business Day.
SECTION h. Exchange of Notes.
At the written request of the holder of the Notes and upon surrender
of the Notes for such purposes, the Borrower shall, at any time and at its
expense (other than any transfer taxes) issue new Notes to the Lender or to
another entity designated by the Lender which is an Affiliate of AFG in
exchange for such Notes in denominations not smaller than One Million and
00/100 Dollars ($1,000,000.00) specified by such holder, in an aggregate
principal amount equal to the unpaid principal amount of the Notes so sur-
rendered and substantially in the form of Exhibit "A" or Exhibit "B", as
applicable, with appropriate insertions and variations, and bearing interest
from the date to which interest has been paid on the Notes so surrendered;
provided, however, that Borrower's obligation to issue new Notes pursuant to
this Section 2.8 shall be subject to delivery to Borrower by the holder of
the Notes of a representation substantially similar to that contained in
Section 3.2(b) hereof.
SECTION i. Commitment Fee.
Borrower shall pay to the Lender at Closing an amount equal to One
Percent (1%) of each Loan as a loan fee.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
SECTION a. Representations and Warranties of the Borrower and
the Operating Subsidiaries.
In order to induce the Lender to enter into this Agreement and to
make the Loans, the Borrower and each Operating Subsidiary makes the
following representations and warranties to the Lender:
i. Corporate Existence. The Borrower and each of the Operating
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan.
ii. Power and Authority. The Borrower and each of the Operating
Subsidiaries have full power, authority and legal right, material
governmental permits, consents and licenses, and all other authorizations
which are necessary for them to own, lease and operate their respective
properties and to transact the business in which each is engaged.
iii. Qualification. The Borrower and each of the Operating
Subsidiaries is duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction in which the conduct of their respective
businesses or the ownership of their respective assets requires such
qualification except where the failure to be so qualified would not have a
material adverse effect on the Borrower or any of the Operating Subsidiaries
or their respective operations.
iv. Transaction Authority and Proceedings. Except as set forth
on Schedule 3.1(d) hereto, the Borrower and each of the Operating
Subsidiaries has all requisite power, authority and legal right to execute,
deliver and perform all of their respective obligations under this
Agreement, the Notes and the other Loan Documents to which each of them is a
party; the execution, delivery and performance by the Borrower and each of
the Operating Subsidiaries of this Agreement, the Notes and the other Loan
Documents to which each of them is a party have been duly authorized by all
necessary corporate action, and do not and will not require any consent or
approval of any other party, including the stockholders of the Borrower.
v. No Legal Bar. Except as set forth on Schedule 3.1(e)
hereto, the execution, delivery and performance by the Borrower and each of
the Operating Subsidiaries of this Agreement, the Notes and the other Loan
Documents to which each of them is a party do not and will not (i) violate
any material provision of any law, rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award
presently in effect, or the certificate of incorporation, charter, by-laws
or any preferred stock provision of the Borrower or any of the Operating
Subsidiaries; nor (ii) result in a material breach of or constitute a
material default under any existing Indebtedness, mortgage, indenture, loan
or credit agreement, or any other agreement, lease or instrument to which
the Borrower or any Operating Subsidiary is a party or by which the
Borrower, any of the Operating Subsidiaries or their respective properties
may be bound or affected; nor (iii) result in the creation or imposition of
any Lien on any of the properties or assets of the Borrower or any of the
Operating Subsidiaries except as contemplated by this Agreement.
vi. Execution, Binding Effect. This Agreement has been duly
executed and delivered by the Borrower and each of the Operating
Subsidiaries and constitutes, and the Notes and other Loan Documents to
which each of the Borrower and the Operating Subsidiaries are parties when
executed and delivered by the Borrower and each of the Operating
Subsidiaries will constitute, legal, valid and binding obligations of each
of the Borrower and the Operating Subsidiaries, as the case may be,
enforceable against such entities in accordance with their respective terms
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally or by the availability of equitable remedies.
vii. Litigation. Except as set forth on Schedule 3.1(g) hereto,
there are no actions, suits, investigations, claims or proceedings (whether
or not purportedly on behalf of the Borrower or an Operating Subsidiary)
pending or, to the knowledge of the Borrower or an Operating Subsidiary,
threatened against or affecting the Borrower, any of the Operating
Subsidiaries or any of their respective properties before or by any court,
arbitrator or governmental body, which would, if determined adversely to the
Borrower or any of the Operating Subsidiaries, have a material adverse
effect on the financial condition, business or operations of the Borrower or
any of the Operating Subsidiaries or the ability of such entities to perform
their obligations under this Agreement, the Notes and the other Loan
Documents.
viii. Default. Except as set forth on Schedule 3.1(h) hereto,
neither the Borrower nor any of the Operating Subsidiaries is in default and
no condition exists which, with the passing of time, and/or the giving of
notice would constitute a default or an event of default under any existing
Indebtedness, order, writ, judgment, injunction, decree, determination,
award, indenture, agreement, lease or other instrument to which the Borrower
or any of the Operating Subsidiaries is a party or by which the Borrower or
any of the Operating Subsidiaries is subject or bound.
ix. Government Consents, Registration, Etc. To the best of
Borrower's knowledge after diligent inquiry, no authorization, consent,
approval, license, exemption, filing, qualification or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection
with the execution, delivery or performance by the Borrower or the Operating
Subsidiaries of this Agreement, the Notes or the other Loan Documents or the
transactions contemplated hereby or thereby. Neither the Borrower nor any
of the Operating Subsidiaries is subject to regulation under the Public
Utility Holding Company Act of 1935, the Interstate Commerce Act, or any
statute or regulation which regulates the incurring of Indebtedness for
Borrowed Money.
x. Designated Contracts. Except as set forth on Schedule
3.1(j), no authorization, consent or approval from any party, is or will be
necessary in connection with the Assignment of Franchise Agreements.
xi. Principal Office; Name. The principal place of business,
the chief executive office and the place at which the books and records of
the Borrower and the Operating Subsidiaries are kept is 00 Xxxxx Xxxxxx,
X.X., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 00000. All other locations where
the Borrower and the Operating Subsidiaries conduct business or own real or
personal property are listed on Schedule 3.1(k) hereto.
xii. Private Offering. The Borrower has not, either directly or
indirectly, offered the Notes or any similar security of the Borrower or the
Operating Subsidiaries to, or solicited offers to acquire from, or otherwise
approached or negotiated with respect thereto with, any Person other than
the Lender. Neither the Borrower nor anyone acting on its behalf shall
offer the Notes or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, anyone so as
thereby to bring the issuance of the Notes within the provisions of
Section 5 of the Act.
xiii. Finder's Fee. Neither the Borrower nor any of the Operating
Subsidiaries have made any agreement or taken any action which may cause
anyone to become entitled to a commission or finder's fee as a result of the
making of the Loans.
