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EXHIBIT 10.8
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MARKETING/RESERVE AGREEMENT
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U.S. FRANCHISE SYSTEMS, INC.
AND
PMC COMMERCIAL TRUST
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MARKETING/RESERVE AGREEMENT
THIS MARKETING/RESERVE AGREEMENT (this "Agreement") made and entered
into between U.S. FRANCHISE SYSTEMS, INC., a Delaware Corporation (hereinafter
referred to as "USFS"), with its principal office located at 13 Corporate
Square, Suite 250, Atlanta, Georgia 30329 and PMC COMMERCIAL TRUST, a Texas
real estate investment trust (hereinafter referred to as "PCC"), with its
principal office located at 17290 Preston Road, 3rd Floor, Dallas, Texas 75252.
W I T N E S S E T H:
WHEREAS, USFS is a franchising company that owns the franchise rights
to the "Microtel" motels ("Microtel"); and
WHEREAS, PCC is, among other things, engaged in the business of
lending money for purposes of acquiring, constructing, owning and operating
motels; and
WHEREAS, USFS and PCC desire that USFS present to franchisees, PCC's
financing programs for the purpose of providing financing to USFS's franchisees
for the acquisition of land ("Franchise Property") and/or construction of
Microtel motels (the Franchise Property with all buildings and other
improvements thereon hereinafter called the "Franchise Facility");
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties hereto hereby agree as follows:
SECTION 1. MARKETING:
1.1. PROVISION OF INFORMATION TO FRANCHISE APPLICANTS. USFS agrees
to present to each Applicant for a Microtel motel franchise "Franchisee"),
PCC's then available financing programs for providing financing for the
acquisition of the Franchise Property and/or construction of a Microtel motel
(herein "PCC Loans" or the "Loans" and the Note issued in connection therewith
referred to as the "PCC Note").
1.2. APPLICATIONS FOR PCC LOANS. USFS and PCC must both agree in
writing that an application for a loan by any Franchisee shall be covered by
this Agreement. All applications for PCC Loans ("Loan Applications") shall be
presented on forms provided by PCC and shall contain such information and data
as PCC may from time to time require in connection with its review and approval
of Loan Applications from Franchisees.
1.3. ACCEPTANCE OR REJECTION OF A LOAN.
(a) PCC agrees to accept or reject each Loan Application
within five (5) business days after actual receipt (exclusive of
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the date of receipt) of a fully complete and documented Loan Application
package in form and substance satisfactory to PCC. Any completed Loan
Application which has not been accepted by PCC within five (5) business days
after the date of receipt of a complete Loan Application shall be deemed to
have been rejected. A determination of the completeness of a Loan Application
made by PCC in good faith shall be final and binding on all concerned parties.
(b) USFS and PCC acknowledge and agree that PCC shall
have and retain the sole authority, discretion, and responsibility to approve
or disapprove any Loan Application and to establish the terms, provisions and
conditions, including collateral requirements and the terms and conditions of
any and all personal or corporate guarantees, on all PCC Loans and Loan
Applications submitted or processed under this Agreement.
1.4. LOAN APPROVAL PROCESS. PCC, at its cost and expense, shall
perform such due diligence and conduct such verification of information and
data pertaining to an applicant Franchisee, including verification of
information and data provided by the Franchisee, Franchisee's representatives
and third-party sources (such as Franchisee's accountants, credit bureaus,
appraisers, environmental consultants, etc.) as PCC shall deem appropriate.
USFS shall not participate in the underwriting or approval of any Loan
Application submitted to PCC. It is understood and agreed that PCC shall have
and will exercise sole and absolute discretion and authority in approving or
rejecting any Loan Application and establishing all terms, provisions, and
conditions of any Loan approved by PCC. With respect to each approved
Franchisee PCC will provide USFS copies of documents and instruments related to
the PMC Loan, as directed by the maker of such Loan; excluding, however, PCC's
work product and proprietary information.
1.5. LOAN APPROVAL AND CLOSING. Upon approval of a Loan
Application, PCC will notify Franchisee and USFS of its acceptance and the
terms and conditions under which the Loan will be made. Thereafter, PCC will
use reasonable business efforts to complete the origination, processing,
closing and disbursement of the PCC Loan.
1.6. PCC AS HOLDER OF LOAN DOCUMENTS. When the PCC Loan has been
closed in accordance with the terms and conditions of the Loan commitment
issued by PCC, PCC will disburse the proceeds of such PCC Loan to or on behalf
of the Franchisee, whereupon PCC shall become the holder of the Franchisee's
promissory note and all other loan documents associated with the PCC Loan (the
"Loan Documents").
