EXHIBIT 10.2
PROCEEDS DEFICITS LOAN AGREEMENT
THIS PROCEEDS DEFICITS LOAN AGREEMENT (this "AGREEMENT") is made and
entered this 4th day of October, 2004, to be effective as of October 1, 2004
(the "EFFECTIVE DATE"), by and among PMC COMMERCIAL TRUST and its subsidiaries,
PMCT Sycamore, L.P., PMCT Macomb, L.P., PMCT Marysville, L.P. and PMCT
Plainfield, L.P. (collectively, "PMC") and ARLINGTON HOSPITALITY, INC.
("ARLINGTON").
RECITALS
WHEREAS, PMC, Arlington and Arlington Inns, Inc. (formerly Amerihost
Inns, Inc.) (the "LESSEE") entered into an Amended and Restated Master Agreement
dated January 24, 2001 (the "ORIGINAL MASTER AGREEMENT"), to set forth their
agreement to amend and restate provisions of the Master Agreements (as therein
defined) and other matters set forth therein; and
WHEREAS, PMC, Arlington and Lessee have previously amended the Original
Master Agreement by (a) that certain First Amendment to Amended and Restated
Master Agreement dated as of May 25, 2001 and (b) that certain Second Amendment
to Amended and Restated Master Agreement dated as of June 4, 2003; and
WHEREAS, PMC, Arlington and Lessee are concurrently executing a Third
Amendment to the Original Master Agreement (the "THIRD AMENDMENT") (the Original
Master Agreement as amended by the amendments described in these recitals herein
called the "MASTER AGREEMENT") pursuant to which, among other things, PMC has
agreed to defer the payment of certain amounts otherwise payable to it in
connection with the sales of the Hotels (as defined in the Master Agreement) and
loan to Arlington the amounts so deferred, provided that Arlington agree to pay
such amounts pursuant to the terms hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS. Capitalized terms used but not defined herein shall have
the meanings set forth in the Master Agreement (inclusive of the Third
Amendment).
2. PROCEEDS DEFICITS LOAN. PMC agrees to make a loan to Arlington in an
amount equal to the aggregate amount of all Proceeds Deficits arising under the
Master Agreement (the "PROCEEDS DEFICITS LOAN"). The Proceeds Deficits Loan will
be evidenced by a promissory note in substantially the form of Exhibit "A-1"
hereto (each such note and all extensions, renewals, and modifications thereof
and all substitutions therefore herein called a "DEFICIT NOTE"). Prior to the
Effective Date, a Sale Closing occurred with respect to Port Huron, Michigan
Hotel. Notwithstanding the foregoing, the parties hereto acknowledge and confirm
that (i) a Proceeds Deficit existed in connection with such sale and (ii)
Arlington executed, as maker, a promissory note to PMC in an amount equal to
such Proceeds Deficit (the "PORT HURON NOTE"). As contemplated in the Third
Amendment, concurrently herewith Arlington shall execute, as Maker, a Deficit
Note in the amount specified in the Third Amendment. This Deficit Note shall
replace the Port Huron Note and upon PMC's receipt of the Deficit Note, PMC
shall return the original Port Huron Note to Arlington. Hereinafter, upon each
Sale Closing, PMC shall
record on Schedule 1 to the Deficit Note, the then current amount of principal
under the Proceeds Deficit Loan and shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of Arlington to PMC
under this Agreement, including the amounts of principal and interest payable
and paid to PMC from time to time hereunder (i.e., increases in the principal
balance if additional Proceeds Deficits exist or reductions in the principal
balance if a Proceeds Excess exists). The entries made by PMC pursuant to the
preceding sentence shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of PMC to maintain
such information or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Proceeds Deficits Loan in accordance
with the terms of this Agreement. Notwithstanding the foregoing, at the request
of PMC at any time during the term hereof, Arlington shall execute a new Deficit
Note, which Deficit Note shall be in the amount of the then outstanding
aggregate Proceeds Deficits as determined in accordance with the Master
Agreement, which Deficit Note shall be issued in substitution and replacement of
the existing Deficit Note. Upon the receipt by PMC of any such replacement
Deficit Note, PMC will return the Deficit Note so replaced to Arlington.
