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Exhibit 10.25
LOAN PARTICIPATION
AND AGENCY AGREEMENT
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This Agreement is entered into as of October ____, 1998, by and among
MERITAGE HOSPITALITY GROUP INC., a Michigan corporation ("Meritage"), and each
Participant who is identified as such in a fully executed Signature Page to this
Agreement.
RECITALS
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A. Meritage is the payee of a Mortgage Note in the stated principal
amount of $2 million (the "Mortgage Note") made by Xxxxxxxx/Xxxxxxx Enterprises,
LLC, a Michigan limited liability company (the "Borrower"), a copy of which is
attached hereto as Exhibit A.
B. The Borrower's obligations under the Mortgage Note are guaranteed by
Xxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxxx, and Xxxxxxx X. Xxxxxxx (each a
"Guarantor" and collectively the "Guarantors"), pursuant to a Continuing
Guaranty (the "Guaranty"), and are secured by a subordinate pledge of certain
cash deposit accounts pursuant to a Pledge Agreement (Deposit Accounts) from
Xxxxxx X. Xxxxxxxx (the "CD Pledge Agreement"), a pledge of certain capital
stock in Grand Rapids Innkeepers Management, Inc. ("GRIMI") pursuant to a Pledge
Agreement from Xxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx (the "Xxxxxxxx Stock
Pledge Agreement"), a pledge of certain capital stock in GRIMI pursuant to a
Pledge Agreement from Xxxxxxx X. Xxxxxxx (the "Xxxxxxx Stock Pledge Agreement"),
and a First Mortgage from the Borrower covering certain real property located in
the City of Port Huron, County of St. Clair, State of Michigan (the "Mortgage").
Copies of the Guaranty, the CD Pledge Agreement, the Xxxxxxxx Stock Pledge
Agreement, the Xxxxxxx Stock Pledge Agreement and the Mortgage are attached
hereto as Exhibits B, C, D, E and F, respectively, and such documents are
referred to collectively as the "Security Documents".
C. The Participants have agreed to purchase undivided interests in the
Mortgage Note and Security Documents from Meritage, and Meritage has agreed to
sell undivided interests in the Mortgage Note and Security Documents to the
Participants, on the terms and conditions hereinafter set forth. The percentage
interest in the Mortgage Note and Security Documents that each Participant has
acquired pursuant to this Agreement is set forth opposite such Participant's
signature on a Signature Page to this Agreement.
Meritage and each Participant agree that the terms and conditions of
their relationships with respect to the Mortgage Note and the Security Documents
shall be as follows:
SECTION 1
PARTICIPATION INTERESTS
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1.1 PARTICIPANT'S PARTICIPATION INTEREST. Concurrently with the
execution and delivery of this Agreement, each Participant has paid to Meritage,
in exchange for an undivided interest in the
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Mortgage Note and Security Documents, cash in an amount equal to the product
obtained by multiplying (a) the present outstanding principal balance of the
Mortgage Note by (b) the participation percentage in the Mortgage Note and
Security Documents acquired by such Participant. The participation percentage in
the Mortgage Note and Security Documents acquired by each Participant pursuant
to this Agreement is set forth opposite such Participant's signature on a
Signature Page to this Agreement (such interest is referred to as the
Participant's "Participation Interest").
1.2 MERITAGE'S PARTICIPATION INTEREST. Meritage represents and warrants
to the Participants that the present outstanding principal balance of the
Mortgage Note is $1,844,617.06, and that Meritage owns an undivided percentage
interest in the Mortgage Note and Security Documents that is equal to 100 minus
the sum of the Participation Interests now or hereafter held by the Participants
as a group (the undivided interest in the Mortgage Note and Security Documents
owned by Meritage from time to time is referred to as Meritage's "Participation
Interest").
1.3 SALE OR DISPOSITION OF MERITAGE'S PARTICIPATION INTEREST. Meritage
shall have the right, at any time and from time to time, to sell or otherwise
dispose of any interest in the Mortgage Note and Security Documents that
Meritage now owns or hereafter acquires. No such sale or disposition shall
abridge, impair or otherwise alter Meritage's rights or obligations under this
Agreement, including its rights and obligations as Agent or as holder of
Meritage's Participation Interest. If Meritage sells or otherwise disposes of
all or any portion of its Participation Interest, Meritage shall, promptly after
concluding such transaction, deliver to all Participants completed supplemental
Signature Pages, duly executed by Meritage and such transferee.
