-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UWxOHml3FAaZF8SoeIaZXigkZdeVX7Him9Xmj1wCKaJ6fsvWLIys3jf1y6XqlR+H IM4B2SEIYFwguldX9nbOgw== 0000950144-02-003313.txt : 20020415 0000950144-02-003313.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950144-02-003313 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LODGIAN INC CENTRAL INDEX KEY: 0001066138 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 522093696 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14537 FILM NUMBER: 02597846 BUSINESS ADDRESS: STREET 1: 3445 PEACHTREE ROAD N E SUITE 700 CITY: ATLANTA STATE: CA ZIP: 30326 BUSINESS PHONE: 4043649400 MAIL ADDRESS: STREET 1: 3445 PEACHTREE ROAD N E SUITE 700 CITY: ATLANTA STATE: CA ZIP: 30326 10-K 1 g75096e10-k.txt LODGIAN, INC. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NO. 1-14537 LODGIAN, INC. (Exact name of registrant as specified in its charter) DELAWARE 52-2093696 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3445 PEACHTREE ROAD N.E., SUITE 700 30326 ATLANTA, GA (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (404) 364-9400 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS ------------------- Common Stock, $.01 par value per share Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Common Stock, par value $.01 per share, held by non-affiliates of the registrant as of March 15, 2002, was $1,634,865 based on the closing price of $0.06 per share on the Over the Counter Bulletin Board on such date. The registrant has 28,479,837 shares of Common Stock, par value $.01, outstanding as of March 15, 2002. ================================================================================ PART I ITEM 1. BUSINESS Lodgian, Inc. ("Lodgian" or the "Company") is a successor to Servico, Inc. ("Servico") as a result of Servico's merger (the "Merger") with Impac Hotel Group, LLC, a privately owned hotel ownership, management and development company ("Impac"). The Merger was completed on December 11, 1998. The Merger was accounted for under the purchase accounting method. Lodgian was formed by Servico's merger with Impac in December 1998. Servico was incorporated in 1956 under the laws of the State of Delaware. From 1956 through 1990, the predecessor was engaged in the ownership and operation of hotels under a series of different ownerships. CHAPTER 11 FILING On December 20, 2001, the Company and eighty one of its subsidiaries (collectively "the Debtors") filed for voluntary reorganization with the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) under Chapter 11 of the Bankruptcy Code (the Chapter 11 Cases). The Chapter 11 Cases have been consolidated for purposes of administration under case number 01-16345. The filing was precipitated by the weaker US economy, the decline in travel since the events of September 11 and the Company's heavy debt load. The Debtors are currently operating their businesses as debtors-in-possession and are subject to the jurisdiction of the Bankruptcy Court while a reorganization plan is being formulated. As a result of the Chapter 11 filing, the Company is prohibited from paying pre-petition claims (unless these are approved by the courts) and creditors are prohibited from attempting to collect loans or debts arising prior to December 20, 2001. The Company, at its option, may assume or reject contracts entered into prior to the date of filing. Rejected contracts entered into prior to the date of the petition would be treated as unsecured claims. The Company has received approval from the Bankruptcy Court to pay pre and post-petition employee wages, salaries, benefits and other employee obligations. The Bankruptcy Court also approved orders granting the debtors authority to pay, among other things, certain pre-petition claims of its critical service vendors. The Company has been and intends to continue to pay its post-petition obligations arising in the ordinary course of business. The Debtors have received debtor-in-possession financing (the DIP facility) of $25 million from a group of lenders led by Morgan Stanley Funding Inc. and Lehman Brothers Inc. The DIP facility, along with the rights of the Debtors to use the cash collateral of these lenders, expires one year from the date of filing or the effective date of the reorganization plan, whichever is earlier. This financing will allow the Company to operate in the normal course during the bankruptcy proceedings. As of March 22, 2002, the Debtor had not yet filed its plan of reorganization (the Plan) with the Bankruptcy court but management believes that the Plan will result in most unsecured claims being settled for less than 100% of their face value and that the interests of the common stock holders will be significantly diluted. GENERAL Lodgian is one of the largest owners and operators of full-service hotels in the United States. Lodgian owns or manages 106 hotels, containing 19,893 rooms located in 32 states and Canada as of December 31, 2001. The Company's hotels include 101 wholly-owned hotels, four hotels in which the Company has a 50% or greater equity interest and one hotel in which the Company has a minority equity interest. Lodgian's hotels are primarily full-service properties which offer food and beverage services, meeting space and banquet facilities and compete in the mid-price and upscale segments of the lodging industry. Lodgian believes that these segments have more consistent demand generators than other segments of the lodging industry and that they have recently experienced less development of new properties than other lodging segments, such as 1 limited service, economy and budget segments. Substantially all of the Company's hotels (101) are affiliated with seven different nationally recognized hospitality franchises. The Company is one of the largest Holiday Inn franchisees and one of the largest Marriott franchisees nationally. FRANCHISE AFFILIATIONS Management believes that Lodgian's strong brand affiliations bring many benefits in terms of guest loyalty and market share premiums. With 80% of the Company's portfolio composed of Crowne Plaza, Holiday Inn and Marriott hotels, the Company believes that it is well-positioned to take advantage of superior brand equity, quality standards and reservation contribution. As a result of recent renovations and improvements, as well as improvements made by other franchisees under the "Holiday Inn Worldwide Core Modernization" program, management believes that the Holiday Inn image will be enhanced. In addition, management believes that Marriott continues to be a very strong name among travelers and in the industry, providing consistently high quality products and service. The Company's hotels also benefit from both franchisors' toll free reservation numbers, which contribute approximately 30% of the Company's total reservations for these brands. The Company is subject to certain property maintenance and quality standard compliance requirements under its franchise agreements. The Company periodically receives notifications from its franchisors of events of noncompliance with such agreements and may continue to receive notifications if the liquidity and cash constraints of the Company limit its ability to comply with its franchise agreements. In the past, management has cured most cases of noncompliance within the applicable cure periods and the events of noncompliance did not result in events of default under the respective loan agreements. However, in selected situations, as warranted, based on economic evaluations, management may elect to not comply with the franchisor requirements. In such situations, the Company will either select an alternative franchisor or operate the property independent of any franchisor. As a result of the Company's petition for bankruptcy, the Company is technically in default of its franchise agreements. However, due to the automatic stay of proceedings, the franchisors are prohibited from proceeding with certain actions absent approval from the Bankruptcy Courts. Were the automatic stay, in respect of these franchise agreements, to be lifted, this could negatively impact operating results and the value of the Company's hotels. At December 31, 2001, substantially all of the Company's owned and managed hotels were affiliated with national franchisors, as set forth in the following table:
TOTAL ----- NO. OF HOTELS NO. OF ROOMS ------------- ------------ Six Continents Hotels and Resorts(1)................................... 69 14,107 Marriott International(2).............................................. 16 1,892 Hilton(3).............................................................. 7 1,205 Choice Hotel(4)........................................................ 6 1,068 Starwood(5)............................................................ 2 346 Radisson .............................................................. 1 163 Other .............................................................. 5 1,112 ------ --------- Total Owned................................................... 106 19,893 ====== =========