xiv. Financial Statements; Indebtedness. To the best of
Borrower's knowledge after diligent inquiry, the consolidated balance sheet
of the Borrower as of November 30, 1994, and the related consolidated state-
ments of income and retained earnings and consolidated statements of cash
flows for the fiscal year ended on November 30, 1994, reported upon by Xxxxx
Xxxxxxxx LLP, independent public accountants, copies of which have been
furnished to the Lender, (x) have been prepared in accordance with GAAP and
are complete and correct in all material respects, and (y) fully and fairly
present the financial condition of the Borrower as at such date and the
results of operations of the Borrower for the period covered thereby;
(1) the consolidated balance sheet of the Borrower as
of August 31, 1995 and the related consolidated
statements of income and retained earnings and
consolidated statements of cash flows for the nine
months ended August 31, 1995, copies of which have
been furnished to the Lender, (x) have been
prepared in accordance with GAAP and are complete
and correct in all material respects, (y) fully and
fairly present the financial condition of the
Borrower at such date and the results of operations
of the Borrower for the period covered thereby, and
(z) since August 31, 1995, there has been no
material adverse change in such condition or
operations;
(2) since August 31, 1995 the Borrower has incurred no
material Indebtedness of any nature which remains
unpaid, including, but without limitation,
liabilities for taxes and any interest or penalties
relating thereto, except to the extent listed on
Schedule 4.2(c) hereof; and the Borrower does not
know of any basis for the assertion against the
Borrower of any material claim or liability of any
nature not fully reflected and reserved against in
the financial statements referred to in the
preceding paragraph.
The Borrower owns no assets except for the Meritage Note, the
Meritage Pledge Agreement, and the common stock of the Operating
Subsidiaries. The Operating Subsidiaries have good and marketable title to
the Hotel Properties, the Assets to be Sold and the Collateral, free, clear
and unencumbered except for Permitted Liens.
xv. Taxes. To the best of Borrower's knowledge after diligent
inquiry, the Borrower and the Operating Subsidiaries have filed all tax
returns (Federal, state and local) required to be filed (except those as to
which valid extensions of time have been granted) and paid all taxes,
assessments, fees and other governmental charges imposed upon the Borrower,
the Operating Subsidiaries or upon any of their respective properties,
income or franchises, which are due and payable (except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have
been provided). All tax liabilities of the Borrower and the Operating
Subsidiaries are adequately provided for, and neither Borrower nor any
Operating Subsidiary knows of any proposed additional tax assessment against
it or the Operating Subsidiaries not adequately provided for in the Balance
Sheet of the Borrower at August 31, 1995, described in Section hereof. The
provision for taxes on the books of the Borrower and each Subsidiary is
adequate for each of their respective current fiscal periods.
xvi. Regulations U and G. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying
"margin securities" (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Loan will be used to extend credit to others for the purpose of purchasing
or carrying any "margin securities." The Borrower does not own any "margin
securities" (as defined in Regulation G of the Board of Governors of the
Federal Reserve System) which in the aggregate would constitute a
substantial part of the assets of the Borrower.
xvii. Commitments. Except as described on Schedule 3.1(q) hereto,
neither the Borrower nor any of the Operating Subsidiaries have any material
lease, contract or commitment of any kind which provides for an annual
expenditure in excess of Fifty Thousand and 00/100 Dollars ($50,000.00); to
the best knowledge of the Borrower and each Operating Subsidiary, all
parties (including the Borrower and the Operating Subsidiaries) to all such
material leases, contracts and other commitments have complied with all
material provisions of such leases, contracts and other commitments; no
party is in default under any thereof and no event has occurred which, but
for the giving of notice or the passage of time, or both, would constitute a
default.
xviii. Compliance With Law. The Borrower and each of the Operating
Subsidiaries have complied with all material applicable laws, ordinances,
governmental rules or regulations with respect to:
(1) any restrictions, specifications, or other
requirements pertaining to products that the
Borrower and the Operating Subsidiaries sell or to
the services they perform;
(2) the conduct of their respective businesses; and
(3) the use, maintenance and operation of the real and
personal properties owned or leased by them in the
conduct of their respective businesses.
xix. Subsidiaries. Except for the Operating Subsidiaries, the
Borrower has no Subsidiaries.
xx. Disclosure. No information, exhibit or report furnished by
the Borrower or any Operating Subsidiary to the Lender in connection with
the negotiation of the Loan, or the Loan Documents contain any material
misstatement of fact or omit to state a material fact necessary to make the
statements contained therein not misleading.
xxi. Restrictions on Borrower. Except and as provided under the
Articles of Incorporation and Bylaws of the Borrower and the Operating
Subsidiaries, there are no limitations in any indenture, mortgage, deed of
trust or other agreement or instrument to which the Borrower or any of the
Operating Subsidiaries is now a party or by which the Borrower or any of the
Operating Subsidiaries may now be bound with respect to the declaration and
payment of dividends or other distributions on its capital stock, the
incurrence of indebtedness or payment of interest thereon, nor any provision
which, by requiring the maintenance of specified amounts of net current
assets, ratios of current assets to liabilities, ratios of equity or surplus
to debt, or otherwise, directly or indirectly has the effect of such a
limitation.
xxii. Capitalization. The authorized and issued capital stock of
the Borrower and each of the Operating Subsidiaries is set forth on Schedule
3.1(v) hereto. Except as is therein disclosed, there are no shares of any
class of capital stock of Borrower or the Operating Subsidiaries issuable
upon conversion or exercise of any security of the Borrower, nor are there
any rights, options or warrants outstanding to purchase shares of any class
of capital stock of Borrower set forth on Schedule 3.1(v). The Borrower
owns all of the outstanding equity securities of each of the Operating
Subsidiaries free, clear and unencumbered by all Liens, except Liens in
favor of Lender.
xxiii. Investment Company. The Borrower is not an investment
company within the meaning of the Investment Company Act of 1940, as
amended, nor, to the best of the Borrower's knowledge, is it, directly or
indirectly, controlled by or acting on behalf of any person which is an
investment company within the meaning of said Act.
xxiv. ERISA. All Defined Benefit Pension Plans (as defined in the
Pension Reform Act) of the Borrower or any Affiliate of the Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of the
Pension Reform Act, and no Reportable Event or Prohibited Transaction has
occurred with respect to any such plan. No fact, including, but not limited
to, any Reportable Event or prohibited transaction exists in connection with
any Plan of Borrower or any Affiliate of the Borrower which might constitute
grounds for the termination of any such Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer any such Plan.
xxv. Condition of Assets. Since August 31, 1995, neither the
business nor the properties of the Borrower or the Operating Subsidiaries
have been materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition, or taking of property or
cancellation of contracts, permits or concessions by any domestic or foreign
government or agency thereof, riot, activities of armed forces or acts of
God or of any public enemy.