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1.7. SERVICING, MONITORING AND LIQUIDATION OF LOANS. PCC will be
responsible for collecting and receiving all installments of principal and
interest, escrow payments and other payments made on any PCC Loan. Except as
otherwise specifically provided or modified by the terms and provisions of this
Agreement, all servicing, monitoring and liquidation functions shall be the
responsibility of PCC, and PCC shall have and may exercise sole and absolute
discretion and authority in carrying out such functions.
1.8. ACTIONS BY PCC. PCC, and each of its agents and employees, is
authorized to accept and act upon any documents, information or data provided
by or on behalf of an applicant Franchisee which it in good faith believes to
be genuine, true or correct, without independent verification, and shall not be
liable for any error of judgment or for any act done or omitted by it in good
faith in connection with underwriting review, approval, rejection, closing,
administration or servicing of a PCC Loan for a Franchisee, unless the same is
occasioned by the willful misconduct or gross negligence of PCC or its
employees or agents.
SECTION 2. COMPENSATION FOR MARKETING SERVICES:
2.1. COMPENSATION FOR MARKETING SERVICES.
(a) As full compensation for all marketing services
rendered by USFS pursuant to this Agreement, PCC shall credit to the Reserve
Account (as hereinafter defined) an amount equal to three-eighths (3/8%)
percent per year (the "Marketing Fee") times the average principal balances of
outstanding and performing PCC Loans originated under this Agreement,
calculated as of the end of each calendar quarter (March, June, September and
December) based upon the average principal balances of such outstanding and
performing Loans during the immediate preceding three month period; provided,
however, that the Marketing Fee shall be reduced by one-half to
three-sixteenths (3/16%) percent per year to the extent that transactions (both
performing and non-performing loans) originated under this Agreement exceed, on
the date the amount of such Marketing Fee is to be calculated, seventy (70%)
percent of the net proceeds from the stock offering referred to in Section 7
hereof.
(b) The Marketing Fee shall apply only to the principal
balances of PCC Loans which are outstanding and not in monetary default by the
original borrower/maker (the "Borrower") at the end of each calendar quarter
for which the Marketing Fee calculation is made.
(c) The amount of the Marketing Fee due USFS shall be
calculated and credited to the Reserve Account within fifteen (15)
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days after the end of each calendar quarter and PCC shall promptly thereafter
provide USFS a report showing the calculation of the Marketing Fee for the
quarter. The excess, if any, of the funds held in the Segregated Reserve
Account (as hereinafter defined) over the Required Reserve Amount (as hereafter
defined) resulting from crediting the amount of the Marketing Fee to the
Reserve Account shall be paid to USFS quarterly, within thirty (30) days after
the quarter-end, and will be transmitted to USFS together with the quarterly
report containing the calculation of the Marketing Fee.
SECTION 3. LOAN FUNDS AND RESERVE ACCOUNT:
3.1. RESERVE ACCOUNT
(a) Upon the date that the first loan commitment is
issued by PCC to a Franchisee under this Agreement, USFS shall deposit the sum
of One Hundred Thousand ($100,000) Dollars with PCC, which, together with the
Marketing Fees credited thereto quarterly and the additions to be made by USFS
as hereinafter provided, will be held by and under the control of PCC in a
Reserve Account (herein the "Reserve Account") to secure payment and
performance of the PCC Loans and pay any losses suffered by PCC on
non-performing and/or foreclosed Loans.
(b) From and after such time as the principal amount
outstanding (after giving effect to principal repayments) on all PCC Loans plus
the total undisbursed principal amount of all Loans on which PCC has commenced
any funding (herein such cumulative amount is referred to as the "Proforma
Principal Amount") equals or exceeds Five Million ($5,000,000) Dollars, USFS
shall deposit with PCC, within five (5) days following the date the first
advance is made by PCC on a Loan, an amount equal to two (2%) percent of the
Proforma Principal Amount of each such Loan. Such deposit amounts shall be
held, applied and/or disbursed as a part of the Reserve Account.
(c) All Marketing Fees earned by USFS will be credited to
the Reserve Account and held, applied and/or disbursed by PCC as provided in
this Agreement, until such time (determined on a calendar quarter basis) as the
Reserve Account balance equals or exceeds the Required Reserve Amount (as
hereinafter defined in paragraph 3.3), at which time and during the continuance
thereof the excess, if any, will be remitted to USFS as provided in paragraph
3.3 of this Agreement.
3.2. SEGREGATED RESERVE ACCOUNT.
(a) The funds paid or credited to the Reserve Account
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will be placed by PCC in a Segregated Reserve Account (the "SRA") which may be
invested by PCC in eligible instruments or accounts (the "Eligible
Investments") identified in Exhibit "A" hereto.
