1
AMENDMENT NO. 1
---------------
This Amendment No. 1 (the "Amendment") is made and entered into this
23rd day of May, 1997 to that certain Loan Agreement dated November 26, 1996
by and among MERITAGE HOSPITALITY GROUP INC. ("MHG"), ST. CLAIR INN, INC.
("SCI"), GRAND HARBOR RESORT INC. ("GH Resort"), XXXXXX XXXXXX INN,
INCORPORATED ("TEI"), MHG FOOD SERVICE INC. ("Food Service"), GRAND HARBOR
YACHT CLUB INC. ("GH Yacht Club"), collectively, the Obligors and GREAT
AMERICAN LIFE INSURANCE COMPANY, as Lender.
WITNESSETH
WHEREAS, GH Yacht Club has requested the Lender to make an additional
loan to GH Yacht Club in the amount of Eight Hundred Seventy-Five Thousand and
00/100 Dollars ($875,000.00) (such loan shall hereinafter be referred to as
"Loan III"); and
WHEREAS, the Lender has agreed to make Loan III to GH Yacht Club under
the terms of this Amendment No. 1;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. LOAN III. The Lender agrees to make Loan III to GH Yacht Club. Such
loan shall be evidenced by a promissory note, substantially in the form of the
attached Exhibit "A." Loan III shall be cross-collateralized with Loans I and
II as set forth herein. The proceeds of Loan III shall be used by GH Yacht Club
solely to finance the construction and improvement of boat slips on the
property of GH Yacht Club and to pay an amount not exceeding $134,000 in real
estate taxes due and payable on the property of GH Yacht Club and GH Resort.
2. LOAN III FEE. GH Yacht Club shall pay to the Lender a fee of Eight
Thousand Seven Hundred Fifty and 00/100 Dollars ($8,750.00) in connection with
the Lender's commitment to make Loan III. Such fee shall be paid to the Lender
contemporaneously with the execution of this Amendment.
3. SECURITY FOR LOAN III. In order to secure the obligations of GH
Yacht Club to repay Loan III, together with the interest accrued thereon and
all other charges relating thereto, GH Yacht Club shall deliver, or cause to be
delivered to, the Lender, the following:
(a) a mortgage on the real property and marina facility owned
by GH Yacht Club substantially in the form of the attached Exhibit
"B";
(b) a security agreement substantially in the form of the
attached Exhibit "C" granting to the Lender a security interest in all
personal property, tangible and intangible,
2
- 2 -
of GH Yacht Club, together with appropriate UCC Financing Statements
to perfect the security interest granted to Lender;
(c) a Guaranty, substantially in the form of the attached
Exhibit "D", executed by MHG and a Guaranty substantially in the form
of Exhibit "E", executed by each of SCI, GH Resort, TEI and Food
Service;
(d) mortgages on the real property owned by SCI, GH Resort
and TEI, substantially in the forms of Exhibits "F", "G" and "H",
respectively; and
(e) an Assignment of Construction Agreements, Management
Agreements, Permits and Contracts, substantially in the form of
Exhibit "I" hereto.
4. DISBURSEMENTS OF LOAN PROCEEDS. The Lender shall make disbursements
of the proceeds of Loan III to GH Yacht Club in accordance with the following
provisions:
(a) GH Yacht Club shall submit to the Lender, no more
frequently than twice per month, a master affidavit requesting an
advance of loan proceeds at least five (5) days prior to the date of
each disbursement. The affidavit shall list by name, trade breakdown
and amount, the names of each contractor, subcontractor and
materialman who has done work or supplied materials for the
improvements to the property of GH Yacht Club;
(b) Borrower shall also submit supporting affidavits from
each contractor/subcontractor and a materialman's certificate from
each supplier, which evidence the following:
(1) whether or not such party has been paid;
(2) amount paid to the supplier or
contractor/subcontractor to date; and
(3) balance due the supplier or
contractor/subcontractor to date.
In the event that any such affidavit or certificate states that there are one
(1) or more persons to whom sums are owing in respect to the construction, GH
Yacht Club hereby authorizes Lender to pay on behalf of GH Yacht Club the sums
owed to such persons directly.
(c) GH Yacht Club shall, upon request, submit an AIA form
G702 Application and Certificate for Payment and AIA form G703
Continuation Sheet certified by an officer of GH Yacht Club indicating
that such officer has inspected the improvements and agrees that the
improvements, the cost of which payment is being requested, have been
installed on the property of GH Yacht Club;
(d) Lender hereby reserves the right to require GH Yacht Club
to provide such documents and follow such procedures as are required
under applicable Michigan law;
3
- 3 -
(e) Lender shall have the right to pay any contractor,
subcontractor or supplier directly without the consent of GH Yacht
Club, and to consider the amount of such payment as an advance against
Loan III as though such amount had been advanced pursuant to a request
by GH Yacht Club if such disbursement is deemed necessary by Lender to
aid in the progress of construction. Lender shall, in no event, be
responsible or liable to any person other than GH Yacht Club for its
disbursement of or failure to disburse the proceeds of Loan III or any
part thereof, and no contractor, subcontractor, supplier or laborer
shall have any right or claim against Lender under this Amendment No.