SECTION b. Representations and Warranties of the Lender.
The Lender makes the following representations and warranties to the
Borrower and the Operating Subsidiaries:
i. Corporate Organization. The Lender is a corporation duly
organized, validly existing and in good standing under the laws of the state
of its incorporation and has all requisite power and authority to carry on
its business as now conducted.
ii. Investment Representation. The Lender is acquiring the
Notes in the ordinary course of its commercial lending business for its own
account for investment and not with a view to, or for sale in connection
with, the distribution thereof within the meaning of the Act, but subject,
nevertheless, to any requirement of law that the disposition of its property
shall at all times be within its control, and without prejudice to its right
at all times to sell or otherwise dispose of all or any part of the Notes
under a registration or exemption from registration available under the Act.
iii. Corporate Authority. The Lender has taken all corporate
action necessary to authorize the execution, delivery and performance of all
obligations on its part to be performed hereunder. The execution and
delivery of this Agreement is not, and the performance of this Agreement
will not result in, a breach of any of the terms, conditions or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
credit agreement, note or other evidence of indebtedness, or other
agreement, or the Certificate of Incorporation or By-Laws of the Lender, as
presently in effect, or any order, writ, injunction, rule or regulation of
any court or Federal, state, county, municipal or other regulatory board or
body or administrative agency having jurisdiction over the Lender or over
its properties or its business. No event has occurred and no condition
exists which, upon making of the Loans or the passing of time, would
constitute a default or an event of default under any agreement, other
instrument or understanding to which the Lender is a party or by which it is
bound.
iv. Finders Fee. The Lender has not made any agreement or taken
any action which may cause anyone to become entitled to a commission or
finder's fee as a result of the making of the Loans.
SECTION c. Survival of Representations.
All representations and warranties made by the Borrower, the
Operating Subsidiaries and Lender in this Agreement and the other Loan
Documents shall survive the execution and delivery of such instrument and
the making of the Loans.
ARTICLE 4.
COVENANTS
The Borrower and each Operating Subsidiary covenants and agrees that
from the date of this Agreement until all of the principal amount of and
interest due on the Notes and all other amounts due hereunder shall have
been duly paid in full in lawful money the Borrower and the Operating
Subsidiaries will comply with the following covenants.
SECTION a. General Covenants.
i. Financial Statements and Reports. The Borrower will
maintain an adequate system of accounting in which complete entries are made
in accordance with GAAP reflecting all financial transactions of the
Borrower, and the Borrower will furnish to the Lender the following:
(1) Annual Financial Statements. Within ninety (90)
days after the close of each fiscal year an audit
report, prepared in accordance with GAAP, certified
by nationally recognized independent certified
public accountants, including a consolidated
balance sheet of the Borrower as of the end of such
period, the related consolidated statements of
income and retained earnings and the consolidated
statements of cash flows for the Borrower for the
fiscal year then ended;
(2) Quarterly Financial Statements. Within forty-five
(45) days after the close of each fiscal quarter,
unaudited statements at the close of such quarter,
including a consolidated balance sheet of the
Borrower as of the end of such period, the related
consolidated statements of income and retained
earnings and the consolidated statements of cash
flows for the Borrower for the quarter then ended,
certified by a responsible officer of the Borrower;
(3) Monthly Operating Reports. Within twenty (20) days
after the close of each month, operating reports
and other financial information in such format as
is reasonably requested by the Lender detailing the
results of operations for each of the Hotel
Properties;
(4) Annual Operating Budget. At least fifteen (15)
days prior to the start of each fiscal year, an
annual operating and Capital Expenditure budget for
each Hotel Property, including cash flow
projections for the upcoming fiscal year, presented
on a monthly basis consistent with the operating
statements referred to in clauses (ii) and (iii)
above;
(5) No Default Certificate. Together with the annual
and quarterly financial statements required
hereunder, a certificate signed by the President or
any Vice President of the Borrower to the effect
that no Default under this Agreement exists, that
the Borrower is in full compliance with each of the
financial covenants set forth in Section 4.2
hereof, and that no condition exists which with the
passage of time or the giving of notice or both
would give rise to a Default hereunder except as
specified in such certificate;
(6) SEC and Shareholder Reports. Promptly after the
sending or making available or filing of the same,
copies of all reports, proxy statements and
financial statements that the Borrower sends or
makes available to its stockholders and all
registration statements and reports that the
Borrower files with the Securities and Exchange
Commission or any successor Person;
(7) Tax Returns. Within ten (10) days of the Lender's
request therefor, the Borrower and the Operating
Subsidiaries will furnish to the Lender copies of
the federal income tax returns filed by the Borrow-
er and the Operating Subsidiaries; and
(8) Additional Information. Such other information as
the Lender may from time to time reasonably
request.
ii. Corporate Existence. The Borrower and each of the Operating
Subsidiaries will carry on and conduct their respective businesses in
substantially the same manner and in substantially the same fields of enter-
prise as they are presently conducted and do all things necessary to
preserve corporate existences, licenses or qualifications as a domestic
corporation in their respective jurisdictions of incorporation and as a
foreign corporation in every jurisdiction in which the character of their
respective properties or the nature of the business transacted by them at
any time makes qualification as a foreign corporation necessary, and
maintain all other material corporate rights and franchises.
iii. Merger. Neither the Borrower nor any of the Operating
Subsidiaries will merge or consolidate with or into, or sell, assign, lease
or otherwise dispose of to any Person (whether in one transaction or in a
series of transactions) all or substantially all of its properties and
assets (whether now owned or hereafter acquired); provided, however, that
any of the Operating Subsidiaries may be merged into the Borrower with
Thirty (30) days prior notice to the Lender.
iv. Compliance with Laws. The Borrower and each of the
Operating Subsidiaries will comply with all laws, rules and regulations of
any governmental body to which each may be subject and maintain and keep in
full force and effect all franchises, licenses, permits, approvals or
certificates required by governmental authorities material to the conduct of
their respective businesses.
v. Principal Office. Each of the Borrower and the Operating
Subsidiaries will maintain their respective principal place of business,
chief executive office and the place at which their respective books and
records are kept within the United States of America, and will not change
the location of their respective principal place of business, chief
executive office or the place at which their respective books and records
are kept from the address specified in Section 3.1(k) hereof unless they
shall have given the Lender at least Thirty (30) days prior written notice
of such change.
vi. Default Notice. The Borrower will give prompt notice in
writing to the Lender of any Default or Event of Default hereunder, or of
any condition which with the passage of time or the giving of notice or both
would give rise to a Default or an Event of Default hereunder, and of any
development, financial or otherwise, which would materially adversely affect
their respective businesses, properties or affairs or the ability of the
Borrower and the Operating Subsidiaries to perform their respective
obligations under this Agreement, the Notes, or under any other Loan
Document.