- -------------------------- (1) Holiday Inn, Holiday Inn Select and Crowne Plaza brands. (2) Marriott, Courtyard by Marriott, Residence Inn and Fairfield Inn brands. (3) Hilton, Hampton Inn and Doubletree brands. (4) Comfort Inn and Suites, Quality Inn and Clarion brands. (5) Four Points brands. 2 Franchisors provide a number of services to hotel operators which can positively contribute to the improved financial performance of their properties, including national reservation systems, marketing and advertising programs and direct sales programs. The Company believes that noted franchisors with larger numbers of hotels enjoy greater brand awareness among potential hotel guests than those with fewer numbers of hotels. Hotels typically operate with high fixed costs, and increases in revenues generated by affiliation with a national franchisor can, at times, contribute positively to a hotel's financial performance. The Company's license agreements with the national hotel franchisors typically authorize the operation of a hotel under the licensed name, at a specific location or within a specified area, and require that the hotel be operated in accordance with standards specified by the licensor. Generally, the license agreements require the Company to pay a royalty fee, an advertising/marketing fee, a fee for the use of the licensor's nationwide reservation system and certain ancillary charges. Royalty fees under various license agreements generally range from 3% to 6.5% of gross room revenues, while advertising/marketing fees provided for in agreements generally range from 1% to 4.5% of gross room revenues and reservation system fees generally range from 1% to 2% of gross room revenues. In the aggregate, royalty fees, advertising/marketing fees and reservation fees range from 6% to 9% of gross revenues. The license agreements are subject to cancellation in the event of a default, including the failure to operate the hotel in accordance with the quality standards and specifications of the licensor. The license agreements generally have an original ten-year term, although certain license agreement provide for original 15 and 20-year terms. The majority of the Company's license agreements have five to ten years remaining on the term. The licensor may require the Company to upgrade facilities at any time to comply with the licensor's then current standards. The licensee may apply for a license renewal as existing licenses expire. In connection with license renewals, the licensor may require payment of a renewal fee, increased royalty and other recurring fees and substantial renovation of the facility or the licensor may elect not to renew the license. It is the Company's policy to review individual property franchise affiliations at the time of property acquisition and, thereafter, on a regular basis. These reviews may result in changes in such affiliations. DEVELOPMENT VENTURE; MANAGEMENT AGREEMENTS In addition to operating the 101 hotels which the Company wholly owned at December 31, 2001, Lodgian operated four hotels owned in joint venture in which the Company has a 50% or greater equity interest and one hotel in which the Company has a minority equity interest. In each joint venture, to varying extents, the Company shares decision making authority with its joint venture partners and may not have sole discretion with respect to a hotel's disposition. Prior to March 2001, the Company managed one hotel for a third party: the Courtyard by Marriott in Tifton, Georgia. A former Chief Executive Officer and President and currently a member of the Board of Directors had been an 8% limited partner in the partnership that owns the Courtyard by Marriott in Tifton, Georgia since 1996. This hotel was managed in accordance with a management agreement, which provided that the Company be paid a base fee calculated as a percentage of gross revenues, an accounting services fee and an incentive management fee. The base fee was 3% of gross revenues and the incentive fee was a percentage of the amount by which gross operating profit exceeded a negotiated amount. All operating and other expenses of the hotel were paid by the owner. This management agreement was terminated in March 2001. COMPETITION AND SEASONALITY The hotel business is highly competitive. The Company competes with other facilities on various bases, including room prices, quality, service, location and amenities customarily offered to the traveling public. The demand for accommodations and the resulting cash flow vary seasonally. The off-season tends to be the winter months for properties located in colder weather climates and the summer months for properties located in warmer weather climates. Levels of demand are dependent upon many factors including general and local economic conditions and changes in levels of tourism and business-related travel. The hotels depend upon both commercial and tourist travelers for revenues. Generally, the hotels operate in areas that contain numerous other competitive lodging facilities, including hotels associated with franchisors which may have more extensive reservation systems. Lodgian also competes with other hotel owners and operators with respect to: (1) licensing upscale and mid-priced franchises in targeted markets, (2) acquiring hotel properties to renovate and reposition; and (3) acquiring developmental sites 3 for new hotel properties. The Company's competition is highly fragmented and is composed of relatively small, private owners and operators of hotel properties, public companies and private equity funds. EMPLOYEES At December 31, 2001, the Company had approximately 5,010 full-time and 1,898 part-time associates. The Company had 108 full time associates engaged in administrative and executive activities. The balance of associates manage, operate and maintain the Company's properties. At December 31, 2001, approximately 843 of the Company's full and part-time associates located at 8 hotels were covered by collective bargaining agreements which expire between December 2002 and September 2004. The Company considers relations with its associates to be good. INSURANCE Lodgian maintains insurance covering liabilities for personal injuries and property damage. The Company also maintains, among other types of insurance coverage, real and personal property insurance, directors' and officers' liability insurance, liquor liability insurance, workers' compensation insurance, travel accident insurance for certain employees, fiduciary liability insurance and business automobile insurance. Management believes it maintains sufficient insurance coverage for the operation of its business. However, following the terrorist activity of September 11, 2001, and in light of the resulting uncertainty in the insurance market, many insurance companies have indicated that they will exclude insurance against acts of terrorism from their "all risks" policies. Our "all risk" insurance coverage in place for the current policy year does not contain specific exclusions for losses attributable to acts of terrorism; however, there is a high probability that such exclusions will be present as we renew and replace existing insurance coverage. The cost and limited availability of specific third party insurance coverage for losses from acts of terrorism have made it commercially unreasonable for us to secure such coverage in the future. Further, there are other types of losses, such as from wars or catastrophic acts of nature, for which we cannot obtain insurance at all or at a reasonable cost. In the event of an uninsured loss or a loss in excess of our insurance limits, we could lose both the revenues generated from the affected property and the capital we have invested in the affected property; depending on the specific circumstances of the affected property it is possible that we could be liable for any mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect our business and financial condition and results of operations. REGULATION The Company's hotels are subject to certain federal, state and local regulations which require the Company to obtain and maintain various licenses and permits. All such licenses and permits must be periodically renewed and may be revoked or suspended for cause at any time. Certain of these licenses and permits are material to the Company's business and the loss of such licenses could have a material adverse effect on the Company's financial condition and results of operations. The Company is not aware of any reason why it should not be in a position to maintain its licenses. Lodgian is subject to certain federal and state labor laws and regulations such as minimum wage requirements, regulations relating to working conditions, laws restricting the employment of illegal aliens and the Americans with Disabilities Act. As a provider of restaurant services, the Company is also subject to certain federal, state and local health laws and regulations. The Company believes it complies with such laws and regulations in all material respects. Lodgian is also subject in certain states to dramshop statutes, which may give an injured person the right to recover damages from any establishment which wrongfully served alcoholic beverages to a person who, while intoxicated, caused the injury. Management believes that the Company's insurance coverage with respect to any such liquor liability is adequate. To date, federal and state environmental regulations have not had a material effect on the Company's operations. However, such laws potentially impose cleanup costs for hazardous waste contamination on property owners. If any material hazardous waste contamination problems do exist on any of the Company's properties, the Company may be exposed to liability for the costs associated with the cleanup of such sites. 4 ITEM 2. PROPERTIES Lodgian owned or managed 106 hotels, containing 19,893 rooms located in 32 states and Canada at December 31, 2001. The Company's hotels include 101 wholly-owned hotels, four hotels in which the Company has a 50% or greater equity interest, and one hotel in which the Company has a minority equity interest. DISPOSITIONS As discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources", the Company previously adopted strategic plans to reduce the size of the Company's non-core hotel portfolio and reduce the overall level of debt. With regard to these strategic plans, the Company sold twenty-five hotel properties and four other assets between January 1, 2000 and December 31, 2001. As previously indicated, on December 20, 2001, the Company petitioned for reorganization under Chapter 11 of the Bankruptcy Code and is currently not actively pursuing the sale of any of its hotel assets. PORTFOLIO The Company's hotel portfolio by franchisor is set forth below.