(b) All income earned from Eligible Investments shall be
credited to the Reserve Account quarterly and the report provided by PCC to
USFS on a quarterly basis will reflect income earned on the SRA balance through
reported quarter.
3.3. REQUIRED RESERVE AMOUNT; PAYMENTS OF EXCESS TO USFS. USFS and
PCC agree that the term "Required Reserve Amount" shall mean the greater of (i)
One Hundred Thousand ($100,000) Dollars, or (ii) an amount found by multiplying
two (2%) percent times the Proforma Principal Amount on performing and
non-performing Loans originated pursuant to this Agreement, excepting only
those PCC Loans covered by the provisions of Section 3.4 hereof. In the event
and to the extent that the balance of the SRA, after deducting therefrom (i)
accrued and unpaid interest on non-performing Loans and (ii) actual costs and
expenses incurred in connection with non-performing Loans exceeds the Required
Reserve Amount as of the end of a calendar quarter, such excess amount shall be
remitted by PCC to USFS within thirty (30) days following the end of the
quarter for which the calculation is made.
3.4. TRANSACTIONS EXCLUDED FROM RESERVE REQUIREMENTS. USFS and PCC
agree that the two (2%) percent reserve deposit required from USFS for PCC
Loans shall be waived with respect to transactions with verifiable loan to
value (LTV) ratios of seventy (70%) percent or less [i.e. with thirty (30%)
percent or more equity invested]. USFS agrees that the LTV calculation shall
be based upon the lesser of (i) actual verifiable cost, or (ii) appraised value
as determined by a qualified appraiser approved by PCC. Notwithstanding the
above waiver of the reserve deposit requirements for transactions with LTV
ratios of seventy (70%) percent or less, USFS and PCC agree that all other
terms and provisions of this Agreement shall apply to such transactions,
including without limitation the provisions of Section 2 applicable to
Marketing Fees and Section 4 relating the availability of the Reserve Account
to cover any losses incurred in connection with such Loans.
3.5. DEFICIENCY IN RESERVE ACCOUNT. If losses, costs and expenses
resulting from defaults by Franchisees on PCC Loans at any time exceed the
funds available in the Reserve Account for the payment of such losses, costs
and expenses, all Marketing Fees and deposits made pursuant to paragraph 3.2(b)
shall be retained by or paid to PCC until such time as any deficiency in the
Reserve Account shall be paid in full before any such amounts shall be
deposited in or credited to the Reserve Account, including the SRA.
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SECTION 4. NON-PERFORMING LOANS; REMARKETING:
4.1. DEFAULT ON PCC LOAN BY FRANCHISEE.
(a) In the event that a Franchisee defaults under its
Loan and/or the Loan Documents and PCC forecloses, accepts a reconveyance in
lieu of foreclose, or otherwise takes possession of the Franchise Facility, PCC
shall notify USFS and USFS shall:
(i) From and after the earlier of the date PCC
forecloses or the date PCC receives
possession of a Franchise Facility, pay to
PCC monthly from NOI (as hereinafter defined)
generated by the facility, with any
deficiency made-up by USFS, within ten (10)
days after the end of each calendar month,
the installments of principal and interest
(based upon the principal installments and
interest rate contained in the PCC Note) and
other amounts provided in the Loan Documents;
(ii) Promptly begin and utilize reasonable
commercial efforts to remarket the Franchise
Facility of the defaulting Franchisee;
(iii) Operate and maintain, or cause the Franchise
Facility to be operated and maintained by an
affiliate of USFS, in ordinary course of
business; and
(iv) Observe and comply with Franchisee's
obligations under the Loan Documents to
maintain insurance on and with respect to the
Franchise Facility. The insurance required
to be maintained by USFS must be available on
commercially reasonable terms and shall
include policies of fire and extended
coverage and general public liability
insurance and be in such amounts, with such
coverages as are usual and customary in the
industry for properties of a size and type
substantially similar to the Franchise
Facility of the defaulting Franchisee. PCC
shall be named an additional insured,
mortgagee and/or loss payee, as its interest
shall appear, on all such insurance policies.
(b) The obligations of USFS provided in paragraph 4.1(a)
above and rights to remarket the Franchise Facility shall continue
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for a period not to exceed twelve (12) months following earlier of the date PCC
forecloses or the date PCC receives possession of the Franchise Facility, or
such later date as USFS and PCC shall agree in writing. Any resale or
remarketing of a Franchise Facility by or at direction of USFS shall be subject
to the prior approval of PCC, which approval will not be unreasonably withheld.
