EXCHANGE AND NOTE PREPAYMENT AGREEMENT
THIS EXCHANGE AND PREPAYMENT AGREEMENT (the "Agreement") is entered into
effective as of September 17, 1997 by and among Host Funding, Inc., a
Maryland corporation ("Host Funding") and Guy and Xxxxxxx Xxxxxxxx
(collectively, the "Hatfields").
RECITALS
A. The Hatfields and AAG executed that certain Promissory Note dated
April 1, 1995 payable to Host Funding in the principal amount of $1,805,675
(the "Xxxxxxxx Note"). The Xxxxxxxx Note bears interest at the rate of 12%
quarterly with all outstanding principal and accrued interest being due and
payable on March 31, 2000.
B. In December 1996, All American Group, Ltd., a Delaware limited
partnership, transferred all of its interest, consisting of 140,000 shares of
Class A Common Stock and 90,000 shares of Class B Common Stock in Host
Funding to the Hatfields. The Hatfields acquired the stock subject to the
obligations to repay the Xxxxxxxx Note to Host Funding.
C. The Hatfields currently own 140,000 shares of Class B Common Stock
of Host Funding (the "Class B Common"). The 140,000 shares of the Class B
Common owned by the Hatfields represents all of the issued and outstanding
shares of Class B Common of Host Funding. The Xxxxxxxx Note is secured by
(i) 90,000 shares of the Class B Common and (ii) 190,000 shares of the Class
A Common Stock of Host Funding held by the Hatfields (collectively, the
"Pledged Shares"), as more particularly described in that certain Assignment
Separate From Certificate attached hereto as Exhibit A.
D. The Hatfields desire to prepay the Xxxxxxxx Note and in connection
with such prepayment to exchange the Class B Common for shares of the Class A
Common Stock of Host Funding (the "Class A Common").
E. Host Funding desires to accept such prepayment and to exchange the
Class A Common for the Class B Common, all upon the terms and conditions set
forth in this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and agreed, the parties to this
Agreement hereby agree as follows:
1. EXCHANGE OF SHARES. In consideration for the prepayment of the
Xxxxxxxx Note, Host Funding agrees to issue to the Hatfields 140,000 shares
of Class A Common in exchange for the 140,000 shares of Class B Common held
by the Hatfields. The parties acknowledge and agree that the shares of Class
A Common Stock issued to the Hatfields will be deemed restricted securities
under the Securities Act of 1933 (the "Act") and will therefore be subject to
the resale provisions of Rule 144 promulgated under the Act.
2. PREPAYMENT OF XXXXXXXX NOTE. Simultaneously with and as a condition
precedent to the obligations of each of the parties to consummate the
exchange of shares described in Section 1 above, the Hatfields agree to make
a cash prepayment in the amount of $874,325 on the outstanding principal
balance on the Xxxxxxxx Note as of the date of the funding of the loan
described in greater detail below. The parties acknowledge and agree that
said cash prepayment of the Xxxxxxxx Note shall be conditioned upon the
closing of a loan to the Hatfields from a third party lender in the amount of
at least $935,000 for a one year period on terms no less favorable than at
prime plus 3% at a cost of 6% points (the "Secured Loan"). The Hatfields
agree to pay up to 6% of the closing points payable on the Secured Loan in
exchange for a $25,675 credit as set out below which credit shall be deemed
earned upon receipt by Host Funding of the $874,325 loan. Accordingly, after
payment of the loan the outstanding principal balance of the loan shall be
$900,000.
In addition, if the third party lender charges a prepayment penalty in
the nature of a yield maintenance not to exceed 3% times the principle
balance of the Secured Loan for the one year term of the Secured Loan when
the Secured Loan is no longer outstanding, Host Funding has agreed to pay
said prepayment penalty if the Hatfields sell their Host Funding shares at a
price less than $10.00 per share to pay off the Secured Loan; but if the
Hatfields sell the Host Funding shares at more than $10.00 per share to pay
off the Secured Loan, then the Hatfields shall bear the full cost of such
penalty. The Hatfields further agree to pledge up to 285,000 shares of their
Class A Common Stock as security for the repayment of the Secured Loan.
3. IN-KIND EXCHANGE. Simultaneously with the exchange of shares
described in Section 1 above, and the cash prepayment of $874,325 and the
$25,675 credit earned by the Hatfields described in Section 2 above, the
Hatfields will deliver to Host Funding 90,000 shares of the 140,000 shares of
Class A Common received by the Hatfields pursuant to the exchange described
in Section 1 above. Such delivery of the 90,000 shares to Host Funding shall
constitute prepayment of the remaining $900,000 outstanding principal balance
due on the Xxxxxxxx Note, since the parties agree to value the 90,000 shares
at $10.00 per share and since the remaining balance on the Note is $900,000
after prepayment of the note as described section 2 above. Upon receipt by
Host Funding of the cash payment described in Section 2 above and the 90,000
shares of Class A Common Stock described in this Section, Host Funding will
cancel all accrued interest on the Xxxxxxxx Note and return the Xxxxxxxx Note
to the Hatfields marked "Paid in Full".
4. REPRESENTATIONS AND WARRANTIES OF THE HATFIELDS. The Hatfields
hereby represent and warrant to Host Funding, as follows:
(A) As of the date of the exchange of the Class B Common as provided in
Section 1 above, the Hatfields are the owners of 50,000 shares of the Class B
Common free and clear of any and all liens, claims, encumbrances, proxies or
rights of first refusal, subject to the release of the lien held by
Caruthersville Bank with respect to such shares;
(B) As of the date of the exchange of the Class B Common as provided in
Section 1 above, the Hatfields are the owners of 90,000 shares of the Class B
Common free and clear of any and all liens, claims, encumbrances, proxies or
rights of first refusal, subject to the release of the lien held by Host
Funding with respect to such shares;
2
(C) This Agreement has been duly authorized, executed and delivered by
the Hatfields and constitutes the legal, valid and binding obligation of the
Hatfields enforceable against the Hatfields in accordance with its terms.
5. REPRESENTATIONS AND WARRANTIES OF HOST FUNDING. Host Funding
represents and warrants that this Agreement has been duly authorized,
executed and delivered by Host Funding and constitutes the legal, valid and
binding obligation of Host Funding enforceable against Host Funding in
accordance with its terms.
6. FURTHER ASSURANCES. The parties hereto agree (i) to furnish upon
request to each other such further information; (ii) to execute and deliver
to each other such other documents; and (iii) to do such acts and things, all
as any party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to herein.
7. General.
(A) The parties hereby confirm and ratify the matters contained and
referred to in the recitals to this Agreement and agree that the same are
expressly incorporated into this Agreement.
(B) This Agreement constitutes the entire agreement between the parties
relating to the subject matter hereof and supercedes all prior and
contemporaneous agreements, understandings and negotiations, whether oral or
written.
(C) This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas. The parties hereto submit to the
jurisdiction of the Courts of the State of Texas in and for the County of
Dallas in connection with any dispute under this Agreement.
(D) Time shall be of the essence of this Agreement.
(E) This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, executors, administrators, successors and
assigns.
(F) This Agreement may be signed or executed in separate counterparts
and the signing or execution of each counterpart shall have the same effect
as the signing or execution of a single original document.
(G) Representations and warranties of the parties hereto shall survive
the closing of the transactions contemplated herein.
3
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
hereinabove written.
HOST FUNDING, INC.
By: /s/ Xxxxxxx X. XxXxxxx
---------------------------------
Xxxxxxx X. XxXxxxx, President
/s/ Xxx X. Xxxxxxxx
------------------------------------
Xxx X. Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxx
0