YEAR OF LAST RENOVATION OR FRANCHISOR/HOTEL NAME NO. OF HOTELS NO. OF ROOMS LOCATION CONSTRUCTION - --------------------- ------------- ------------ -------- ------------ SIX CONTINENTS HOTELS AND RESORTS Crowne Plaza Albany......................... 384 Albany, NY 2001 Crowne Plaza Cedar Rapids................... 275 Cedar Rapids, IA 1998 Crowne Plaza Houston........................ 291 Houston, TX 1999 Crowne Plaza Macon(1)....................... 297 Macon, GA 1998 Crowne Plaza Pittsburgh..................... 193 Pittsburgh, PA 2001 Crowne Plaza West Palm Beach(1)............. 219 West Palm Beach, FL 2001 Crowne Plaza Worcester...................... 243 Worcester, MA 1996 Holiday Inn Arden Hills..................... 156 St. Paul, MN 1995 Holiday Inn Augusta......................... 239 Augusta, GA 1998 Holiday Inn Austin (South).................. 210 Austin, TX 1994 Holiday Inn Belmont......................... 135 Belmont, MD 2000 Holiday Inn Brunswick....................... 126 Brunswick, GA 1998 Holiday Inn BWI Airport..................... 259 Baltimore, MD 2000 Holiday Inn Cincinnati...................... 243 Cincinnati, OH 1998 Holiday Inn City Center(2).................. 240 Columbus, OH 1996 Holiday Inn Clarksburg...................... 160 Clarksburg, WV 1997 Holiday Inn Cromwell Bridge................. 139 Cromwell Bridge, MD 2000 Holiday Inn Dothan.......................... 102 Dothan, AL 1996 Holiday Inn East Hartford................... 130 East Hartford, CT 2000 Holiday Inn Express Gadsden................. 141 Gadsden, AL 1997 Holiday Inn Express Palm Desert............. 129 Palm Desert, CA 1992 Holiday Inn Express Pensacola............... 214 Pensacola, FL 1996
5 Holiday Inn Fairmont........................ 106 Fairmont, WV 1997 Holiday Inn Florence........................ 105 Florence, KY 1997 Holiday Inn Fort Mitchell................... 214 Fort Mitchell, KY 1997 Holiday Inn Fort Wayne...................... 208 Fort Wayne, IN 1995 Holiday Inn Frederick....................... 158 Frederick, MD 2000 Holiday Inn Frisco.......................... 217 Frisco, CO 1997 Holiday Inn Glen Burnie North............... 127 Glen Burnie, MD 2000 Holiday Inn Grand Island.................... 261 Grand Island, NY 2000 Holiday Inn Greentree....................... 200 Pittsburgh, PA 2000 Holiday Inn Hamburg......................... 130 Buffalo, NY 1998 Holiday Inn Hilton Head..................... 201 Hilton Head, SC 2001 Holiday Inn Inner Harbor.................... 375 Baltimore, MD 2000 Holiday Inn Jamestown....................... 146 Jamestown, NY 1998 Holiday Inn Jekyll Island................... 198 Jekyll Island, GA 2000 Holiday Inn Lancaster (East)................ 189 Lancaster, PA 2000 Holiday Inn Lansing West.................... 244 Lansing, MI 1998 Holiday Inn Lawrence........................ 192 Lawrence, KS 1996 Holiday Inn Manhattan....................... 197 Manhattan, KS 1996 Holiday Inn Marietta........................ 193 Marietta, GA 1996 Holiday Inn Market Center Dallas............ 246 Dallas, TX 1998 Holiday Inn McKnight Rd..................... 147 Pittsburgh, PA 1995 Holiday Inn Meadow Lands.................... 138 Pittsburgh, PA 1996 Holiday Inn Melbourne(1).................... 295 Melbourne, FL 1996 Holiday Inn Memphis......................... 173 Memphis, TN 1998 Holiday Inn Monroeville..................... 188 Monroeville, PA 1998 Holiday Inn Morgantown...................... 147 Morgantown, WV 1997 Holiday Inn Myrtle Beach.................... 133 Myrtle Beach, SC 1998 Holiday Inn North Miami..................... 98 Miami, FL 1998 Holiday Inn Parkway East.................... 178 Pittsburgh, PA 1996 Holiday Inn Phoenix West.................... 144 Phoenix, AZ 1995 Holiday Inn Richfield....................... 216 Richfield, OH 1998 Holiday Inn Rolling Meadows................. 420 Rolling Meadows, IL 2000 Holiday Inn Santa Fe........................ 130 Santa Fe, NM 1992 Holiday Inn Select DFW...................... 282 Dallas, TX 1997 Holiday Inn Select Niagara Falls............ 397 Niagara Falls, NY 1999 Holiday Inn Select Phoenix Airport.......... 298 Phoenix, AZ 1995 Holiday Inn Select Strongsville............. 302 Cleveland, OH 1996 Holiday Inn Select Windsor, Ontario......... 214 Windsor, Ontario 1998 Holiday Inn Sheffield....................... 201 Sheffield, AL 1998 Holiday Inn Silver Spring................... 231 Silver Spring, MD 1998 Holiday Inn St. Louis North................. 392 St. Louis, MO 1996 Holiday Inn Syracuse........................ 152 Syracuse, NY 1997 Holiday Inn University Mall................. 152 Pensacola, FL 1997 Holiday Inn Valdosta........................ 167 Valdosta, GA 1997 Holiday Inn Wichita......................... 152 Wichita, KS 1998 Holiday Inn Winter Haven.................... 228 Winter Haven, FL 1998 Holiday Inn York (Arsenal Rd.).............. 100 York, PA 2000 ------- SUBTOTAL............................... 69 14,107
6
YEAR OF LAST RENOVATION OR FRANCHISOR/HOTEL NAME NO. OF HOTELS NO. OF ROOMS LOCATION CONSTRUCTION - --------------------- ------------- ------------ -------- ------------ MARRIOTT INTERNATIONAL Courtyard by Marriott Abilene....................... 99 Abilene, TX 1996 Courtyard by Marriott Bentonville................... 90 Bentonville, AR 1996 Courtyard by Marriott Buckhead...................... 181 Atlanta, GA 1996 Courtyard by Marriott Florence...................... 78 Florence, KY 1995 Courtyard by Marriott Lafayette..................... 90 Lafayette, LA 1997 Courtyard by Marriott Paducah....................... 100 Paducah, KY 1997 Courtyard by Marriott Revere........................ 154 Revere, MA 1999 Courtyard by Marriott Tulsa......................... 122 Tulsa, OK 1997 Fairfield Inn Augusta............................... 117 Augusta, GA 1998 Fairfield Inn Colchester............................ 117 Colchester, VT 1998 Fairfield Inn Jackson............................... 105 Jackson, TN 1998 Fairfield Inn Merrimack............................. 116 Merrimack, NH 1998 Fairfield Inn Valdosta.............................. 108 Valdosta, GA 1997 Marriott Denver..................................... 238 Denver, CO 1998 Residence Inn Dedham................................ 81 Dedham, MA 1998 Residence Inn Little Rock........................... 96 Little Rock, AR 1998 ------- SUBTOTAL....................................... 