SECTION 2
AGENCY; REQUISITE PARTICIPATION INTERESTS
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2.1 APPOINTMENT OF MERITAGE AS AGENT. Each Participant designates and
appoints Meritage the limited administrative agent ("Agent") for all
Participants under the Mortgage Note and the Security Documents, and irrevocably
authorizes Meritage, on behalf of such Participant, to take or refrain from
taking any action, and to exercise or refrain from exercising any power, that is
required or permitted to be taken or exercised by the holder of the Mortgage
Note and the Security Documents, subject only to the express limitations set
forth in this Agreement. Without limiting the foregoing, each Participant
authorizes Meritage, as Agent, to collect principal and interest payments on the
Mortgage Note on behalf of the Participant and, after obtaining written consent
from the holders of the Requisite Participation Interests, to accelerate the
indebtedness evidenced by the Mortgage Note and undertake enforcement and
collection activities on behalf of the Participant (including without limitation
the filing of suit or commencement of other collection, foreclosure or
enforcement proceedings as permitted by law) with respect to the Mortgage Note
and Security Documents. With respect to any material decisions regarding
enforcement or collection activities (including, without limitation, decisions
to sell collateral or to bid at the foreclosure sale of collateral and to
commence or settle collection, foreclosure or enforcement proceedings), Meritage
shall comply with written instructions from the holders of the Requisite
Participation Interests.
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2.2 OTHER ACTIONS REQUIRING CONSENT FROM HOLDERS OF PARTICIPATION
INTERESTS. Without written consent from the holders of the Requisite
Participation Interests, the Agent shall not agree to any amendment,
modification, supplement, termination, consent or waiver of or to any provision
of the Mortgage Note or any of the Security Document. Further, without the
written consent from the holders of 100% of the Participation Interests, the
Agent shall not consent to any change in any interest rate set forth in the
Mortgage Note or to the date upon which interest or principal payments are
required to be made under the Mortgage Note. When the Agent requests the consent
of the holders of Participation Interests and does not receive a written denial
thereof from a Participant within five (5) Business Days (a "Business Day" is
any day other than a Saturday, Sunday or other day on which banks in Grand
Rapids, Michigan, are permitted or required by law to be closed) after making
such request, such Participant will be deemed to have granted the consent
requested by the Agent.
2.3 REQUESTS FOR INSTRUCTIONS, ETC. The Agent may at any time and from
time to time request written instructions from the holders of the Requisite
Participation Interests with respect to any action, inaction, failure or
approval which, by the terms of this Agreement, the Mortgage Note or any
Security Document the Agent is permitted or required to take or to grant, and if
such instructions are promptly requested, the Agent may refrain from taking any
action or withhold any approval and may refrain from any action or withhold any
approval until it has received such instructions from the holders of the
Requisite Participation Interests. No Participant shall have any right of action
whatever against the Agent as a result of the Agent acting or refraining from
acting in accordance with instructions of the holders of the Requisite
Participation Interests.
2.4 RELIANCE ON WRITINGS, CONSULTANTS, ETC. The Agent may rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message or other communication believed by it in good faith to be
genuine and correct and to have been signed, sent or made by the proper person,
and with respect to all matters pertaining to this Agreement, the Mortgage Note
or the Security Documents, upon advice of legal counsel as to legal matters,
independent accountants as to audit and accounting matters, and other experts
selected by it, and when doing so will not be liable to any Participant for any
action taken or omitted by the Agent in good faith.
2.5 AGENT'S RESIGNATION. Meritage or any successor Agent may resign as
Agent at any time upon at least 30 days' prior notice to all Participants. Upon
such resignation, the Agent shall be discharged from all duties and obligations
as Agent arising under this Agreement after the date upon which its resignation
became effective. The holders of the Requisite Participation Interests shall
have the right to appoint a successor Agent, who shall have all rights, powers
and obligations that Meritage has as Agent under this Agreement.