vii. Use of Proceeds. The Borrower will use the proceeds of the
Loans for the purposes set forth in Section 2.2 hereof and not for the
purpose of purchasing or carrying any margin stock so as to cause the Lender
to be in violation of Regulations G or U of the Board of Governors of the
Federal Reserve System.
viii. Further Assurances. The Borrower and the Operating
Subsidiaries will execute and deliver to the Lender, as requested by it, all
further instruments, documents and agreements which may be deemed reasonably
necessary and desirable by the Lender to carry out and perform the intent
and purpose of this Agreement, the Notes and the other Loan Documents.
ix. Taxes and Other Claims. The Borrower and the Operating
Subsidiaries will promptly pay and discharge (i) all taxes, assessments and
governmental charges and levies upon income, profits or property, real,
personal or mixed, or any part thereof, and (ii) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien
upon their properties, provided, however, that neither the Borrower nor any
of the Operating Subsidiaries shall be required to pay or cause to be paid
any tax, assessment, charge, levy or claim which is contested in good faith
by appropriate proceedings and with respect to which it shall have set aside
or caused to be set aside on its books reserves adequate therefor.
x. Insurance. The Borrower and each Operating Subsidiary will
keep and maintain public liability insurance and property and casualty
insurance on their respective properties in such amounts and against such
risks as provided for in the other Loan Documents, but, in any event, as are
customarily maintained by similar businesses, including without limitation
thereto, public liability, fire (with extended coverage) and workmen's
compensation insurance and employee fidelity insurance. The Borrower and
the Operating Subsidiaries shall make all premium payments required under
the terms of the Life Insurance, and shall not attempt to cancel such
policies or make any loans thereunder.
xi. Maintenance of Properties. Each of the Borrower and the
Operating Subsidiaries will do all things reasonably necessary to materially
maintain, preserve, protect and keep its properties in good repair, working
order and condition, and make all necessary and proper repairs, renewals and
replacements, including Capital Expenditures, so that each of such
properties is maintained in first-class operating condition, provided,
however, the Borrower or any Operating Subsidiary may, with the Lender's
prior written consent, demolish or cause to be demolished, the buildings,
improvements and the Loan B Personal Property located on or related to the
ancillary buildings adjacent to the St. Clair Inn, the commercial properties
adjacent to the St. Clair Inn, and the residential properties adjacent to
the Xxxxxx Xxxxxx Inn.
xii. ERISA. With respect to any Plan of the Borrower or any
Affiliate of the Borrower, the Borrower or such Affiliate will (i) make
prompt payments of contributions required to meet the minimum funding
standards set forth in Sections 302 through 305 of the Pension Reform Act,
(ii) promptly after the filing thereof, furnish to the Lender copies of each
annual report required to be filed pursuant to Section 103 of the Pension
Reform Act in connection with such Plan for each Plan year, including, if
required by Section 103, (x) a statement of the assets and liabilities of
such Plan as of the end of such Plan year and statements of changes in fund
balance and in financial position, or a statement of changes in net assets
available for Plan benefits, for such Plan year, certified by independent
public accountants of recognized standing acceptable to the Lender, and (y)
to the extent required by the Pension Reform Act, an actuarial statement of
such Plan applicable to such Plan year, certified by an enrolled actuary of
recognized standing acceptable to the Lender, (iii) notify the Lender
immediately of any fact, including, but not limited to, any Reportable Event
or Prohibited Transaction, arising in connection with any Plan which might
constitute grounds for the termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer the Plan, and (iv) furnish to the Lender, promptly upon its
request therefor, such additional information concerning any Plan as may be
reasonably requested.
xiii. SEC Filings. The Borrower will deliver to the Lender copies
of (i) all documents filed or delivered by the Borrower with or received by
such Person from the SEC or any successor agency, any securities exchange
and any state blue sky or securities law commission which relates to or
affects the Borrower, and (ii) all notices and other materials transmitted
to its shareholders generally.
xiv. Litigation. The Borrower and the Operating Subsidiaries
will deliver to the Lender immediately after the commencement thereof,
notice in writing of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any of the
Operating Subsidiaries of the type described in Section 3.1(g) hereof.
xv. Inspection. The Borrower and the Operating Subsidiaries
will permit the Lender, its representatives and agents, to visit and inspect
any of the properties, corporate books and financial records of the Borrower
and the Operating Subsidiaries, to examine and make copies of the books of
accounts and other financial records of the Borrower and the Operating
Subsidiaries, to examine and make copies of the books of accounts and other
financial records of the Borrower and the Operating Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrower and the Operating
Subsidiaries, and to be advised as to the same by, the officers of, and the
independent certified public accountants for, the Borrower at such
reasonable times and intervals as the Lender may designate.
SECTION b. Additional Covenants.
i. Acquisition of Non-Core Assets. Borrower shall not purchase
any assets and shall not incur any obligations which are unrelated to and
are not required in connection with the operation of the Hotel Properties.
ii. Restricted Payments. Except for the payment of the Special
Dividend, the Borrower will not, without the prior written consent of the
Lender, declare or pay any dividends, purchase, redeem, retire, or otherwise
acquire for value any of its capital stock now or hereafter outstanding,
return any capital to its stockholders as such.
iii. Indebtedness. Neither the Borrower nor any of the Operating
Subsidiaries will incur or suffer to exist any Indebtedness except (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness with those lenders
and creditors listed on Schedule 4.2(c) hereto in amounts not in excess of
the amounts listed thereon, (iii) trade indebtedness incurred in the
ordinary course of business, and (iv) any additional Indebtedness incurred
to refinance or refund Loan A so long as the amount of such Indebtedness
does not exceed Fifteen Million and 00/100 Dollars ($15,000,000).
iv. Minimum Net Worth. Borrower's total stockholders' equity as
reported on the consolidated balance sheet to be delivered in accordance
with Section 4.1(a)(i), (ii) and (iii) hereof shall not, be less than the
following amounts for the following periods:
COMPUTATION DATE STOCKHOLDERS' EQUITY
November 30, 1996 $2,500,000
February 28, 1997 $2,750,000
May 31, 1997 $3,000,000
August 31, 1997 $3,250,000
November 30, 1997 $3,500,000
and for each fiscal quarter thereafter, as long as either Loan is
outstanding, stockholders' equity shall not be less than Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000) in excess of the amount of
stockholders' equity required in the immediately preceding fiscal quarter.
v. Coverage Ratios.