16 1,892 HILTON Doubletree Club Philadelphia........................ 189 Philadelphia, PA 1997 Hampton Inn Dothan.................................. 113 Dothan, AL 1996 Hampton Inn Pensacola............................... 123 Pensacola, FL 1995 Hilton Fort Wayne................................... 244 Fort Wayne, IN 1996 Hilton Inn Columbia................................. 152 Columbia, MD 1998 Hilton Inn Northfield............................... 191 Troy, MI 1997 Hilton Inn Sioux City............................... 193 Sioux City, IA 1994 ------- SUBTOTAL....................................... 7 1,205 CHOICE HOTEL Clarion Central Omaha............................... 212 Omaha, NE 1997 Clarion Council Bluffs.............................. 89 Council Bluffs, IA 1997 Clarion Northwoods Atrium Inn....................... 197 Charleston, SC 1994 Clarion Omaha....................................... 163 Omaha, NE 1997 Clarion Raleigh Downtown............................ 202 Raleigh, NC 1994 Clarion West Des Moines............................. 157 West Des Moines, IA 1997 Clarion Quality Hotel & Conference Ctr. Metairie.... 205 New Orleans, LA 1995 ------- SUBTOTAL....................................... 7 1225 STARWOOD Four Points Niagara Inn............................. 189 Niagara Falls, NY 1999 ------- SUBTOTAL....................................... 1 189 RADISSON Radisson Phoenix Hotel.............................. 163 Phoenix, AZ 1995 ------- SUBTOTAL....................................... 1 163
7 OTHER Hurstborne Hotel, a Louisville Conference Center........................... 398 Louisville, KY 2000 French Quarter Suites Memphis............... 105 Memphis, TN 1997 Mayfair House Coconut Grove................. 179 Miami, FL 1998 New Orleans Airport Plaza Hotel And Conference Center (1)................... 244 New Orleans, LA 1998 University Inn, Bloomington................. 186 Bloomington, IN 1992 --------- SUBTOTAL............................... 5 1,112 ------- --------- TOTAL.................................. 106 19,893 ======= =========
- -------------- (1) These hotels are partially owned and consolidated. (2) This hotel is partially owned and not consolidated. Fourteen of Lodgian's hotels are located on land subject to long-term leases. Generally, the leases are for terms in excess of the depreciable lives of the improvements or contain a purchase option and provide for fixed rents. In certain instances, additional rents, based on a percentage of revenue or cash flow, may be payable. The leases generally require the Company to pay the cost of repairs, insurance and real estate taxes. ITEM 3. LEGAL PROCEEDINGS On December 20, 2001, the Company and eighty one of its subsidiaries filed for voluntary reorganization with the United States Bankruptcy Court for the Southern District of New York under Chapter 11 of the Bankruptcy Code. The Chapter 11 Cases have been consolidated for purposes of administration under case number 01-16345. The filing was precipitated by the weaker US economy, the decline in travel since the events of September 11 and the Company's heavy debt load. The Debtors are currently operating their businesses as debtors-in-possession and are subject to the jurisdiction of the Bankruptcy Court while a reorganization plan is being formulated. As of March 22, 2002, the Debtors had not yet filed a plan of reorganization (the Plan) with the Bankruptcy courts but management believes that the Plan will result in most unsecured claims being settled for less than 100% of their face value and that the interests of the common stock holders will be significantly diluted. The Company is a party in litigation with Hospitality Restoration and Builders, Inc. ("HRB"), a general contractor hired to perform work on six of the Company's hotels. The litigation involves hotels in Texas, Illinois, and New York. In general, HRB claims that the Company breached contracts to renovate the hotels by not paying for work performed. The Company contends that it was over-billed by HRB and that a significant portion of the completed work was defective. In July 2001, the parties agreed to settle the litigation pending in Texas and Illinois. In exchange for mutual dismissals and full releases, the Company has paid HRB $750,000. With respect to the matter pending in the state of New York, HRB claims that it is owed $10.7 million. The Company asserted a counterclaim of $7 million and believes that it has valid defenses and counterclaims to the contractor's remaining claims and that the outcome will not have a material adverse effect on its financial position or results of operations. On October 13, 2000, Winegardner & Hammons, Inc. ("WH") filed an arbitration claim against the Company claiming breach of contract relating to a January 4, 1992 contract. WH claimed entitlement to profit participation relating to the Company's acquisition of AMI Operating Partners, LP. WH sought damages totaling $764,500. The Company settled this matter by paying WH $100,000 in exchange for a full release. In 1999 and 2000, a total of six class actions were filed in the Delaware Court of Chancery on behalf of all security holders of the Company. Named as defendants in each of the actions were the Company and six of the Company's directors and/or officers. The complaints alleged, among other things: (1) that the individual defendants breached their fiduciary duties in connection with an offer by Casuarina Cayman Holdings Ltd. ("Casuarina") to acquire all of the Company's outstanding common stock; (2) that the director defendants breached their fiduciary duties in connection with effecting certain changes to 8 the size and composition of the Company's Board of Directors in connection with certain agreements entered into by the Company regarding a potential sale of the Company to Whitehall Street Real Estate Limited Partnership XIII and Whitehall Parallel Real Estate Limited Partnership XIII ("Whitehall") and (3) that the individual defendants breached their fiduciary obligations in connection with their consideration of certain conditional offers received by the Company regarding a potential sale of the Company. The complaints sought injunctive relief and compensatory damages in unspecified amounts. The Delaware court created one consolidated class action in November 2000 (the "Consolidated Action"). In July 2001, the plaintiffs agreed to dismiss the