2.6 NO FIDUCIARY DUTY; SCOPE OF AGENT'S DUTIES AND LIABILITY. No
provision of this Agreement shall be deemed to impose fiduciary duties or
obligations upon the Agent or its officers, directors, employees or agents, and
all Participants acknowledge and agree that neither Meritage nor any successor
Agent shall have any fiduciary duties or obligations of any type under this
Agreement or otherwise with respect to any Participation Interest. The Agent and
its officers, directors, employees, and agents shall have no duties under this
Agreement other than as expressly set forth
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in this Agreement. Without limiting the generality of the foregoing, the Agent
and its officers, directors, employees and agents shall have no duty or
responsibility at any time to provide any Participant with credit or other
information with respect to the Borrower or any Guarantor, whether coming into
the Agent's possession before or after the date of this Agreement; provided,
however, that the Agent shall, upon written request by a Participant, deliver to
the Participants copies of any written materials relating to the Borrower or the
Guarantors that are specifically requested by a Participant and that are within
the Agent's possession or control. The Agent and its officers, directors,
employees and agents shall be liable for their acts or omissions under this
Agreement only if such acts or omissions constitute gross negligence or willful
misconduct.
2.7 MERITAGE'S RIGHTS AS PARTICIPANT. Meritage, in its capacity as
holder of its Participation Interest, shall have the same rights, powers, duties
and liabilities with respect to such Participation Interest as any Participant
has with respect to his Participation Interest, and Meritage may exercise the
same as if it were not the Agent. Unless otherwise required by the context, the
terms "Participant" and "Participants", or any similar terms, will include the
Agent when not acting as agent.
2.8 REQUISITE PARTICIPATION INTERESTS. The "Requisite Participation
Interests" means 50.01% or more of the Participation Interests held by all
Participants.
SECTION 3
COLLECTION AND REMITTANCE OF PAYMENTS
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3.1 ALLOCATION OF PAYMENTS. All payments of principal and interest made
pursuant to the Mortgage Note shall be paid by the Borrower to the Agent, and
shall be allocated by the Agent among the Participants in accordance with their
respective Participation Interests. Within three (3) Business Days after receipt
by the Agent of a principal or interest payment under the Mortgage Note, the
Agent shall calculate and remit to all Participants his or its allocable share
thereof, based upon such Participant's Participation Percentage. Unless
otherwise instructed in writing by a Participant, the Agent shall make all
remittances required under this Agreement by mailing a check drawn on an account
maintained by the Agent to the Participants at their respective addresses shown
on a Signature Page to this Agreement.
3.2 RETURN OF PAYMENTS. If the Agent determines at any time that an
amount received by the Agent under this Agreement must be returned to the
Borrower or paid to any other person pursuant to any solvency law or otherwise,
then, notwithstanding any other term or condition of this Agreement, the Agent
will not be required to distribute any portion thereof to any Participant.
However, if the Agent has previously distributed such amount, each Participant
shall repay to the Agent on demand any portion of such amount that the Agent has
distributed to such Participant, without set-off, counterclaim or deduction of
any kind.
3.3 RETURN OF ERRONEOUS PAYMENTS. If the Agent makes a payment to a
Participant under this Agreement in the belief or expectation that a related
payment has been or will be received by
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the Agent from the Borrower, which related payment in fact is not received by
the Agent, each Participant shall repay such payment to the Agent on demand,
without set-off, counterclaim or deduction of any kind.
SECTION 4
PROHIBITED CONDUCT BY PARTICIPANTS
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4.1 SALE OR TRANSFER OF PARTICIPATION INTERESTS. Except as set forth in
Section 1.3 above, no Participant may assign or transfer any of its rights under
this Agreement or the Mortgage Note or any of the Security Documents, or sell
any participation under this Agreement or the Mortgage Note or any of the
Security Documents.