3. PAYMENT OF THE PROCEEDS DEFICITS LOAN. Arlington hereby promises to pay
to PMC the principal amount of the Proceeds Deficits Loan, together with
interest thereon, in accordance with the following terms and conditions:
(a) Applicable Rate. The principal amount of the Proceeds Deficits
Loan outstanding from time to time will bear interest until paid in
full at the following rates (the rate in effect from time to time
herein called the "APPLICABLE RATE"): (i) from the date hereof until
the Payment Commencement Date (as hereinafter defined), at the annual
rate of eight and one-half percent (8.5%) and (ii) beginning on the
Payment Commencement Date, at the annual rate equal to the greater of
(A) the Treasury Rate plus four and one-half percent (4.5%) or (B)
eight and one-half percent (8.5%), but in no event in excess of the
maximum interest rate permitted by applicable law. As used herein,
"TREASURY RATE" shall mean the asking yield (Ask Yld.) in effect as of
the first (1st) day of the month prior to the Payment Commencement Date
on U.S. Treasury Bonds maturing three (3) years following the end of
such Payment Commencement Date, as reported in the issue of the Wall
Street Journal published on the first (1st) day of the month prior to
the Payment Commencement Date in the Govt Bonds & Notes portion of the
Treasury Bonds, Notes & Bills Tables)
(b) Payment of Interest. Arlington shall pay to PMC on the first
day of each calendar month after the date hereof to and including the
Maturity Date (hereinafter defined), interest on the Proceeds Deficits
Loan from time to time outstanding, at the Applicable Rate, for the
immediately preceding calendar month. Interest shall be calculated and
applied on the basis of a 365-day year and the actual number of days
elapsed in any month (or partial month) during which the Proceeds
Deficits Loan is outstanding.
(c) Payment of Principal. Commencing on the earlier of October 1,
2008 or the closing date of the sale of the final Hotel (the "PAYMENT
COMMENCEMENT DATE"), Arlington shall pay to PMC during each Loan Year
thereafter, principal payments in the aggregate amount equal to
one-third (1/3) of the principal balance of the Proceeds Deficits Loan
outstanding as of the Payment Commencement Date (the "MINIMUM ANNUAL
PRINCIPAL REDUCTION"). Such payments may be made at such times during
the applicable Loan Year as Arlington may elect, provided they total,
in the aggregate, the
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minimum Annual Principal Reduction for such Loan Year. The full amount
of the Proceeds Deficits Loan and all accrued and unpaid interest
thereon shall be fully due and payable on the date that is three (3)
years following the Payment Commencement Date (the "MATURITY DATE"),
unless accelerated pursuant to the terms hereof. As used herein, "LOAN
YEAR" shall mean each consecutive 12-month period beginning on the
Payment Commencement Date.
(e) Special Mandatory Principal Prepayments. Anything herein to
the contrary notwithstanding, Arlington shall be required to make the
following payments of principal in addition to those described in
subsection (c) above:
(i) If at any time during the term of this Agreement,
Arlington's net worth (as determined in accordance with generally
accepted accounting principles applied to Arlington's annual, audited
statements or quarterly financial statements issued in public filings
of Arlington (the "GAAP NET WORTH")), exceeds $15,000,000, as adjusted
and detailed herein (the "NET WORTH BASE"), Arlington will reduce (or
pay off) to the extent of the funds available to do so the Proceeds
Deficits Loan by an amount equal to the excess of the GAAP Net Worth as
recorded on Arlington's financial statement over the Net Worth Base,
provided, that if the funds are not available to pay such amount, the
Proceeds Deficit Loan will thereafter bear interest at the greater of
the Contract Rate or the Treasury Rate plus four and one-half percent
(4.5%) per annum until such amount is paid. Such principal payment
shall be made on or before the first (1st) day of the month following
the month in which such calculation is made. Arlington's Net Worth Base
shall be increased by (A) any sales of common or preferred stock of
Arlington, (B) deferred gains included as liabilities on Arlington's
financial statement dated as of March 31, 2004, which are recognized as
income by Arlington after March 31, 2004 pertaining to the (x) original
sales of the Hotels to PMC and (y) the total amount of all incremental
fees from Cendant Corporation or its affiliates that are deferred as of
such date and (C) the amount of payments made previously pursuant to
this Section 3(d)(i).
(ii) If at any time during the term of this Agreement, the
balance of the Proceeds Deficits Loan exceeds Four Million and No/100
Dollars ($4,000,000.00), Arlington will immediately make a payment to
PMC in an amount necessary to reduce the balance of the Proceeds
Deficits Loan to $4,000,000.00 or less.