Consolidated Action, hence relieving the Company of any potential claim for damages. In October 2000, a class action was filed in the Superior Court of the State of Georgia, Fulton County. Named as defendants were the Company, six of the Company's directors and/or officers, and Whitehall. The complaint alleged, among other things, that the individual defendants breached their fiduciary duties in connection with certain agreements entered into with Whitehall regarding a potential sale of the Company to those entities. The complaint also alleges that Whitehall aided and abetted the alleged breach of fiduciary duty by the individual defendants. The case was voluntarily dismissed by the plaintiffs on December 20, 2001. In 2000, several actions were filed in the Delaware Court of Chancery by Casuarina and Edgecliff Holdings, LLC ("Edgecliff"). Named as defendants were the Company and five of its directors and/or officers. The complaints alleged, among other things: (1) that the defendant directors breached their fiduciary duties in connection with effecting certain changes to the size and composition of the Company's Board of Directors and sought declaratory and injunctive relief; and (2) that the Company had not timely scheduled its annual meeting of shareholders in accordance with Section 211 of the Delaware General Corporation Law. The complaints also challenged the Company's decision to postpone its annual meeting from October 12 to October 20, 2000 in response to the offer received by the Company from Whitehall. The court granted plaintiffs' motion for summary judgment to the limited extent that the court required the Company to hold the annual meeting on October 20, 2000, the rescheduled date on which the Company had planned to hold the meeting. Subsequently, Edgecliff dismissed all of its actions. The Company and individual directors are parties to a lawsuit alleging violations of federal securities laws and breach of fiduciary duty in connection with certain investments made in affiliates of Impac Hotel Group, LLC, a predecessor of the Company. The Company believes that it has valid defenses to this matter. The Company is a party to other legal proceedings arising in the ordinary course of business, the impact of which would not, either individually or in the aggregate, in management's opinion, have a material adverse effect on its financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Shareholders on June 21, 2001. The stockholders voted on (1) the election of directors to serve in Class III until the Annual Meeting of Stockholders for fiscal 2004 and (2) to ratify the appointment of Arthur Andersen LLP as independent public accountants of the Company. The votes cast on each of the above matters were as follows:
ELECTION OF DIRECTORS NOMINEE VOTES FOR VOTES WITHHELD Robert S. Cole 19,954,327 1,398,579 Richard H. Weiner 20,170,471 1,182,435 INDEPENDENT PUBLIC ACCOUNTANTS FOR AGAINST ABSTAIN 21,132,826 127,572 92,508
9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Prior to November 21, 2001, the Company's common stock was traded on the New York Stock Exchange under the symbol "LOD". On November 21, 2001, due to the dimunition in the stock price of the Company's common stock and the Company's total market capitalization, the Company's stock ceased trading on the New York Stock Exchange and is currently being traded on the Over-the-Counter Bulletin Board under the trading symbol LODN.OB. The following table sets forth the high and low sales prices of the Company's common stock on a quarterly basis for the past two years.
2001 2000 ---- ---- HIGH LOW HIGH LOW ---- --- ---- --- First Quarter........................................ $ 4.00 $ 1.10 $ 5.12 $ 3.37 Second Quarter....................................... 1.20 0.62 3.87 1.81 Third Quarter........................................ 0.75 0.07 3.81 2.00 Fourth Quarter....................................... 0.35 0.03 4.00 2.56
As of March 15, 2002, there were 757 shareholders of record of Lodgian common stock. In addition, there were 2,456 Servico shareholders who had not yet converted their shares into shares of the Company. When all Servico shareholders have converted their shares, the Company will have 3,213 shareholders. On December 20, 2001, the Company and eighty one of its subsidiaries filed for voluntary reorganization with the Bankruptcy Courts. As of March 22, 2002, the Debtor had not yet filed its plan of reorganization (the Plan) with the Bankruptcy courts but management believes that the Plan will result in most unsecured claims being settled for less than 100% of their face value and that the interests of the common stock holders will be significantly diluted. The Company has not paid any cash dividends since the Merger and has no current plans to initiate the payment of dividends and is currently prohibited under various credit agreements from paying any dividends. The Company currently anticipates that it will retain any future earnings for use in its business. On exiting Chapter 11, the Board of Directors of the Company will determine future dividend policies based on the Company's financial condition, profitability, cash flow, capital requirements and business outlook, among other factors. The Company's ability to pay dividends was previously restricted by the Indenture governing the Company's 12 1/4 % Senior Subordinated Notes Due 2009 (the "Notes"), the Company's credit agreement dated as of July 23, 1999 among the Company, Lodgian Financing Corp., certain other of the Company's subsidiaries and the banks named therein, and the Indenture governing the Company's Convertible Redeemable Equity Structured Trust Securities ("CRESTS"). Payment restrictions contained in the Company's Notes allowed the Company to defer dividend payments on the CRESTS beginning June 30, 2000. Pursuant to the terms of the instrument, the Company had the right to defer payment for up to twenty quarters (the "Extension Period"), during which Extension Period no interest was due and payable. 10 ITEM 6. SELECTED FINANCIAL DATA SELECTED CONSOLIDATED FINANCIAL DATA The following table presents selected financial data derived from the Company's historical financial statements for the years ended December 31, 1997 through 2001. This financial data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements and Supplementary Data" included in this Form 10-K.