(1) On each Computation Date set forth below, for the
Relevant Reference Period the ratio of (x) actual
consolidated EBITDA of Borrower to (y) Debt Service
of Borrower shall not be less than the ratios
listed below:
COMPUTATION DATE REQUIRED RATIO
November 30, 1996 2.4 to 1
February 28, 1997 2.4 to 1
May 31, 1997 2.4 to 1
August 31, 1997 2.4 to 1
November 30, 1997 2.2 to 1
February 28, 1998 2.2 to 1
May 31, 1998 2.2 to 1
August 31, 1998 2.2 to 1
November 30, 1998 2.4 to 1
February 28, 1999 2.4 to 1
May 31, 1999 2.4 to 1
August 31, 1999 2.4 to 1
November 30, 1999 2.9 to 1
February 28, 2000 2.9 to 1
May 31, 2000 2.9 to 1
August 31, 2000 2.9 to 1
November 30, 2000 3.3 to 1
February 28, 2001 3.3 to 1
May 31, 2001 3.3 to 1
August 31, 2001 3.3 to 1
November 30, 2001 4.0 to 1
February 28, 2002 4.0 to 1
May 31, 2002 4.0 to 1
August 31, 2002 4.0 to 1
November 30, 2002 and 5.1 to 1
each fiscal quarter
thereafter
(2) On each Computation Date set forth below,
for the Relevant Reference Period the ratio of (x)
actual consolidated EBITDA minus Capital
Expenditures of Borrower to (y) Debt Service of
Borrower shall not be less than the ratios listed
below:
COMPUTATION DATE REQUIRED RATIO
November 30, 1996 0.8 to 1
February 28, 1997 0.8 to 1
May 31, 1997 0.8 to 1
August 31, 1997 0.8 to 1
November 30, 1997 1.4 to 1
February 28, 1998 1.4 to 1
May 31, 1998 1.4 to 1
August 31, 1998 1.4 to 1
November 30, 1998 1.6 to 1
February 28, 1999 1.6 to 1
May 31, 1999 1.6 to 1
August 31, 1999 1.6 to 1
November 30, 1999 2.4 to 1
February 28, 2000 2.4 to 1
May 31, 2000 2.4 to 1
August 31, 2000 2.4 to 1
November 30, 2000 2.8 to 1
February 28, 2001 2.8 to 1
May 31, 2001 2.8 to 1
August 31, 2001 2.8 to 1
November 30, 2001 3.3 to 1
February 28, 2002 3.3 to 1
May 31, 2002 3.3 to 1
August 31, 2002 3.3 to 1
November 30, 2002 and 4.2 to 1
each fiscal quarter
thereafter
(i) On each Computation Date set forth below, for the
Relevant Reference Period the ratio of (x) Total
Debt of Borrower to (y) EBITDA of Borrower shall
not be greater than the ratios listed below:
COMPUTATION DATE REQUIRED RATIO
November 30, 1996 4.1 to 1
February 28, 1997 4.1 to 1
May 31, 1997 4.1 to 1
August 31, 1997 4.1 to 1
November 30, 1997 2.9 to 1
February 28, 1998 2.9 to 1
May 31, 1998 2.9 to 1
August 31, 1998 2.9 to 1
November 30, 1998 2.4 to 1
February 28, 1999 2.4 to 1
May 31, 1999 2.4 to 1
August 31, 1999 2.4 to 1
November 30, 1999 2.0 to 1
February 28, 2000 2.0 to 1
May 31, 2000 2.0 to 1
August 31, 2000 2.0 to 1
November 30, 2000 1.7 to 1
February 28, 2001 1.7 to 1
May 31, 2001 1.7 to 1
August 31, 2001 1.7 to 1
November 30, 2001 1.5 to 1
February 28, 2002 1.5 to 1
May 31, 2002 1.5 to 1
August 31, 2002 1.5 to 1
November 30, 2002 and 1.3 to 1
each fiscal quarter
thereafter
vi. Limitation on Capital Expenditures. Except as set
forth in the following sentence, neither Borrower
nor any Operating Subsidiary will make or contract
to make Capital Expenditures during any fiscal year
in excess of the following amounts:
Fiscal year ending November 30 Limitation
1996 $2,500,000
1997 $1,500,000
1998 $1,500,000
thereafter 4% of Total Revenues from
Hotel Operations
In any fiscal year, if the Borrower determines that it is unable or
it is unnecessary to make all Capital Expenditures permitted by this
section, it may carry over such unused amounts to the immediately following
fiscal year, which unused amounts shall be expended first prior to the use
of such fiscal year's Capital Expenditures budget.
vii. Ownership and Control of Borrower. Subject to the
restrictions regarding Meritage's ability to vote
its shares of Borrower's Common Stock in connection
with the election of Class II directors contained
in Article III of the Borrower's Bylaws, as
amended, at all times after the date hereof,
Xxxxxxxxxxx X. Xxxxxx ("Xxxxxx") shall own not less
than 50% of the outstanding equity securities
having the power to vote of Meritage, Meritage
shall own and control, directly, both legally and
beneficially, with the power to vote, Fifty-One
Percent (51%) or more of the issued and outstanding
shares of the common stock of Borrower, or in the
event of an issuance of common stock by the
Borrower, Meritage shall, directly, legally and
beneficially, own more shares of Borrower's common
stock than any other shareholder or group of
shareholders acting in concert and have sufficient
control to cause the election of persons nominated
by Meritage as a majority of the Borrower's
directors, and Xxxxxx or another person acceptable
to the Lender in its sole and absolute discretion
shall serve as the President and Chief Executive
Officer of the Borrower with all authority and
responsibility generally exercised by persons in
similar offices.
viii. Ownership and Control of the Operating
Subsidiaries. The Borrower shall continue to own
One Hundred Percent (100%) of the outstanding
equity securities of each of the Operating
Subsidiaries and no additional equity securities
shall be issued by any of the Operating
Subsidiaries.
ix. Lease Obligations. Neither Borrower nor any
Operating Subsidiary will incur or suffer to exist
any lease obligations (including Capitalized Lease
Obligations) except (i) lease obligations presently
in existence and listed on Schedule 4.2(i) hereto,
and (ii) other lease obligations provided the ag-
gregate annual rental payments under all such other
leases shall not exceed Fifty Thousand and 00/100
Dollars ($50,000.00).
x. Sale and Leaseback. Neither Borrower nor any
Operating Subsidiary will enter into any sale and
leaseback transaction with respect to their
respective assets.
xi. Investment and Loans. Except for the Meritage
Note, neither Borrower nor any Operating Subsidiary
will make or permit to exist any loans or advances,
to, or purchases of or investments in, or
acquisitions from any officer, shareholder,
director or employee of the Borrower or any
Operating Subsidiary.
xii. Guarantees and Other Contingent Liabilities.