4.2 COLLECTION ACTIVITIES. No Participant shall, without written
consent from the Agent and the holders of the Requisite Participation Interests,
undertake any collection activities or commence enforcement of the Mortgage Note
or any of the Security Documents. All amounts received by a Participant in
respect of the indebtedness evidenced by the Mortgage Note or the Security
Documents shall be shared among the Participants in proportion to their
respective Participation Interests, whether received by voluntary payment, by
the exercise of the right of set-off or lien, by counterclaim or cross action or
by the enforcement of the Mortgage Note or any of the Security Documents.
4.3 COMMUNICATIONS WITH BORROWER AND GUARANTORS. No Participant shall
communicate directly with the Borrower or any Guarantor concerning the Mortgage
Note or any of the Security Documents. Any Participant who wishes to obtain
information from the Borrower or a Guarantor concerning the Mortgage Note or any
of the Security Documents, or who wishes to communicate with the Borrower or a
Guarantor concerning the Mortgage Note or Security Documents, shall direct such
requests and communications through Meritage.
SECTION 5
REPURCHASE OBLIGATION
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5.1 REPURCHASE OBLIGATION. Within ten (10) Business Days after the
later of: (a) receipt of written request from a Participant; (b) the foreclosure
or disposition of all collateral covered by the Security Documents; and (c)
conclusion of all efforts to collect or realize upon any judgment(s) entered
against any Guarantor(s) pursuant to the Guaranty, Meritage shall repurchase the
Participation Interest held by such Participant for a price equal to the product
obtained by multiplying (a) the then outstanding principal balance of the
Mortgage Note plus any accrued interest thereon by (b) the participation
percentage in the Mortgage Note and Security Documents acquired by such
Participant (the "Repurchase Price"). The Repurchase Price shall be paid in
cash.
5.2 SATISFACTION OF REPURCHASE OBLIGATION. Upon tendering the
Repurchase Price to the Participant, Meritage shall be relieved of all further
liability under this Section 5 as to such
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Participant, and such Participant shall be divested of all right, title and
interest in his Participation Interest. The Participant nevertheless shall
return to Meritage all documents and things then in the Participant's possession
or control evidencing or otherwise relating to his former ownership of the
Participation Interest, and shall execute such documents as Meritage may
reasonably request to confirm that such Participant no longer has or claims any
interest in the Participation Interest.
SECTION 6
ACKNOWLEDGMENTS RE: CERTAIN MATTERS
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6.1 SECURITIES LAWS AND OTHER MATTERS. The Participant:
(a) Acknowledges that he has purchased his Participation
Interest for his own account, and not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that
he has no intention of selling, granting participations in, or
otherwise distributing the same, and agrees that he will not do so. The
Participant has entered into no contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations
to such person, or to any third person, with respect to his
Participation Interest, and the Participant will not do so.
(b) Acknowledges that neither the Participation Interests nor
this Agreement have been registered under applicable federal and state
securities laws. The Participant acknowledges that, unless re-purchased
by Meritage pursuant to this Agreement, the Participant must hold the
Participation Interest, and bear the economic risks of his investment
in the Participation Interest, indefinitely.
(c) Represents that he is experienced in investment matters,
has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of his investment in
the Participation Interest, understands the risks associated with his
investment in the Participation Interest, and has the financial ability
and resources necessary to bear the economic risks of his investment in
the Participation Interest, including the total loss of such
investment.
(d) Represents and warrants that he is an "accredited
investor" as that term is defined in Rule 501 of Regulation D under the
Securities Act of 1933.
(e) Understands that in the event of a default under the
Mortgage Note, the Participant shall have recourse only to the
Borrower, the Guarantors to the extent provided in the Guaranty, the
collateral covered by the Security Documents, and Meritage to the
extent provided in this Agreement, and that no other person or entity
has any liability whatever under the Mortgage Note, the Security
Documents or this Agreement.
(f) Acknowledges that neither Meritage nor any of its
officers, directors, employees, agents or attorneys has made any
representation or warranty to the Participant
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concerning the validity or enforceability of the Mortgage Note or the
Security Documents, or the ability of the Borrower to pay the
indebtedness evidenced by the Mortgage Note, or the ability of the
Guarantors to observe and perform their obligations under the Guaranty,
or the adequacy of the collateral for the Mortgage Note, or the ability
of Meritage to re-purchase the Participation Interest in accordance
with this Agreement, and that the Participant has decided to invest in
the Participation Interest solely on the basis of its own investigation
of all factors upon which its investment decision was based, which was
not dependent in any respect upon information furnished or statements
made by Meritage or its officers, directors, employees, agents or
attorneys.