2001 2000 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ (IN THOUSANDS, EXCEPT SHARE DATA) Revenues (a) ................................... $ 447,556 $ 580,897 $ 592,420 $ 395,214 $ 276,657 (Loss) income before extraordinary items, net of taxes (b) ............................ (142,764) (87,955) (52,943) (3,145) 12,570 Extraordinary items, net of taxes .............. -- -- (7,750) (2,076) (3,751) Net (loss) income .............................. (142,764) (87,955) (60,693) (5,221) 8,819 EBITDA, as adjusted (c) ........................ 80,748 126,811 147,087 98,225 69,559 Net cash provided by operating activities ...... 9,299 22,352 67,191 29,301 30,970 Net cash provided by (used in) investing activities .................................. 37,258 124,623 (90,957) (182,524) (220,266) Net cash (used in) provided by financing activities .................................. (53,552) (140,617) 19,225 157,165 174,415 Earnings per common share: (Loss) income before extraordinary items, net of taxes ................................ (5.04) (3.12) (1.95) (0.16) 0.83 Net (loss) income .............................. (5.04) (3.12) (2.23) (0.26) 0.58 Earnings per common share-assuming dilution: (Loss) income before extraordinary items, net of taxes ................................ (5.04) (3.12) (1.95) (0.16) 0.80 Net (loss) income .............................. (5.04) (3.12) (2.23) (0.26) 0.56 Basic weighted average shares .................. 28,350,000 28,186,000 27,222,000 20,245,000 15,183,258 Diluted weighted average shares ................ 28,350,000 28,186,000 27,222,000 20,245,000 15,640,000 Total assets ................................... $ 975,362 $ 1,160,344 $ 1,421,996 $ 1,497,068 $ 62,651 Long-term obligations .......................... 7,652 674,038 856,675 816,644 323,320 Liabilities subject to compromise .............. 925,894 -- -- -- -- Total stockholders' equity (deficit) ........... (6,681) 136,880 224,542 283,767 239,535
- ------------- (a) See Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations. (b) (Loss) income before extraordinary items, net of taxes, for 2001, is after deducting reorganization items of $25.0 million which primarily relates to write-offs of deferred loan fees. (c) The Company has computed earnings before interest, taxes, depreciation and amortization ("EBITDA") without regard to the unusual items and one-time charges presented in the table below. EBITDA is a widely regarded industry measure of liquidity used in the assessment of hotel property values. EBITDA does not measure whether cash flow is sufficient to fund all of the Company's cash needs, including principal amortization, capital expenditures, and distributions to shareholders. Additionally, EBITDA does not represent cash flows from operating, investing, or financing activities as defined by generally accepted accounting principles. EBITDA as calculated by Lodgian, may not be comparable to similarly titled measures reported by other companies and would be misleading unless all companies and analysts calculate EBITDA in the same manner. 11
2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- EBITDA .................................. $ (13,917) $ 64,621 $ 75,392 $ 94,825 $ 69,121 Unusual Items: Impairment of long-lived assets.......... 67,340 60,688 37,977 -- -- Write-off of goodwill.................... -- -- 20,748 -- -- Other operating expenses(1).............. -- -- 12,470 -- -- Severance and other...................... 2,309 1,502 500 3,400 438 Reorganization expenses.................. 25,016 -- -- -- -- ----------- ----------- ---------- ----------- ----------- EBITDA, as adjusted......................... $ 80,748 $ 126,811 $ 147,087 $ 98,225 $ 69,559 =========== =========== ========== =========== ===========
(1) See Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 14 to the Company's consolidated financial statements. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CHAPTER 11 PROCEEDINGS As previously discussed in "Item 1: Business", on December 20, 2001, the Company and eighty one of its subsidiaries filed for voluntary reorganization with the Bankruptcy Court. The Chapter 11 Cases have been consolidated for purposes of administration under case number 01-16345. The filing was precipitated by the weaker US economy, the decline in travel since the events of September 11 and the Company's heavy debt load. The Debtors are currently operating their businesses as debtors-in-possession and are subject to the jurisdiction of the Bankruptcy Court while a reorganization plan is being formulated. CONSOLIDATED FINANCIAL STATEMENTS The Company's Consolidated Financial Statements have been prepared on the going concern basis of accounting and do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company's recent losses, and the Chapter 11 Cases, raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and the appropriateness of using the going concern basis is dependent upon, among other factors, the Company's ability (i) to comply with the debtor-in-possession financing agreements, (ii) to obtain exit financing to enable it to exit Chapter 11, (iii) to obtain confirmation of a plan of reorganization under the Bankruptcy Code, (iv) to achieve profitable operations after such confirmation, and (v) the Company's ability to generate sufficient cash from operations to meet its obligations. As a result of the filing of the Chapter 11 Cases and related circumstances, book values of assets may not be realized and liquidation of liabilities is subject to substantial doubt. While under the protection of Chapter 11, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities, for amounts other than those reflected in the Consolidated Financial Statements. Further, the confirmation of a plan of reorganization could materially change the amounts reported in the accompanying Consolidated Financial Statements. The Consolidated Financial Statements do not include any adjustments relating to recoverability of the value of the recorded asset amounts or the amounts and classification of liabilities that might be necessary as a consequence of a plan of reorganization. FORWARD-LOOKING STATEMENTS/RISK FACTORS The following discussion should be read in conjunction with the Company's financial statements and related notes thereto included elsewhere herein. 12 The discussion below and elsewhere in this Form 10-K includes statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These include managements' expectations with respect to the Chapter 11 filing, statements that describe anticipated revenues, capital expenditures and other financial items, statements that describe the Company's business plans and objectives, and statements that describe the expected impact of competition, government regulation, litigation and other factors on the Company's future financial condition and results of operations. The words "may", "should", "expect", "believe", "anticipate", "project", "estimate", and similar expressions are intended to identify forward-looking statements. Such risks and uncertainties, any one of which may cause actual results to differ materially from those described in the forward-looking statements, include or relate to, among other things: - The impact of the Chapter 11 Cases and related circumstances which could materially reduce the reported amounts of assets and liabilities included in these consolidated financial statements. Liabilities subject to compromise could increase as a result of negotiations, actions of the bankruptcy court, changes in the reported amounts of disputed claims, proof of claims and other events. - Risks associated with the Company's ability to obtain approval for its plan of reorganization. - Risks associated with the Company's ability to obtain exit financing to replace the DIP facility. - The impact of pending or threatened litigation and/or governmental inquiries and investigation involving the Company. - The effect of competition and the economy on the Company's ability to maintain margins on existing operations, including uncertainties relating to competition. - The Company's ability to generate sufficient cash flows from operations to meet its obligations. - The effectiveness of changes in management and the ability of the Company to retain qualified individuals to serve in senior management positions. - The potential for additional impairment charges against earnings related to long-lived assets. - The impact of increased expenses due to layoffs of employees. Many of these factors are not within the Company's control and readers are cautioned not to put undue reliance on these forward looking statements. STRATEGIC PLANS PRIOR TO CHAPTER 11 FILING At the end of 1999, the Company adopted a strategic plan to reduce the size of the Company's non-core hotel portfolio. In 2000, the Company adopted a strategic plan to reduce the level of overall debt of the Company. As discussed more fully in the Liquidity and Capital Resources section and in Notes 4 and 5 to the financial statements, with regard to these plans to reduce the size of the Company's non-core hotel portfolio and reduce the level of overall debt, the Company sold twenty-five hotel properties and four other assets between January 1, 2000 and December 31, 2001. Gross sales price of these twenty-nine properties was $285.3 million while