Neither Borrower nor any Operating Subsidiary will
directly or indirectly, guarantee, endorse (other
than for collection or deposit in the ordinary
course of business), discount with recourse, agree
(contingently or otherwise) to purchase, repurchase
or otherwise acquire or to supply or advance funds
(whether by way of loan, stock purchase or capital
contribution) in respect of, or become liable with
respect to, directly or indirectly, any
indebtedness, obligation, liability or dividend of
any other person.
xiii. Encumbrances. Neither Borrower nor any Operating
Subsidiary will incur, or suffer to exist any
pledge, mortgage, assignment or other encumbrance
of or upon any of their respective assets or
properties now owned, or of or upon the income or
profits thereof, except Permitted Liens.
xiv. Limitation on Encumbrances. Neither Borrower nor
any Operating Subsidiary will enter into or suffer
to exist any indenture, contract or other
instrument or agreement with any Person which
prohibits it from creating, incurring or suffering
to exist any mortgage, pledge, lien, security
interest or other encumbrance upon their respective
assets and properties now owned, except as provided
in this Agreement.
xv. Prepayments. Except as contemplated herein, the
Borrower will not make or suffer to be made any
prepayment on Indebtedness other than the Notes.
xvi. Limitation on Transactions with Affiliates.
Subject to Section 4.2(q) hereof, neither Borrower
nor any Operating Subsidiary will at any time,
enter into or participate in any transaction with
or make any payment to including, without
limitation, any purchase, sale, lease or exchange
of property or the rendering of any service, with
any officer, director, shareholder or Affiliate of
Borrower or Meritage for an amount in excess of
Twenty Five Thousand and 00/100 Dollars
($25,000.00) during any fiscal year, without the
prior written consent of Lender.
xvii. Limitation on Executive Compensation. For fiscal
year 1996, neither Borrower nor any Operating
Subsidiary shall pay any officer total
compensation, excluding bonuses, in excess of One
Hundred Fifty Thousand and 00/100 Dollars
($150,000.00). For subsequent fiscal years,
neither Borrower nor any Operating Subsidiary shall
pay any officer total compensation, excluding
bonuses, in excess of One Hundred Fifty Thousand
and 00/100 Dollars ($150,000.00) increased by 5%
for each succeeding fiscal year. For fiscal year
1996 and thereafter, neither Borrower nor any
Operating Subsidiary shall pay Xxxxxx or Xxxxxx X.
Xxxxxxxx, Xx. ("Xxxxxxxx") bonuses in excess of
Seventy-Five percent (75%) of their respective
total compensation in such year payable in
accordance with the guidelines established by the
respective Board of Directors or a designated
commitee thereof.
xviii. St. Clair Inn Title Problems. The Commitment for
Title Insurance delivered to the Lender with
respect to the Assets to be Sold adjacent to the
St. Clair Inn reflects requirements and exceptions
from coverage relating to Parcel Nos. 1, 2 and 3
described therein. As soon as possible after the
Closing, the Borrower will take all necessary
action to cause free, clear and unencumbered title
to such parcels to be vested in St. Clair Inn, Inc.
and the mortgage lien in favor of the Lender on
such parcels to be the first and only lien on such
parcels. In addition, the Borrower shall take
whatever action is required to cause the title
insurance policy with respect to such parcels to be
issued without exception except for Permitted
Liens.
ARTICLE 5.
DEFAULTS AND REMEDIES
SECTION a. Event of Default.
The occurrence of any one or more of the following events shall
constitute an Event of Default, provided that there has been satisfied any
requirement in connection with such event for the giving of notice or the
lapse of time, or the happening of any further condition, event or act, it
being agreed that time is of the essence hereof:
i. Payment. Failure to pay for a period of Three (3)
days after the same is due any installment of
principal of, or premium or interest on either of
the Notes or any other amount due the Lender under
this Agreement when due which failure shall
constitute an Event of Default under both Loans; or
ii. Misrepresentation. Any material representation or
warranty made by the Borrower or Operating
Subsidiary or any officer of the Borrower or any
Operating Subsidiary in this Agreement or in any
Loan Document including any certificate, agreement,
instrument or written statement contemplated hereby
or made or delivered pursuant hereto or in
connection herewith, shall prove to have been
incorrect in any material respect as of the date on
which made; or
iii. Breach of Covenant. Failure by the Borrower or any
Operating Subsidiary in the observance or
performance of any other term, covenant or
agreement contained in, or made in connection with,
this Agreement, including, but not limited to, the
covenants contained in Section 4.2 hereof, or any
Loan Document on its part to be performed or
observed and any such failure shall remain
unremedied for ten (10) Business Days after (i)
written notice thereof shall have been given to the
Borrower or any Operating Subsidiary by the Lender
or (ii) the Lender is notified of such failure or
should have been so notified pursuant to
Section 5.1(f), whichever is earlier; provided,
however, the failure by the Borrower or any
Operating Subsidiary to deliver the documents
required by Section 6.3 hereof on a timely basis
shall constitute an Event of Default without notice
to the Borrower; or
iv. Cross Default-Other Indebtedness. Failure by the
Borrower to pay any Indebtedness (other than as
evidenced by the Notes) owing by the Borrower, or
any interest or premium thereon, when due, whether
such Indebtedness shall become due by scheduled
maturity, by required prepayment, by acceleration,
by demand or otherwise, or shall fail to perform,
prior to expiration of any applicable period of
grace, any term, covenant or agreement on its part
to be performed under any agreement or instrument
(other than the Loan Documents) evidencing or
securing or relating to any such indebtedness owing
by the Borrower, when required to be performed if
the effect of such failure is to accelerate, or to
permit the holder or holders of such Indebtedness
or the trustee or trustees under any such agreement
or instrument to accelerate the maturity of such
Indebtedness unless such failure to pay or perform
shall be waived by the holder or holders of such
Indebtedness or such trustee or trustees or the
Borrower commences a proceeding to contest the
validity or enforceability of such term, covenant
or agreement within 30 days after the date of such
performance is due and proceeds with the
prosecution of such proceeding in good faith and
such proceedings do not adversely affect the
business or operations of the Borrower; or
v. Insolvency. The Borrower, any Operating Subsidiary
or Meritage shall be or become insolvent, or be
adjudicated a bankrupt or insolvent, or admit its
inability to pay its debts as they mature, or make
an assignment for the benefit of creditors; or the
Borrower, any Operating Subsidiary or Meritage,
shall apply for or consent to the appointment of
any receiver, trustee, or similar officer for it or
for all or any substantial part of its respective
property, or such receiver, trustee or similar
officer shall be appointed without the application
or consent of the Borrower, any Operating
Subsidiary or Meritage, and such appointment shall
continue undischarged for a period of forty-five
(45) days; or the Borrower, any Operating
Subsidiary or Meritage shall institute (by
petition, application, answer, consent or
otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding
relating to it under the laws of any jurisdiction,
or any such proceeding shall be instituted (by
petition, application or otherwise) against the
Borrower, any Operating Subsidiary or Meritage and
shall remain undismissed for a period of forty-five
(45) days; or any judgment, writ, warrant of
attachment or execution or similar process shall be
issued or levied against a substantial part of the
property of the Borrower, any Operating Subsidiary
or Meritage and such judgment, writ, or similar
process shall not be released, vacated or fully
bonded within forty-five (45) days after its issue
or levy; or
vi. Reportable Event. Any Reportable Event shall have
occurred which the Lender determines in good faith
constitutes grounds for the termination by the PBGC
of any Plan or for the appointment by the
appropriate United States District Court of a
trustee for any such Plan, or any such Plan shall
be terminated or any such trustee shall be
appointed or any proceedings shall be instituted by
the PBGC for such appointment, if the Lender in
good faith determines such action could materially
adversely affect the financial condition of the
Borrower or any Operating Subsidiary; or
vii. Judgment. A final judgment for the payment of
money in excess of Fifty Thousand and 00/100
Dollars ($50,000.00) shall be rendered against the
Borrower or any Operating Subsidiary and shall
remain undischarged for a period of sixty (60) days
after the date upon which such judgment shall
become final (including all appeals thereof) or the
time for appeal shall have elapsed without an
appeal having been taken and notice thereof has
been given, by registered or certified mail, to the
Borrower or such Operating Subsidiary by specifying
such event and requiring the Borrower or Operating
Subsidiary to cause such judgment to be rescinded
or annulled or to cause such indebtedness to be
discharged; or
viii. Contest Loan. The validity or enforceability of
this Agreement, the Notes or any of the other Loan
Documents shall be contested by the Borrower or an
Operating Subsidiary, where the Borrower or
Operating Subsidiary shall deny that it has any
further liability or obligation hereunder or
thereunder.
