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EXHIBIT 10.24
[Letterhead of Bank One, N.A.]
July 27, 2001
NOTICE OF DECLARATION OF ACCELERATION DUE TO
EVENT OF DEFAULT
TO THE HOLDERS OF THE HALLWOOD GROUP INCORPORATED 10%
COLLATERALIZED
SUBORDINATED DEBENTURES
(THE "DEBENTURES")
CUSIP affected: 406364AH2
NOTE: THIS NOTICE CONTAINS IMPORTANT INFORMATION THAT IS OF INTEREST TO THE
REGISTERED AND BENEFICIAL OWNERS OF THE SUBJECT SECURITIES. IF APPLICABLE, ALL
DEPOSITORIES, CUSTODIANS AND OTHER INTERMEDIARIES RECEIVING THIS NOTICE ARE
REQUESTED TO EXPEDITE RE-TRANSMITTAL TO BENEFICIAL OWNERS OF THE SECURITIES IN A
TIMELY MANNER.
Dear Debenture Holder:
Bank One, NA, serves as Trustee (the "Trustee") under an Indenture (the
"Indenture") dated as of August 31, 1998 between The Hallwood Group Incorporated
(the "Company") and the Trustee. The Trustee provides this Notice to the holders
of the above captioned Debentures (the "Holders").
EVENTS OF DEFAULT
The Trustee hereby notifies the Holders of Events of Default under Section 501
of the Indenture. Under Section 501(e)(ii)(A), an Event of Default occurs if the
Company or its subsidiaries is subjected to a case, proceeding, or other action
seeking, among other things, appointment of a receiver for all or any
substantial part of its assets for the benefit of its creditors which results in
any such appointment. Additionally, failure to notify the Trustee of a default
or event of default within five business day of its occurrence as required by
section 1107 of the Indenture is an Event of Default under Section 501(c) of the
Indenture.
In December 2000, The Hallwood Group Incorporated decided to discontinue and
dispose of its hotel properties. In disposing of these properties during the
first quarter of 2001, the Company allowed
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its non-recourse debt holders to initiate foreclosure proceedings on three of
its owned hotels. During the foreclosure proceedings the Company's lenders
placed Hallwood Hotels, Inc. and Brock Suite Hotels, Inc. into receivership.
Hallwood Hotels and Brock Suite Hotels are both subsidiaries of the Company.
Accordingly, the subsidiaries' placement into receivership results in an Event
of Default under Section 501(e)(ii) of the Indenture. Furthermore, the Company's
failure to notify the Trustee of this Event of Default within 5 business days of
its occurrence results in an Event of Default under Section 501(c) of the
Indenture.
ACCELERATION OF PRINCIPAL AND INTEREST PAYMENTS
According to Section 502 of the Indenture, acceleration of the Debentures occurs
automatically upon the happening of an Event of Default under Section
501(e)(ii)(A) of the Indenture regardless of whether the Trustee or the Holders
declare such acceleration. Accordingly, because an Event of Default under
Section 501(e)(ii)(A) has occurred, the outstanding principal of the Debentures
together with any accrued interest is immediately due and payable.
WAIVER, RESCISSION AND DIRECTION TO THE TRUSTEE
While acceleration occurs automatically in the case of an Event of Default under
Section 501(e)(ii)(A), the Indenture provides the Debenture Holders with the
option to waive the Event of Default and to rescind and annul the acceleration
and its consequences.
The Trustee has notified the Company that acceleration occurred automatically in
the case of the Event of Default under Section 501(e)(ii)(A). Section 513 of the
Indenture provides that the Holders of a majority of the outstanding principal
amount of the Debentures (the "Majority Holders") may waive the Event of Default
and its consequences on behalf of all of the Holders. Under Section 502 of the
Indenture, if the Event of Default is waived and certain other requirements
(including but not limited to (i) payments of all principal premium and interest
due otherwise than by acceleration; (ii) payment of all amounts due and owing to
the Trustee and its agents and counsel; and (iii) cure or waiver of all other
Events of Defaults under the Indenture) are met, the Majority Holders may
rescind and annul the acceleration and its consequences. Section 502 rescission
requires that the Majority Holders contact the Company and the Trustee in
writing in order to rescind.
It is the Trustee's understanding that the Company will be contacting you
separately to request a rescission of the acceleration under the terms of
Section 502 of the Indenture and waiver of the events of Default under Section
513 of the Indenture.
THE TRUSTEE IS NOT REQUIRED UNDER THE INDENTURE TO RECOMMEND WHAT ACTION THE
HOLDERS SHOULD TAKE IN REGARDS TO THE EVENT OF DEFAULT AND THE RESULTANT
ACCELERATION. THE HOLDERS MAKE THE DETERMINATION OF WHAT ACTION TO TAKE ONLY ON
AN INDIVIDUAL BASIS UPON THE ADVICE OF THEIR OWN FINANCIAL AND LEGAL ADVISORS.
THE TRUSTEE MAKES NO REPRESENTATIONS AS TO THE ACCURACY OF THE INFORMATION
CONTINUED IN ANY MATERIALS THE COMPANY SENDS TO THE HOLDERS SOLICITING THEIR
CONSENT TO RESCISSION OF THE ACCELERATION AND WAIVER OF THE EVENTS OF DEFAULT.
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According to Section 512 of the Indenture, the Majority Holders have the right
to direct the Trustee as to the time, method and place of conducting any
proceedings for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.
RETENTION OF COUNSEL
The Trustee has retained the law firm of Vinson and Elkins, L.L.P. to represent
it in connection with the Event of Default. The firm's address is 2300 First
City Tower, 1001 Fonnin, Houston, TX 77002. The principal contact of Trustee's
counsel is Patricia Hunt Holmes and her phone number is (713)758-1018.
TRUSTEE'S MAILING LIST
The Trustee is sending this Notice to persons identified as Holders by State
Street Bank and Trust Company, as Securities Registrar for the 10% Debentures or
identified by DTC as being a beneficial owner of the 10% Debentures. The Trustee
is not required by the Indenture to send Notice to persons other than Registered
Holders. Nevertheless, we realize that many of the 10% Debentures are held or
registered in names other than the actual names of the beneficial owners. In
order to facilitate future communications between the Trustee and the owners and
for the purpose of receiving direction from the Holders, the Trustee requests
Holders of the Debentures who have not already done so to identify themselves by
sending a letter or postcard to the Trustee stating the Holder's name, address,
and telephone number, and listing the Debentures held by them and the numbers
and denominations thereof. Individual holders of the Debentures in registered
form who already have identified themselves to the Trustee and also have not
changed their address or telephone number need not do so again. Beneficial
Owners may want to consider having their Debentures registered in their name.
COMMUNICATIONS TO TRUSTEE
If you wish to contact us regarding the Debentures or the contents of this
Notice we ask that you do so in writing directed to:
Bank One, N.A.
OH1-0181
100 East Broad Street
Columbus, OH 43271-0181
Attention: Eamon Fahey, Account Executive
(614) 248-5579
(614) 248-5195 (FAX)
Very truly yours,
BANK ONE, NA