4. LOCATION AND MEDIUM OF PAYMENTS. The sums payable under this Agreement
shall be paid to PMC by a federal wire transfer of immediately available funds,
or if not available, to PMC in immediately available funds, at 17950 Preston
Road, Dallas, Texas 75252 or at such other place as PMC may from time to time
hereafter designate to Arlington in writing, in legal tender of the United
States of America.
5. ACCELERATION; DEFAULT INTEREST. The occurrence of any one or more of
the following events shall each be an "EVENT OF DEFAULT" hereunder: (i) the
occurrence of a default in the payment of any amount due hereunder or (ii) the
occurrence of Default Rate Event of Default. After an Event of Default shall
have occurred and be continuing, (A) at the option of PMC, which may be
exercised at any time, the whole of the Proceeds Deficits Loan then outstanding,
together with all interest, and other charges due hereunder shall immediately
become due and payable In full and (B) the amount of the Proceeds Deficits Loan
outstanding will thereafter bear interest at the annual rate of fifteen percent
(15%) (the "DEFAULT RATE") until all amounts due hereunder are paid in full.
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6. ATTORNEY FEES. Arlington, upon demand, shall pay PMC for all costs and
expenses, including without limitation attorneys' fees, paid or incurred by PMC
in connection with the collection of any sum due hereunder, or in connection
with enforcement of any of PMC's rights or Arlington's obligations under this
Agreement, together with interest thereon at the Default Rate.
7. NO ORAL CHANGES; WAIVERS. This Agreement may not be changed orally, but
only by an agreement in writing signed by the party against whom enforcement of
a change is sought.
8. BIND AND INURE. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, heirs, successors
and assigns.
9. APPLICABLE LAW. The provisions of this Agreement shall be construed and
enforceable in accordance with the laws of the State of Texas without giving
effect to any principles of conflicts of laws.
10. NOTICE. Any notice, request, demand, statement or consent made
hereunder shall be in writing signed by the party giving such notice, request,
demand, statement or consent, and shall be deemed to have been properly given
when either delivered personally, delivered to a reputable overnight delivery
service providing a receipt or deposited in the United States Mail, postage
prepaid and registered or certified return receipt requested, at the address set
forth below, or at such other address within the continental United States of
America as may have theretofore been designated in writing by such party in
accordance with the terms of this Section 10. The effective date of any notice
given as aforesaid shall be the date of personal service, one (1) business day
after delivery to such overnight delivery service, or three (3) business days
after being deposited in the United States mail, which ever is applicable. For
purposes hereof, the addresses are as follows:
If to PMC: PMC Commercial Trust
17950 Preston Road, Suite 600
Dallas, Texas 75252
Attn: Jan Salit
with a copy to: Locke Liddell & Sapp LLP
220 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attn: Kenneth Betts
If to Arlington: Arlington Hospitality, Inc.
2355 South Arlington Heights Road
Suite 400
Arlington Heights, Illinois 60005
Attention: Jerry H. Herman, President
with a copy to: Squire, Sanders & Dempsey, LLP
Two Renaissance Square, Suite 2700
40 North Central Avenue
Phoenix, Arizona 85004
Attn: Richard E. Ross
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IN WITNESS WHEREOF, Arlington and PMC have duly executed this Agreement
as a sealed instrument as of the day and year first above written.
ARLINGTON:
ARLINGTON HOSPITALITY, INC.
By: /s/ Jerry H. Herman
--------------------------------
Name: Jerry H. Herman
Title: President
By: /s/ James B. Dale
--------------------------------
Name: James B. Dale
Title: Secretary
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PMC:
PMC COMMERCIAL TRUST
By: /s/ Lance B. Rosemore
----------------------------------
Name: Lance B. Rosemore
Title: President
PMCT SYCAMORE, L.P.
By: PMCT AH-SYCAMORE, INC.,
Its general partner
By: /s/ Lance B. Rosemore
---------------------------
Name: Lance B. Rosemore
Title: President
PMCT MACOMB, L.P.
By: PMCT AH-MACOMB, INC.,
Its general partner
By: /s/ Lance B. Rosemore
---------------------------
Name: Lance B. Rosemore
Title: President
PMCT PLAINFIELD, L.P.
By: PMCT AH, INC, its general partner
By: /s/ Lance B. Rosemore
---------------------------
Name: Lance B. Rosemore
Title: President
PMCT MARYSVILLE, L.P.
By: PMCT AH, INC, its general partner
By: /s/ Lance B. Rosemore
---------------------------
Name: Lance B. Rosemore
Title: President
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