(g) Acknowledges receipt of copies of Meritage's most recent
annual report to its shareholders and the following reports filed by
Meritage with the United States Securities and Exchange Commission:
Report on Form 10-K for the year ended 11/30/97, Reports on Form 10-Q
for the quarters ended 2/28/98 and 5/31/98, and Form 8-K dated 9/9/98,
and that the Participant or his advisors have reviewed such reports and
have asked such questions of Meritage management as they deemed
relevant and necessary to their evaluation of the risks of an
investment in the Participation Interest, and that the Participant is
satisfied in all respects with the results of such review and
inquiries.
SECTION 7
MISCELLANEOUS
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7.1 INCORPORATION OF RECITALS. The Recitals set forth above are
incorporated into and form a part of this Agreement.
7.2 NO THIRD-PARTY BENEFICIARIES. The provisions of this Agreement are
solely for the benefit of the Agent and the Participants, and neither the
Borrower, nor any Guarantor, or any other person shall have rights as a third
party beneficiary of any of the provisions hereof.
7.3 HEADINGS AND CAPTIONS. Section headings and paragraph sections used
in this Agreement are for convenience of reference only and will not constitute
a part of this Agreement for any other purpose or affect the construction of
this Agreement.
7.4 COUNTERPARTS. This Agreement may be executed in counterparts and by
different parties on separate counterparts, each of which counterparts, when so
executed and delivered, will be deemed to be an original and each of which
counterparts, taken together, will constitute but one and the same agreement.
This Agreement will become effective upon the execution of a counterpart hereof
by each of the parties hereto.
7.5 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon, and
inure to the benefit of, the Agent, the Participants, and their respective
permitted successors and assigns.
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7.6 RULE OF CONSTRUCTION. Neither this Agreement nor any uncertainty or
ambiguity herein will be construed or resolved against the Agent or any
Participant, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by each of the parties and their
counsel and will be construed and interpreted according to the ordinary meaning
of the words used so as to fairly accomplish the purposes and intentions of all
parties hereto.
7.7 NO OTHER AGREEMENTS. This Agreement is intended by the parties as a
final expression of their agreement and is intended as a complete statement of
the terms and conditions of their agreement.
7.8 CONTROLLING LAW. The validity of this Agreement, its construction,
interpretation and enforcement and the rights of the parties hereto will be
determined under, governed by and construed in accordance with the internal laws
of the State of Michigan, without regard to principles of conflicts of law.
7.9 WAIVER OF JURY TRIAL. The parties acknowledge and agree that there
may be a constitutional right to a jury trial in connection with any claim,
dispute or lawsuit arising between them, and that such right may be waived.
Accordingly, the parties agree that notwithstanding such constitutional right,
in this commercial matter the parties believe and agree that it will be in their
best interest to waive such right, and accordingly, hereby waive such right to
jury trial, and further agree that the best forum for hearing any claim, dispute
or lawsuit, if any, arising in connection with this Agreement or the
relationship among the Participants will be a court of competent jurisdiction
sitting without a jury.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first hereinabove set forth.
[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]
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SIGNATURE PAGE TO LOAN PARTICIPATION
AND AGENCY AGREEMENT DATED OCTOBER ____, 1998
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PARTICIPANT MERITAGE HOSPITALITY GROUP INC.
____________________________________ By: ________________________________
Its: ___________________________
PARTICIPANT'S PARTICIPATION
PERCENTAGE: _____%
PARTICIPANT'S ADDRESS FOR REMITTANCES MERITAGE'S ADDRESS FOR REMITTANCES
AND COMMUNICATIONS: AND COMMUNICATIONS:
______________________________________ 00 Xxxxx Xxxxxx, X.X., Xxxxx 000
______________________________________ Xxxxx Xxxxxx, XX 00000
______________________________________ Attention: President
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