PASS-THROUGH AGREEMENT
PASS-THROUGH AGREEMENT
This Pass-Through Agreement (this “Agreement”) is made this 19th day of August, 2004, between Meritage Hospitality Group Inc., a Michigan corporation, whose address is 0000 Xxxx Xxxxxxxx Xxx., X.X., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx, 00000 (“Meritage”), and Xxxxxx X. Xxxxxxxx, Xx., a Michigan resident, whose address is 000 Xxxx Xxxx, X.X., Xxxxx Xxxxxx, Xxxxxxxx 00000 (“Xxxxxxxx”).
RECITALS
A. WHEREAS, Xxxxxxxx is (i) a member of Meritage’s Board of Directors, (ii) Meritage’s Chief Executive Officer and President, and (iii) the beneficial owner of approximately 873,300 Meritage common shares (approximately 15.8% of outstanding).
B. WHEREAS, Meritage, through its affiliate (Wendy’s of Michigan), desires to sell to Xxxxx Income Properties, LLC, a Michigan limited liability company (“Xxxxx”), and Xxxxx desire to acquire from Wendy’s of Michigan, the following assets for total consideration of $1,652,000:
| » | 0000 00xx Xxxxxx, X.X., Xxxx xx Xxxxxxx, Xxxxxx of Kent, State of Michigan, containing approximately 1.2 acres (the “28th Street Property”); |
| » | 00000 Xxxxx Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx of Ottawa, State of Michigan, containing approximately 2.5 acres (the "Xxxxx Street Property"); and |
| » | a Purchase & Sale Agreement dated January 27, 2004, as amended, to purchase real estate located at 0000 Xxxxxxxxx Xxx., X.X., Xxxxxxxxx Xxxxxxxx, Xxxxxx of Kent, State of Michigan, containing approximately 3.3 acres (the "Caledonia Contract"). |
C. WHEREAS, Meritage, through its affiliates, then intends to lease-back from Xxxxx, and Xxxxx will lease to Meritage, (i) a portion of the Xxxxx Street Property for the operation of a newly constructed O’Charley’s restaurant, and (ii) a portion of the property acquired under the Caledonia Contract for the operation of a newly constructed Wendy’s restaurant.
D. WHEREAS, in order to facilitate the above-referenced transactions, Xxxxx is requiring that Xxxxxxxx purchase (through a limited liability company of which he owns 50%) an approximate 12.5% ownership interest in Xxxxx (the “Ownership Interest”) and personally guaranty Xxxxx’x indebtedness.
E. WHEREAS, Xxxxxxxx’x Ownership Interest in Xxxxx would make the above-referenced transactions into related party transactions which must be reviewed and approved by Meritage’s Audit Committee.
F. WHEREAS, Xxxxxxxx is willing to purchase the Ownership Interest in Xxxxx but is doing so primarily to facilitate the transaction from Meritage’s standpoint.
AGREEMENT
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Pass-Through. Xxxxxxxx, during the period that Xxxxx retains any interest in the above-referenced properties, agrees to return or assign to Meritage any proceeds which Xxxxxxxx receives or is entitled to receive in his capacity as a 12.5% owner of Xxxxx, but only to the extent such proceeds are above and beyond (a) the equity Xxxxxxxx has invested into Xxxxx in connection with the acquisition of the above sites, (b) any interest that is paid by Xxxxxxxx in connection with his equity investment described in this Paragraph, and (c) any losses incurred by Xxxxxxxx in connection with his equity investment described in this Paragraph.
2. Entire Agreement, Amendments, and Waivers. As it relates to the subject matter herein, this Agreement contains the entire agreement and understanding of the parties, supersedes all prior oral or written agreements (if any) between the parties, and may not be amended or modified except by written consent of both parties.
3. Interpretation.
| (a) | The headings and captions herein are inserted for convenient reference only and the same shall not limit or construe the paragraphs or sections to which they apply or otherwise affect the interpretation hereof. |
| (b) | This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. |
| (c) | This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan. |
4. Notices. All notices hereunder shall be in writing and either delivered personally, by facsimile, or by documentable delivery (such as overnight or express mail delivery like Federal Express). Any such notice shall be deemed given on the date of such delivery.
5. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
This Agreement has been executed and delivered, and shall be effective, as of the date first set forth above.
| MERITAGE HOSPITALITY GROUP INC. /s/Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx Vice President |
/s/Xxxxxx X. Xxxxxxxx, Xx. Xxxxxx X. Xxxxxxxx, Xx. |