1 or by virtue of Lender's administration hereof;
(f) Each request for advance submitted by GH Yacht Club shall
constitute a representation that the work and materials for which
payment is being requested have physically been incorporated into the
property of GH Yacht Club, free of any security interest, lien or
encumbrance, other than the liens in favor of Lender created as
security for Loan III. The amount to be disbursed by Lender on the
date set for each disbursement shall be an amount equal to that
percent of the total construction work to be done that has been
completed to date in accordance with the plans and specifications
submitted to Lender less the total amount disbursed by lender prior to
the disbursement date. Notwithstanding the foregoing, nothing herein
shall obligate Lender to disburse any portion of the proceeds of Loan
III for work performed where such disbursement request is for amounts
in excess of the amounts set forth on the cost budget required to be
provided to Lender;
(g) At any time requested by Lender, GH Yacht Club shall
provide such evidence satisfactory to Lender to establish that there
are sufficient funds available under Loan III to complete the
improvements. To give effect to this condition, Lender may require
either (i) that GH Yacht Club provide its own funds in an amount which
is necessary in addition to Loan III to complete the improvements;
and/or (ii) that a sufficient amount be retained from Loan III
proceeds to assure, at all times, that the construction of the
improvements can be completed; and
(h) Lender hereby reserves the right to automatically draw
against any interest or sinking fund reserves that are established in
connection with Loan III to fund such payments when due.
5. SALE OF BOAT SLIPS AND PREPAYMENT OF LOAN III. At the time of the
sale of any of the boat slips, to be constructed by GH Yacht Club (other than
slips 35, 36, 37, 38, 39, 54 and 55, which are not being mortgaged to Lender),
GH Yacht Club shall pay to the Lender the sum of Thirty-Five Thousand and
00/100 Dollars ($35,000.00) from the proceeds of such sale as a prepayment of
Loan III. Upon such payment and the application thereof, Lender shall release
all liens on the slip which has been sold which secure the repayment of Loan
III, and Loans I and II. After Loan III has been paid in full, either as a
result of the sale of boat slips, or otherwise, Thirty-Five Thousand and 00/100
Dollars ($35,000.00) from the proceeds of the sale of any additional boat slips
shall be applied in prepayment of Loan II. After Loan II has been paid in full,
Lender shall release any remaining liens
4
- 4 -
on the assets of GH Yacht Club. Notwithstanding any other provision of the Loan
Agreement or the other Loan Documents to the contrary, Lender hereby consents
to the sale of the boat slips and the disposition of the proceeds therefrom as
contemplated hereby.
6. SALES OF LOAN II COLLATERAL. Notwithstanding any other term or
provision of the Loan Agreement, so long as any principal amount of Loan III
shall remain outstanding or any interest or other amount payable with respect
to Loan III shall remain unpaid, the proceeds from the sale of any Loan II
Collateral shall be applied to reduce the outstanding principal of Loan III. No
prepayment penalty shall be assessed in connection with any such sale or
prepayment of Loan III.
7. SUBORDINATION OF INDEBTEDNESS OF XXXXXX X. XXXXXXXX, XX.
Contemporaneously with the execution of this Amendment, MHG shall provide
Lender with evidence satisfactory to Lender that the indebtedness of MHG to
Xxxxxx X. Xxxxxxxx, Xx. is subordinated to all obligations of MHG and its
subsidiaries to Lender (including Loan III) on terms acceptable to Lender in
its sole discretion.
8. BORROWINGS AGAINST LIFE INSURANCE POLICIES. The Lender hereby
agrees and consents that, notwithstanding any other provision of the Loan
Agreement or the other Loan Documents, MHG shall be permitted to borrow up to
Two Hundred Thousand and 00/100 Dollars ($200,000) of the cash value of the
Life Insurance policies.
9. REVISED DEFINITIONS. For purposes of this Amendment and the Loan
Agreement after the date hereof, the following terms shall have the following
meanings:
"LOANS" means Loan I, Loan II and Loan III and any other loan made by
the Lender under the Loan Agreement or any amendment or modification
thereto. The term "Loan" shall mean any of the Loans.
10. RATIFICATION OF LOAN AGREEMENT. Except as specifically amended
hereby, the terms of the Loan Agreement are hereby ratified and confirmed as of
this date.
IN WITNESS WHEREOF, the parties have caused this Amendment 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:/s/ Xxxx X. Xxxxxxxx
--------------------------- ---------------------------------
ITS: Vice President
--------------------------- -------------------------------
5
- 5 -
MERITAGE HOSPITALITY GROUP INC.
BY:/s/ Xxxxxxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxxxxxxxx X. Xxxxxx, President
--------------------------------
ST. CLAIR INN, INC.
BY:/s/ Xxxxxxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxxxxxxxx X. Xxxxxx, President
--------------------------------
GRAND HARBOR RESORT INC.
BY:/s/ Xxxxxxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxxxxxxxx X. Xxxxxx, President
--------------------------------
XXXXXX XXXXXX INN, INCORPORATED
BY:/s/ Xxxxxxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxxxxxxxx X. Xxxxxx, President
--------------------------------
GRAND HARBOR YACHT CLUB INC.
BY:/s/ Xxxxxxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxxxxxxxx X. Xxxxxx, President
--------------------------------
MHG FOOD SERVICE INC.
BY:/s/ Xxxxxxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxxxxxxxx X. Xxxxxx, President
--------------------------------