4.2. REMARKETING AND SALE OF FRANCHISE FACILITY.
(a) Upon any resale or remarketing of a Franchise
Facility by USFS directly, or by or through a Franchisee or others at the
direction or under the control of USFS, pursuant to Section 4.1(a)(ii) of this
Agreement, PCC shall automatically and immediately receive from the proceeds of
the sale the following amounts, and the excess, if any, received by PCC from
the sale, shall, subject to satisfaction of the conditions of Paragraph 4.2(c),
be placed in the Reserve Account:
(i) The principal balance of the Loan outstanding
at the date of sale;
(ii) All accrued and unpaid interest through the
date of sale;
(iii) All legal fees and collection costs paid or
incurred by PCC since the default by the
Franchisee and through the date of sale; and
(iv) All other costs and expenses incurred or paid
by PCC under or pursuant to the PCC Note and
Loan Documents, including, without
limitation, any and all amounts advanced or
paid for insurance, taxes, etc. with respect
to the Franchise Facility.
(b) In the event the proceeds from the sale of the
Franchise Facility are insufficient to pay or reimburse PCC the total of all
amounts provided in Subsections 4.2(a)(i) through (iv) [herein the amount of
such insufficiency is referred to as the "Deficiency on Resale"], PCC shall
have the right to immediately withdraw from the Reserve Account an amount
sufficient to satisfy in full the Deficiency on Resale.
(c) Provided that USFS has (i) closed the sale of the
Franchise Facility of a defaulting Franchisee within twelve (12) months after
the earlier date that PCC forecloses or receives possession thereof, (ii) has
timely made the payments required by Section 4.1(a) of this Agreement, and
(iii) the amounts provided in Subsection 4.2(a)(i) through (iv) above are
received by PCC at the
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time of sale, USFS shall be entitled to have immediately credited to the
Reserve Account all excess proceeds resulting from USFS's resale or remarketing
of a Franchise Facility.
4.3. COOPERATION BY PCC. USFS and PCC acknowledge that for USFS to
operate and remarket or resale a Franchise Facility, as contemplated in
paragraph 4.1(a) hereof, will require that PCC foreclose or otherwise take
possession of the Franchise Facility pursuant to the Loan Documents. PCC
agrees to cooperate with USFS in its efforts to remarket or sale and/or operate
the Franchise Facility of a defaulting Franchisee, and will, subject to laws of
the applicable jurisdiction, take such action as USFS may reasonably request to
foreclose upon or otherwise secure possession of such Franchise Facility, and
thereafter permit USFS, or its affiliate, to operate and maintain the Franchise
Facility for the period and, as anticipated by Section 4.1 and as may be
permitted by the Loan Documents and subject to any applicable laws; provided,
however, that USFS shall be responsible for and pay or reimburse PCC out of the
proceeds of the sale of such Franchise Facility or from the Reserve Account all
reasonable out-of-pocket costs and expenses incurred or paid in connection with
any such action or proceeding undertaken by PCC at the request of USFS.
4.4. NO THIRD-PARTY BENEFICIARIES. The provisions of Section 4 of
this Agreement, are for the exclusive benefit of USFS, its successors, assigns
and affiliates, and PCC, its successors, assigns and affiliates (including any
holder of the PCC Note and Loan Documents) and no other person or entity,
including any defaulting Franchisee, shall be entitled to rely upon or to
enforce, in whole or part, any provisions or covenants contained in Section 4
of this Agreement or to any credit or reduction in amounts due or owing under
any PCC Loan as a result of any receipts by PCC from any source, including
payments made by USFS or any amounts paid to PCC from the Reserve Account.
SECTION 5. DEFAULTS AND REMEDIES.
(a) Each of the following shall constitute an Event of
Default under this Agreement:
(i) Default by USFS in the payment to PCC of any
amount provided under Subsections 4.1(a)(i)
or failure by USFS to pay for the insurance
required by 4.1(a)(iv) of the Agreement, when
and as due, which default remains uncured for
a period of thirty (30) days following
written notice from PCC; or
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(ii) Failure of USFS to make any payment to the
Reserve Account required by Section 3.1 of
this Agreement, when and as due, which
failure remains uncured for a period of ten
(10) days following the due date; or
(iii) Failure of USFS to begin and use reasonable
commercial efforts in remarketing of a
Franchise Facility as provided in Subsection
4.1(a)(ii), or the failure of USFS to perform
or comply with the provisions of Subsection
4.1(a)(iii) and any such failure continues
uncured for a period of thirty (30) days
following written notice from PCC; or
(iv) USFS shall (A) become insolvent, (B) make an
assignment for the benefit of creditors, (C)
call a meeting of creditors for the
composition of debts, or (D) there shall be
filed by or against USFS a petition in
bankruptcy or for reorganization (whether
under the Bankruptcy Code of 1978 or other
federal or state bankruptcy or insolvency
law), which filing is not dismissed within
thirty (30) days, or (E) a custodian,
receiver or agent is appointed or authorized
to take charge of any of the properties of
USFS; or
(v) USFS shall voluntarily abandon its business
operations.