SECTION b. Remedies.
If any Event of Default shall occur and be continuing, the Lender
may exercise any or all remedies granted to it under applicable law, this
Agreement and the other Loan Documents, and without further notice to the
Borrower, may declare either or both of the Notes and all other amounts
payable hereunder to be immediately due and payable, whereupon the principal
amount of the Notes, together with accrued interest thereon, shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, anything
contained herein, in the Notes or in any Loan Document to the contrary
notwithstanding.
ARTICLE 6.
CLOSING
SECTION a. Place, Time and Disbursement of Loans.
The closing ("Closing") of the Loan shall take place at the offices
of the Lender or their counsel, Messrs. Xxxxxxx, Xxxxxxxx & Xxxxxxx, at the
address set forth for notices in Section 7.6 hereof. The Closing shall
occur on or before February 15, 1996 or at such other time as the parties
shall agree upon. At the Closing, upon satisfaction of all conditions set
forth herein and subject to the terms of 2.3 hereof, the Lender shall
disburse the entire principal amount of Loan A and Two Million Eight Hundred
Seventy Five Thousand and 00/100 Dollars ($2,875,000) of the principal
amount of Loan B in accordance with written disbursement instructions of the
Borrower delivered by the Borrower to the Lender.
SECTION b. Conditions to Making the Loans.
The Lender shall not be required to make the Loans unless each of
the below listed conditions shall have occurred on or prior to the Closing.
i. Documents. The Borrower and the Operating Subsidiaries
shall deliver to the Lender all documents required to be so
delivered pursuant to Section 6.3 hereof.
ii. Representations and Warranties. The representations and
warranties of the Borrower and the Operating Subsidiaries
made in this Agreement shall be true and correct in all
material respects as of the date of the Closing, with the
same effect as if made on such date except as affected by
transactions contemplated by this Agreement.
iii. Material Change. In the judgment of the Lender, neither
Borrower nor any Operating Subsidiary shall have suffered
any adverse material change in their respective financial
condition or their respective ability to perform the terms
and conditions of this Agreement and to consummate the
transactions contemplated hereby.
iv. Compliance with this Agreement. The Borrower and the
Operating Subsidiaries shall have performed and complied
with all agreements, covenants and conditions contained in
this Agreement which are required to be performed or
complied with by them before or at the Closing and there
shall have occurred no Default hereunder.
v. Legality. The Loan and the Notes shall qualify on the date
of the Closing as legal investments for insurance companies
organized under the laws of the State of Ohio pursuant to
Sections 3925.01 et seq. and 3907.01 et seq. of the Ohio
Revised Code.
vi. Litigation. There shall have been no adverse change in the
Litigation listed on Schedule 3.1(g).
vii. Legal Fees. Borrower shall have reimbursed Lender for all
reasonable fees and disbursements of legal counsel to Lender
which shall have been incurred by Lender through the Closing
Date in connection with the preparation, negotiation,
review, execution and delivery of the Loan Documents and the
handling of any other matters incidental thereto.
viii. Payment of Commitment Fee. Borrower shall have paid to
Lender or made satisfactory arrangements with Lender for the
payment of the Commitment fee provided for in Section 2.9
hereof.
ix. Lien Searches. Lender shall have received the results of a
recent search by a Person satisfactory to Lender, of the
UCC, judgment and tax lien filings which may have been filed
with respect to personal property of Borrower or any of its
Operating Subsidiaries in the jurisdictions listed on
Schedule 3.1(k), and the results of such search shall be
satisfactory to Lender.
SECTION c. Documents to be Delivered to the Lender at Closing.
At the Closing, the Borrower and the Operating Subsidiaries shall
deliver to the Lender the following documents, each dated the date of the
Closing unless otherwise herein indicated, in form and substance reasonably
satisfactory to the Lender and their counsel:
i. Articles of Incorporation. Copies of the Articles of
Incorporation (and all amendments thereto) of the Borrower
and each Operating Subsidiary, certified not more than seven
days prior to the Closing by the Secretary of State of its
state of incorporation, together with certificates of the
Secretary or Assistant Secretary of the Borrower and each
Operating Subsidiary, dated the date of the Closing to the
effect that the foregoing Certificate of Incorporation has
not been amended since the date of the aforesaid
certification.
ii. By-Laws and Corporate Resolutions. A copy certified by the
Borrower's and each Operating Subsidiary's Secretary or an
Assistant Secretary of the By-Laws and the resolutions of
the Board of Directors of the Borrower and each Operating
Subsidiary authorizing and approving the execution, delivery
and performance of this Agreement, the Notes, the
Guarantees, the other Loan Documents and the transactions
contemplated hereby and thereby.
iii. Loan Documents. Each of the Loan Documents shall have been
duly and properly authorized, executed and delivered by
Borrower and/or the Operating Subsidiaries, as the case may
be.
iv. Incumbency of Officers. A certificate of the Secretary or
an Assistant Secretary of the Borrower and each of the
Operating Subsidiaries as to the identity and incumbency of
the officers of the Borrower and the Operating Subsidiaries
authorized to sign the Loan Documents, together with
specimen true signatures of such officers.
v. Insurance Certificate. A certificate of insurance
evidencing insurance with respect to policies covering the
Properties and the Collateral, stating that such policies
are in full force and effect and naming the Lender as an
additional named insured and loss payee thereunder.
vi. Opinion of Borrower's Counsel. A favorable opinion of
Borrower's and the Operating Subsidiaries' counsel
satisfactory to the Lender, addressed to the Lender,
substantially in the form and to the effect set forth in
Exhibit "P" hereof.
vii. Certificate of Meritage. A certificate of an authorized
officer of Meritage, substantially in the form of the
attached Exhibit "M."