the reduction of debt was $216.6 million. GENERAL OVERVIEW Management believes that results of operations in the hotel industry are best explained by four key performance measures: occupancy, average daily rate ("ADR"), revenue per available room ("RevPAR") levels and EBITDA margins. These measures are influenced by a variety of factors including national, regional and local economic conditions, the degree 13 of competition with other hotels in the area and changes in travel patterns. The demand for accommodations is also affected by normally recurring seasonal patterns and most of the Company's hotels experience lower occupancy levels in the fall and winter months (November through February) which may result in lower revenues, lower net income and less cash flow during these months. Revenues. Revenues are composed of rooms, food and beverage and other revenues. Room revenues are derived from guest room rentals, whereas food and beverage revenues primarily include sales from hotel restaurants, room service and hotel catering. Other revenues include charges for guests' long-distance telephone service, laundry service and use of meeting facilities. Operating Expenses. Operating expenses are composed of direct, general and administrative, other hotel operating expenses and depreciation and amortization. Direct expenses, including rooms, food and beverage and other operations, reflect expenses directly related to hotel operations. These expenses are primarily variable with available rooms and occupancy rates, but also have a small fixed component, which can be leveraged with increases in revenues. General and administrative expenses represent corporate salaries and other corporate operating expenses and are generally fixed. Other expenses include primarily property level expenses related to general operations such as marketing, utilities, repairs and maintenance and other property administrative costs. RESULTS OF OPERATIONS The downturn in the US economy, the lodging industry and the events of September 11, 2001 have adversely impacted the Company's results of operations. In addition, operating results have been materially impacted by the significant number of hotel dispositions. During 2001, the Company sold six hotel properties. Gross sales price of these six properties was $76.5 million. The Company also re-branded 5 hotels. During 2000, the Company sold nineteen hotel properties and four other assets. Gross sales price of these twenty-three properties was $208.8 million. In February 2000, the Company opened the Lake Oswego Hilton Garden. During 2000, the Company re-branded three hotels to flags which are more representative of its core focus. In June 1999, the Company sold its joint venture interest in its European hotel portfolio, which consisted of six hotels. The Company received approximately $7.5 million in net proceeds from the sale. In addition, during 1999 the Company sold four wholly-owned hotels and two land parcels in the United States receiving net proceeds of approximately $14.5 million, and, effective August 1, 1999, ceased managing one hotel for a third party. These transactions did not have a material effect on results of operations. In August 1999, the Company opened the Marriott Portland City Center in Portland, Oregon and in October 1999, opened the Courtyard by Marriott in Livermore, California. Also, in September 1999, the Company purchased for $10.2 million the 49% interest of its partner in six hotels. Further, in 1999, the Company re-branded seven hotels to flags that were more representative of its core focus. The discussion of results of operations, income taxes, liquidity and capital resources that follows is derived from the Company's Audited Consolidated Financial Statements set forth in "Item 8. Financial Statements and Supplementary Data" included in this Form 10-K and should be read in conjunction with such financial statements and notes thereto. 14 HISTORICAL RESULTS OF OPERATIONS Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000 REVENUES At December 31, 2001, the Company owned or had a majority interest in 105 hotels and had a minority interest in one hotel. At December 31, 2000, the Company owned or had a majority interest in 111 hotels, had a minority interest in one hotel and managed one hotel for a third party. Revenues for the Company were $447.6 million for 2001, a 22.9% decrease over revenues of $580.9 million for 2000. Of this $133.3 million decrease, approximately $90.6 million is a result of the sale of hotels. Revenues on a same unit basis, for hotels owned at the end of 2001 were $440.5 million for 2001 and $483.2 million for 2000 (a decline of 8.8%). RevPAR, on a same unit basis, for hotels owned at the of 2001 declined by 8.3% compared with 2000 primarily as a result of a decline in occupancy of 7.4% as well as a decrease in average daily rates of 1.0%. Revenues and RevPar on the same unit basis for 2001 were adversely impacted by a general decline in the industry, particularly in certain of the Company's markets. These factors were exacerbated by the events of September 11, 2001. The following table summarizes certain operating data for the Company's hotels for the year ended December 31, 2001 and 2000:
2001 2000 ---- ---- (1) (1) --- --- Number of hotels at end of period.................... 105 111 RevPar ............................................ $45.08 $49.62 Occupancy............................................ 59.89% 64.60% ADR ............................................ $75.28 $76.73
Same Unit Data Operating data for hotels owned at the end of 2001, with 2000 data for the same hotels:
2001 2000 ---- ---- (1) (1) --- --- Number of hotels..................................... 105 105 RevPar ............................................ $45.13 $49.24 Occupancy............................................ 59.92% 64.72% ADR ............................................ $75.32 $76.08
(1) The 2001 and 2000 data excludes one non-consolidated hotel and one hotel that was managed for a third party. The Company ceased managing the hotel for the third party in March 2001. OPERATING EXPENSES Direct operating expenses for the Company were $174.3 million (38.9% of direct revenues) for 2001 and $230.9 million (39.8% of direct revenue) for 2000. This $56.6 million decrease is primarily attributable to the reduction in revenues, which decrease was slightly offset by improvements in operating margins in the food and beverage departments and in other 15 direct activities. Other direct revenue comprises revenue from telephone, laundry services, use of meeting facilities and other miscellaneous activities. General, administrative and other expenses were $192.5 million (43.0% of direct revenues) in 2001 and $223.2 million (38.4% of direct revenues) in 2000. The decrease in general administrative and other expenses is partially due to reduced property level expenses related to reductions in revenues. Property level expenses include expenses related to general operations such as marketing, franchise fees, property repairs and maintenance and other property administrative costs. The reductions were, however, offset by certain higher general, administrative and other expenses, mainly utilities, property insurance, franchise fees and property taxes. The utility costs increased 21% in the first quarter of 2001 due to higher usages caused by extreme winter conditions in certain locations and increased energy rates. These increased utility costs were somewhat offset by utility surcharges added to room rates in selected markets. Property insurance costs increased due to premium increases in the global property insurance market and increases in certain small claims. Franchise fees increased as a result of the prior year conversion of certain hotels to franchise arrangements that have slightly higher fee structures and certain changes in guest awards by franchisors. Property taxes increased due to higher property tax assessments in certain markets. Also, included in general, administrative and other expenses are $3.6 million related to professional fees principally related to consultants performing certain financial and accounting management responsibilities within the Company,$1.2 million relating to certain legal matters mainly in respect of the HRB matter and $3.2 million relating principally to provisions for certain sales and other taxes and receivable write-offs. Included in general, administrative and other expenses for 2000 are $7.5 million related to professional fees related to the completion of accounting, tax, systems and other merger integration matters, $2.0 million related to certain legal matters, including legal and other costs associated with Whitehall, Edgecliff and certain hotel asset dispositions and $2.6 million related principally to provisions for certain sales and other taxes and receivable write-offs. Depreciation and amortization expense was $62.5 million in 2001 and $64.8 million in 2000. The $2.3 million decrease is a result of a decrease in depreciation of $7.1 million related to hotels sold, net of additional depreciation expense of $4.8 million relating to six hotels previously considered held for sale and that are no longer being actively marketed for sale. Impairment of long-lived assets was $67.3 million in 2001 and $60.7 million in 