(b) Upon the occurrence of an Event of Default under
Section 5(a) of this Agreement, PCC may, at its election and in its discretion,
exercise any one or more of the following rights and remedies, each of which
shall be cumulative and nonexclusive, and may be exercised concurrently or
consecutively:
(i) Upon any default by USFS under Subsections
5(a)(i) or (ii), declare all monetary
obligations of USFS under Sections 3.1 and
4.1 to be immediately due and payable,
whereupon, all such monetary obligations
shall automatically be and become immediately
due and payable, without further notice or
demand and PCC shall have the right, at its
option, to proceed forthwith to collect the
total amount due from USFS and concurrently,
proceed as provided in Subsection 5(b)(iii)
hereof;
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(ii) Upon any default by USFS under Subsection 5(a)(iii),
terminate the right of USFS to operate and/or
remarket or resell a Franchise Facility, and
thereafter proceed with the remarketing or sale of
the Franchise Facility and concurrently withdraw
funds held in the Reserve Account to pay and satisfy
installments and other amounts due and coming due
under the defaulted PCC Loan and related Loan
Documents and to reimburse or pay all costs and
expenses paid or incurred by PCC in connection with
remarketing and/or sale of the Franchise Facility;
provided, however, that USFS shall remain liable to
PCC for the deficiency, if any, between the net
operating income ("NOI") of the Franchise Facility
received by PCC and principal and interest
installments due PCC (based upon the interest rate
contained in the PCC Note) for the twelve (12) months
period following the date PCC forecloses or receives
possession of such Franchise Facility, whichever is
earlier; or
(iii) Upon any sale or disposition of a Franchise Facility
by PCC in connection with a default by a Franchisee
and while USFS is in default of the covenants and
conditions in this Agreement with respect to such
Franchise Facility, PCC may apply any part or all of
the Reserve Account, as appropriate, to pay and
satisfy any deficiency remaining under the PCC Note
and Loan Documents after the said sale of the
Franchise Facility; or
(iv) If an Event of Default under Subsections 5(a)(i),
(ii), (iv) or (v) has occurred and is continuing, PCC
may, at its election and without further notice or
demand to USFS, immediately terminate this Agreement
as to all future liabilities or obligations of PCC
[other than the indemnification obligation of PCC
under Section 9.4(b)] and all rights of USFS
hereunder, and thereupon, all monies due or coming
due to USFS pursuant to this Agreement, whether as
Marketing Fees or otherwise, together with all funds
in the Reserve Account (including funds on deposit in
the SRA) and any interest therein, shall be and
automatically become the property of PCC
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and shall be retained by PCC, as partial liquidating damages. USFS
shall and does hereby agree to waive and release any interest in or
claim or right to any such funds or the Reserve Account upon the
occurrence of an Event of Default and termination by PCC as provided
in this paragraph. USFS shall remain liable an shall pay, on demand,
all amounts owing to PCC pursuant to Section 3.1, plus the deficiency,
if any, between the NOI of defaulted Franchise Facilities received by
PCC for the twelve (12) month period following the earlier date that
PCC forecloses or the date PCC receives possession of each defaulted
Franchise Facility and the principal and interest installments due PCC
on defaulted Loans pursuant to Subsection 4.1(a)(i) of this Agreement.
(c) Notwithstanding, any provision in this Agreement to
the contrary or in conflict, upon the occurrence of an Event of Default by USFS
as provided in Section 5 and the sale of a Franchise Facility by PCC, all
excess proceeds received from any such sale, to the extent not required to be
paid to the original Borrower or maker of the PCC Note, shall be and become the
property of PCC without any requirement to account to USFS for such surplus
from the sale.
SECTION 6. TERM AND TERMINATION:
6.1. TERM.
(a) This Agreement shall become effective upon the date
of full execution by the parties hereto (the "Effective Date") as reflected in
Section 9.13 and shall continue until the earlier to occur of:
(i) The date of cancellation by either party upon
giving thirty (30) days prior written notice
from one party to the other; or
(ii) The date of termination by PCC as provided
in Section 5 of this Agreement.
(b) A cancellation of this Agreement pursuant to
subparagraph 6.1(a)(i) shall not terminate the obligations of either party with
respect to all transactions which are or have been:
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(i) Funded;
(ii) Closed; or
(iii) Committed (i.e. any transaction which has
been approved by the Credit Committee of
PCC).