ARTICLE 7.
MISCELLANEOUS
SECTION a. Remedies Cumulative; No Waiver.
The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
No failure or delay on the part of the Lender or any holder of the
Notes in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy hereunder.
SECTION b. Obligation to Pay, Expenses and Taxes.
The Borrower agrees, whether or not the transactions contemplated by
this Agreement shall be consummated, to pay or reimburse the Lender for all
costs and expenses incurred by the Lender (i) in connection with the
preparation, administration, amendment of the Loan and the Loan Documents,
including without limitation the reasonable fees and out-of-pocket expenses
of Messrs. Xxxxxxx, Muething & Xxxxxxx, counsel for the Lender, with respect
thereto and of local counsel, if any, who may be retained by said counsel
with respect thereto; (ii) all costs and expenses of the Lender, if any, in
connection with the enforcement of (or the preservation of any rights under)
the Loan Documents and any modification thereof; and (iii) all stamp, other
taxes and license fees, if any, payable or determined to be payable by
Lender in connection with execution and delivery of the Loan Documents, and
the Borrower shall indemnify and save the Lender harmless from and against
any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes. The obligations of the Borrower under
this Section shall survive payment of the Notes and termination of this
Agreement and the other Loan Documents.
SECTION c. Severability.
Any provision of this Agreement which is prohibited and
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION d. Confidentiality.
All materials and information furnished to Lender which are not
generally available to the public shall be confidential, and used only by
Lender and their legal counsel to enable Lender and Borrower to consummate
this transaction.
SECTION e. Entire Agreement; Amendments.
This Agreement and the instruments referred to herein constitute the
entire agreement of the parties hereto with respect to the subject matter
hereof.
No amendment, modification, termination, or waiver of any provision
of this Agreement or of the Notes nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Lender, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
SECTION f. Notices.
All notices, requests, demands and other communications provided for
hereunder shall be in writing, and if addressed to the Borrower or Operating
Subsidiaries, mailed or delivered to it via facsimile or otherwise,
addressed to it at:
Xxxxxx Xxxxxx Inns, Inc.
00 Xxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, President
with a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxx Xxxxxxxxxx Xxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
and, if to the Lender, mailed or delivered to it via facsimile or otherwise,
addressed to it at:
Great American Life Insurance Company
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
with copies to:
American Money Management Corporation
Second Floor, Provident Tower
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxx and Xxxxxx X.
Xxxxxxxxxx
- and -
Xxxxxxx, Muething & Xxxxxxx
Provident Tower
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with
the terms of this Section. All notices, requests, demands and other
communications provided for hereunder shall be effective 3 business days
after deposit in the mail, first class, postage prepaid, delivered to the
telegraph company charges prepaid, or transmitted by facsimile to such party
addressed as aforesaid.
SECTION g. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Operating Subsidiaries, the Lender and their respective
successors and assigns. Neither Borrower nor any Operating Subsidiary shall
not have the right to assign their respective rights hereunder or any
interest herein without the prior written consent of the Lender.
The Lender shall have the right to assign all or any part of their
obligations to make the loan to any Affiliate or Subsidiary, provided,
however, such Assignment shall not relieve the Lender of their obligations
hereunder. In the event of such Assignment by the Lender, the assignee in
addition to the Lender, shall be deemed to have been named the "Lender" in
the first paragraph of this Agreement and all representations, warranties
and covenants of the Borrower and each Operating Subsidiary made herein
shall be deemed to have been made to and shall inure to the benefit of such
assignee.
SECTION h. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
SECTION i. Reference to Headings.
The Article and Section headings and the Index used in this
Agreement are for convenience only and shall not affect the construction of
this Agreement.
SECTION j. Governing Law.
Except as expressly set forth therein, the Loan Documents shall be
deemed to be contracts made under the laws of, executed, and delivered in
the State of Ohio, and for all purposes shall be construed in accordance
with the laws of the State of Ohio.
SECTION k. Designation of Forum.
The Borrower and each Operating Subsidiary agrees (a) that any suit,
action, or proceeding pertaining to this Agreement may be instituted in the
Courts of the State of Ohio or the United States District Court for the
Southern District of Ohio, Western Division, and (b) irrevocably and
unconditionally submits and consents to the jurisdiction and venue of any
such court for such purpose. Borrower and each Operating Subsidiary hereby
irrevocably appoints CT Corporation, 0000 Xxxxx Xxxxx, Xxxxxxxxxx, Xxxx
00000, and its duly constituted successor(s), if any, as the agent for
service of process in any proceeding instituted hereunder and Borrower and
each Operating Subsidiary agrees that service of process upon such agent, in
accordance with the then-prevailing and applicable law as hereinabove agreed
to, with a copy of such summons or other instrument mailed to the Borrower
and each Operating Subsidiary in the manner specified in Section 7.6 hereof,
shall, upon receipt by Borrower, constitute proper service on Borrower and
each Operating Subsidiary for all purposes without objections of any kind
whatsoever. Notwithstanding the provisions of this Section 7.11, Lender
shall also be entitled to institute legal proceedings to adjudicate matters
pertaining to this Agreement against the other in any other competent court.
SECTION l. Participation.
Notwithstanding any other provision of this Agreement, the Borrower
and each Operating Subsidiary understands that the Lender may enter into
participation agreements with one or more Affiliates of AFG whereby the
Lender will allocate certain percentages of its commitment on the Loans and
Notes to such AFG Affiliates. The Borrower and each Operating Subsidiary
acknowledges that, for the convenience of all parties, this Agreement is
being entered into with the Lender only and that its obligations under this
Agreement are undertaken for the benefit, and as an inducement to, each such
AFG Affiliate as well as the Lender, and the Borrower and each Operating
Subsidiary hereby grants to each such Affiliate, to the extent of its
participation in the Loans the right to set off deposit accounts, if any,
maintained by the Borrower and each Operating Subsidiary with such
Affiliate.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers,
as of the date first above written.
WITNESSES: GREAT AMERICAN LIFE INSURANCE
COMPANY
BY:
ITS:
XXXXXX XXXXXX INNS, INC.
BY:
Xxxxxxxxxxx X. Xxxxxx, President
ST. CLAIR INN, INC.
BY:
Xxxxxxxxxxx X. Xxxxxx, President
SPRING LAKE INN, INC.
BY:
Xxxxxxxxxxx X. Xxxxxx, President
XXXXXX XXXXXX INN, INCORPORATED
BY:
Xxxxxxxxxxx X. Xxxxxx, President