6.2. DISPOSITION OF MARKETING FEES AND RESERVE ACCOUNT UPON EARLY
CANCELLATION/TERMINATION OF AGREEMENT. Notwithstanding any provision herein to
the contrary or in conflict, USFS and PCC agree that in the event this
Agreement is canceled by USFS pursuant to subparagraph 6.1(a)(i) within six (6)
months following the Effective Date and prior to the Public Offering by PCC, or
by PCC pursuant to Subsection 5(b)(iv) as a result of the occurrence of an
Event of Default, all monies due or coming due to USFS hereunder as Marketing
Fees or otherwise, and funds in the Reserve Account (including funds on deposit
in the SRA) and any interest therein, shall be retained by PCC as partial
liquidating damages, free and clear of any obligations or restrictions under
this Agreement, and USFS hereby waives and releases any rights or claims to or
interest in any such funds or the Reserve Account in the event of any such
cancellation or termination of this Agreement.
SECTION 7. PUBLIC STOCK OFFERING; USFS FINANCIAL INFORMATION:
7.1. PUBLIC OFFERING.
(a) USFS acknowledges that PCC may, at its option and on
a best efforts basis, initiate a public offering of PCC shares (the "Public
Offering") in conjunction with this Agreement. The terms, provisions,
conditions and scheduling of the Public Offering shall be under the exclusive
control and within the absolute discretion of PCC, as shall be the decision on
whether or not to proceed with a Public Offering. The costs and expenses
connected with such Public Offering shall be the responsibility of PCC.
(b) USFS hereby agrees to assist PCC in connection with
any such Public Offering as reasonably requested by the underwriter selected by
PCC for the Public Offering. Any cost or expense of assisting with the Public
Offering which is incurred by USFS at the request of PCC or its underwriter
will be reimbursed by PCC; provided, however, that USFS and PCC will agree on
the amount and/or type of costs and expenses to be reimbursed prior to USFS's
incurring the same.
7.2. USFS FINANCIAL INFORMATION.
(a) USFS shall provide PCC annually, within ninety (90)
days following the end of each fiscal year of USFS, with the
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consolidated balance sheet of USFS as at the end of such fiscal year and the
related consolidated statements of income, shareholders' equity and cash flow
of USFS for such fiscal year, prepared in accordance with generally accepted
accounting principals, and audited by the independent certified public
accountants employed by USFS (the "Financial Information").
(b) Within thirty (30) days after preparation thereof,
USFS shall provide PCC a copy of each Uniform Franchise Offering Circular
("UFOC's") pertaining to Microtel.
(c) PCC will use its best efforts to maintain, in
confidence, Financial Information provided by USFS to PCC and marked as
"Confidential." Such Financial Information will be revealed only to such of
PCC's agents and employees as may reasonably be required to evaluate the
ongoing business of USFS. Such agents and employees will be advised of the
restrictions on further disclosure. USFS acknowledges that PCC may be required
by law or order of a court to disclose or provide such confidential Financial
Information to third-persons. In the event that PCC is served with any
subpoena, request for production or order of a court or administrative tribunal
pertaining to such confidential Financial Information, it will notify USFS, and
USFS may, at USFS's cost and expense, object to or defend against any such
subpoena, discovery request or order.
SECTION 8. PCC ACTION WITH RESPECT TO PCC LOANS:
8.1. MODIFICATION OF LOANS, ETC. If PCC shall at any time or from
time to time, with or without the consent of, or notice to, USFS:
(a) change or extend the manner, place or terms of
payment of, or renew or alter all or any portion of, a PCC Loan or Loan
Documents;
(b) take any action under or in respect of a PCC Loan or
Loan Documents in the exercise of any remedy, power or privilege contained
therein or available to it at law, equity or otherwise, or waive or refrain
from exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, a PCC Loan
or Loan Documents;
(d) extend or waive the time for any Borrowers' or other
person's (including, without limitation, any guarantor) performance of, or
compliance with, any term, covenant or agreement on its part to be performed or
observed with respect to a PCC Loan or under
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Loan Documents, or waive such performance or compliance or consent to a failure
of, or departure from, such performance or compliance;
(e) take and hold security or collateral for the payment
of a PCC Loan or sell, exchange, release, dispose of, or otherwise deal with,
any property pledged, mortgaged or conveyed, or in which PCC, as Lender, has
been granted a Lien, to secure any indebtedness of any of the Borrowers, or any
other person (including, without limitation, any guarantor) of a PCC Loan;
(f) release anyone who may be liable in any manner for
the payment of any amounts owed by any of the Borrowers, or any other person
(including, without limitation, any guarantor) of a PCC Loan;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of any of
the Borrowers, or any other person (including, without limitation, any
guarantor) of a PCC Loan are subordinated to the claims of PCC; or
(h) apply any sums by whomever paid or however realized
to any amounts owing by any of the Borrowers or any other person (including,
without limitation, any guarantor) of a PCC Loan in such manner as PCC shall
determine in its discretion;
then PCC shall not incur any liability to USFS as a result thereof, and no such
action shall impair or release any of the obligations of USFS under this
Agreement.
8.2. SURVIVAL OF AGREEMENT. USFS agrees that this Agreement shall
remain in full force and effect, and its obligations hereunder shall continue
with respect to each PCC Loan made subject to this Agreement, irrespective of,
and unaffected by:
(a) the genuiness, validity, regularity, enforceability
or any future amendment of, or change in, any such PCC Loan or any other Loan
Document related thereto or any other agreement, document or instrument to
which any of the Borrowers or any guarantor of the said PCC Loan is or may
become a party;
(b) the absence of any action to enforce the PCC Loan or
any other Loan Document or the waiver or consent by PCC with respect to any of
the provisions of any Loan Document;
(c) the existence, value or condition of, or failure to
perfect a lien against, any security for the PCC Loan or any action, or the
absence of any action, by PCC in respect of such security;
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(d) any change in the time, manner or place of payment
of, or in any other term of, all or any part of the PCC Loan, or any other
amendment or waiver of or any consent to departure from any agreement, note or
other instrument related to such PCC Loan or Loan Documents;
(e) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the PCC Loans; or
(f) any other action or circumstance which might
otherwise constitute a legal or equitable discharge or defense of any Borrower
or a surety or guarantor;
it being agreed by USFS that its obligations under this Agreement shall not be
discharged until the payment and performance, in full, of each said PCC Loan.
USFS expressly waives any rights it may now or in the future have under this
Agreement, any statute, or at common law, or at law or in equity, or otherwise,
to compel PCC to proceed with respect to a PCC Loan against any of the
Borrowers or any other party to such PCC Loan or the Loan Documents, or against
any security for the payment and performance of the PCC Loan before proceeding
against, or as a condition to proceeding under this Agreement. USFS further
expressly waives and agrees not to assert or take advantage of any defense
based upon the failure of PCC to commence an action in respect of any PCC Loan
against any of the Borrowers, or any other person (including, without
limitation, any guarantor) or any security for the payment and performance of a
PCC Loan. USFS agrees that any notice or directive given at any time to PCC
which is inconsistent with the waivers in the preceding two sentences shall be
null and void and may be ignored by PCC, and, in addition, may not be pleaded
or introduced as evidence in any litigation relating to this Agreement for the
reason that such pleading or introduction would be at variance with the written
terms of this Agreement, unless PCC has specifically agreed otherwise in
writing. The foregoing waivers are of the essence of the transaction
contemplated by this Agreement and, but for this Agreement and such waivers,
PCC would decline to make PCC Loans to Franchisees.
8.3. WAIVERS WITH RESPECT TO PCC LOANS. In addition to the waivers
contained elsewhere in this Agreement, USFS waives, and agrees that it shall
not at any time insist upon, plead or in any manner whatever claim or take the
benefit or advantage of, any appraisal, valuation, stay, extension, marshalling
of assets or redemption laws, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the
performance by USFS of its obligations under, or the enforcement by PCC of,
this Agreement. USFS further hereby waives diligence,
- 15 -
17
presentment and demand (whether for non-payment or protest or of acceptance,
maturity, extension of time, change in nature or form respecting PCC Loans,
acceptance of further security, release of further security, composition or
agreement arrived at as to the amount of, or the terms of, PCC Loans, notice of
adverse change in any of the Borrowers' or any other person's (including,
without limitation, any guarantor) financial condition or any other fact which
might materially increase the risk with respect to a PCC Loan) with respect to
any of the PCC Loans or all other demands whatsoever and waives the benefit of
all provisions of law which are or might be in conflict with the terms of this
Agreement.
SECTION 9. MISCELLANEOUS:
9.1. NOTICES.
(a) Unless otherwise provided herein, communications
provided for hereunder shall be in writing and shall be mailed, telecopied or
delivered, as follows:
If to USFS: U.S. FRANCHISE SYSTEMS, INC.
13 Corporate Square, Suite 250
Atlanta, Georgia 30329
Attn: Neal Aronson
Telecopier No. (404) 321-4482
or, an affiliate of USFS designated by USFS by notice in writing to PCC, at the
address shown in such notice.
If to PCC: PMC COMMERCIAL TRUST
17290 Preston Road, 3rd Floor
Dallas, Texas 75252
Attn: Jan S. Salit
Telecopier No. (214) 380-1371
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties. All such notices and other
communications to a party shall be effective (i) if mailed, when received or
three days after mailing, whichever is earlier; (ii) if telecopied, when
transmitted; or (iii) if hand delivered, when delivered. All notices given by
telephone shall be subsequently confirmed in writing, such written confirmation
to be controlling over any information in the telephonic notice. Personal
delivery or delivery by transmittal of a confirmed telecopy sent to the
telecopier number following a party's address herein, to a party or to any
officer, partner, agent, or employee of such party at said address or
telecopier number shall constitute receipt. Rejection or other refusal to
accept or inability to deliver because of a changed address of which no notice
has been
- 16 -
18
received shall also constitute receipt.
9.2. EXPENSES. USFS and PCC hereby agree to share equally the
legal cost of the preparation of this Agreement.
9.3. AMENDMENTS. Any term, covenant, agreement or condition of
this Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by PCC and, in the case of an amendment, by
each USFS and PCC.
9.4. GENERAL INDEMNIFICATION.
(a) USFS agrees to indemnify and hold PCC, its directors,
officers, shareholders, employees, agents and affiliates harmless from and
against any claim, loss, damage, action, cause of action, liability, cost and
expense (including, without limitation, reasonable attorney's fees and
expenses) or suit of any kind or nature whatsoever (collectively "Losses")
brought against or incurred by PCC, including without limitation, claims
brought against PCC by any third party, in any manner arising out of or,
directly or indirectly, related to or connected with USFS' business activities
related to this agreement.
(b) PCC agrees to indemnify and hold USFS, its directors,
officers, shareholders, employees, agents and affiliates harmless from and
against any Losses brought against or incurred by any of the foregoing persons,
in any manner arising out of or, directly or indirectly, related to or
connected with PCC's business activities related to this agreement or the
Public Offering.
9.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
9.6. INTEGRATION. THIS AGREEMENT SETS FORTH AND CONSTITUTES THE
ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE TRANSACTIONS
SET FORTH HEREIN.
9.7. SETOFF. In addition to any rights now or hereafter granted
under Applicable law and not by way of limitation of any such rights, PCC is
hereby authorized by USFS, at any time or from time to time after the
occurrence of an Event of Default, without notice or demand, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, and including, but not limited to,
Marketing Fees or other deposit, whether matured or unmatured) and any other
indebtedness at any time held or owing by the PCC to or for the credit or the
account of USFS against and on account of any monetary obligation of USFS to
PCC under this Agreement or any damages suffered by PCC as a result of the
failure of USFS to keep
- 17 -
19
and perform all terms, provisions and conditions of this Agreement,
irrespective of whether or not any or all of such monetary obligations and
damages shall have been declared to be due and payable.
9.8. ASSIGNMENT. All the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that USFS may not assign or transfer
any of its rights under this Agreement without PCC's prior written consent.
9.9. TITLES AND CAPTIONS. Titles and captions of Sections,
Subsections and paragraphs in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
9.10. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
9.11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original but all of which
together, when taken together, shall constitute one and the same instrument.
9.12. PARTICIPATIONS.
(a) PCC may at any time sell, assign, transfer,
negotiate, and grant participations in, or otherwise dispose of, all or any
portion of its rights, benefits and/or obligations under this Agreement and
under any PCC Loan and related Loan Documents to any Person and in the event of
any such disposition by PCC, all references herein to PCC shall be deemed a
reference to PCC's transferee or participant to the extent of its
participation. USFS hereby agrees that any transferee or participant receiving
or purchasing a participation in a PCC Loan and related Loan Documents or
rights under this Agreement shall be entitled to the rights and benefits of
this Agreement to the extent of any such participation or assignment, as if
such transferee or participant were PCC, provided, however, that all such
rights and benefits shall be exercisable only by and through PCC.
(b) Notwithstanding any provision or condition herein to
the contrary or in conflict, USFS hereby acknowledges and agrees that PCC may
negotiate, sell, assign or transfer all or any part of
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20
a PCC Loan and related Loan Documents free and clear of any claims by USFS
under this Agreement, provided that all obligations of USFS under this
Agreement with respect to such PCC Loan and related Loan Documents shall
automatically terminate upon any such negotiation, sale, assignment of
transfer.
9.13. EFFECTIVE DATE. The "Effective Date" of this Agreement shall
be the __ day of April, 1996.
IN WITNESS WHEREOF, the undersigned have caused their respective
signatures to be affixed hereto by their officers thereunto duly authorized on
this ___ day of April, 1996.
USFS:
U.S. FRANCHISE SYSTEMS, INC.
BY:
-----------------------------------
TITLE:
--------------------------------
[CORPORATE SEAL]
PCC:
PMC COMMERCIAL TRUST
BY:
-----------------------------------
TITLE:
--------------------------------
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EXHIBIT "A"
ELIGIBLE INVESTMENTS
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