2000. The charge for the 2001 period was comprised of $6.6 million related to revised estimates of fair value for properties held for sale, $4.0 million related to one property which was identified as held for sale and also sold in 2001 and $69.0 million relating to a charge to reduce the carrying value of certain of the Company's hotels held for future use, offset by a recapture of $12.3 million of impairment charges related to six hotels that were previously considered held for sale that were no longer being actively marketed for sale. Of the impairment charges in the 2001 period, $69.0 million of the impairment charges and the recapture of $8.5 million of previously recognized impairment reserves were recorded in the fourth quarter. In connection with its bankruptcy petition on December 20, 2001, the Company determined that 29 of its hotels were significantly overleveraged in that the estimated fair value of these hotels did not exceed the outstanding debt on these hotels. Therefore, with the approval of the Bankruptcy Court, the Company ceased paying interest to the secured lenders of these properties from the date of the bankruptcy petition. The Company also concluded that it no longer had the ability to hold these hotels for a period sufficient for their estimated future undiscounted cash flows to cover their carrying values. Therefore in accordance with the provisions of FAS 121, the Company determined that an impairment charge of $69 million was necessary to reduce the carrying value of these assets. In connection with the bankruptcy petition, the Company also ceased marketing for sale the remaining four properties that were previously classified as held for sale. Since these assets were not considered impaired as the estimated future cash flows from the use of these properties exceeded their carrying values, the Company recaptured $8.5 million of impairment reserves previously recorded in 1999, 2000 and 2001. Impairment charges for 2000 comprised $11.3 million related to revised estimates of fair value for properties held for sale at December 31, 1999, $3.5 million related to one property held for use, $56.6 million related to the ten hotels sold to Sunstone Investors, LLC on August 31, 2000, net of a recapture of $10.7 million of impairment charges recorded in 1999 and 2000 as seven hotels previously considered held for sale as of December 31, 1999 were no longer being actively marketed for sale. Severance and restructuring charges were $2.3 million in 2001 and $1.5 million in 2000. The charge for 2001 related principally to senior level management changes during 2001. In addition, during 2001, the Company, in an effort to 16 reduce expenses, instituted a plan to reduce hotel level employees and to eliminate certain positions at the corporate office. As part of this plan, the equivalent of over 1600 full time employees were expected to be terminated at the hotels while 47 employees were terminated at the Corporate office. Approximately 1,800 full time equivalents were terminated under the plan. In 2001, the Company recognized a charge of approximately $0.8 million to implement this plan. All of this charge related to salary and benefits of the terminated employees. As of December 31, 2001, all but $83,000 had been paid. The corporate component of this charge, $0.8 million for the year is reflected in severance and restructuring expenses on the Statement of Operations while the hotel level component is reflected in direct operating expenses and in general, administrative and other expenses. The 2000 charges related to a plan instituted in June 2000 to close four of the Company's six regional offices, close the Company's reservation center located in Baton Rouge, Louisiana and eliminate certain positions in the corporate office. Approximately 65 employees were terminated in this restructuring. The Company recognized a charge of approximately $1.5 million to implement this plan. Of the $1.5 million charge, approximately $1.3 million was related to salary and benefits of the terminated employees and $.2 million related to the costs of closing the physical regional offices and the reservation center. These costs were paid in 2000. In connection with the Merger, Servico incurred approximately $3.4 million of expenses in 1998 primarily associated with the closing and relocation of Servico's corporate headquarters and termination and relocation of certain Servico employees. Severance expenses in 1999 were $0.5 million. During 2001, the following management changes occurred: - On July 12, 2001, one of the Company's directors, Lewis N. Wolff resigned from his position on the Board of Directors. The resignation took effect on July 12, 2001 and was as a result of the time commitment needed to serve on the board. - On and with effect from October 1, 2001, Tom Arasi, the Company's former President and Chief Executive Officer resigned to pursue other opportunities. - The Board of Directors named David E. Hawthorne as the Company's interim Chief Executive Officer and President on October 1, 2001 and Chief Executive Officer and President on November 1, 2001. - On October 11, 2001, William J. Yung resigned from the Board of Directors. The resignation took effect on October 11, 2001 and was tendered for personal reasons. - On November 1, 2001, the Company's Executive Vice President and Chief Operating Officer, Karyn Marasco resigned to pursue other opportunities. The resignation took effect on November 30, 2001. - On November 13, 2001, Richard Cartoon was appointed Executive Vice President and Chief Financial Officer, Michael Amaral was appointed Senior Vice President of Operations and Daniel Ellis was appointed Secretary and Vice President of Legal Affairs and Risk Management. - On January 4, 2002, Charles E. Miller, the former Chief Accounting Officer and Controller resigned. He was replaced by Manuel Artime who joined the Company effective December 27, 2001 as Vice President and Controller. On March 1, 2002, Mr. Artime was appointed Chief Accounting Officer. OTHER INCOME AND EXPENSE Interest expense was $75.3 million in 2001 and $97.3 million in 2000. This decrease is primarily attributable to a decrease in the level of debt and to a lesser extent to a decrease in the cost of debt. The interest hedge break fee recorded in 2000 represents amounts paid by the Company to break the interest rate lock agreement on one of its credit facilities. 17 The acquisition termination fees of $3.5 million recorded during 2000 related to a reimbursement of expenses to Whitehall due to the non-consummation of a definite agreement for the sale of the Company. Gains on asset dispositions were $24.0 million for 2001 and $0.3 million of 2000. The gain for 2001 related primarily to the sale of one hotel in the first quarter of 2001 (the Westin William Penn) and represents the excess of the net proceeds of sale over the net book value of assets sold. Minority interest expense was $12.8 million in 2001 and $13.1 million in 2000. This $0.3 million decrease is due to an increase in the CREST dividend as a result of interest compounding, which increase has been off-set by other minority interests due to lower net income levels for those hotels which the Company co-owns with its third-party-minority equity partners. NET INCOME After a tax charge of $2.8 million in 2001 and a tax benefit of $28.7 million in 2000, the Company had a net loss of $142.8 million $(5.04 loss per share) in 2001 compared with $88.0 million $(3.12 loss per share) in 2000. Accounting during reorganization proceedings The Company continues to apply generally accepted accounting principles in the preparation of its consolidated financial statements while in Chapter 11. However, in accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7 - "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" (SOP 90-7): 1) the consolidated financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business; 2) the Company's consolidated balance sheets segregate liabilities subject to compromise from liabilities not subject to compromise; and 3) where the underlying collateral in respect of certain debt is considered to be less than the debt obligation, the Company ceased accruing interest on those debts. Liabilities subject to compromise Liabilities Subject to Compromise refers to known liabilities incurred prior to the commencement of the Chapter 11 Cases, including those considered by the Bankruptcy Court to be pre-petition claims. These liabilities consist primarily of amounts outstanding under long-term debt and also include accounts payable, accrued interest and other accrued expenses. These amounts represent the Company's estimate of known or potential claims to be resolved in the Chapter 11 Cases. Such claims remain subject to future adjustments. Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy Court; (3) further development with respect to disputed claims; (4) proofs of claim; or (5) other events. Payment terms for these amounts will be established under a plan of reorganization. The principal categories of claims classified as liabilities subject to compromise in the Chapter 11 Cases as of December 31, 2001 are identified below (amounts in thousands):
December 31, 2001 ----------------- Long-term debt and capital lease obligations $485,774 Senior Subordinated Notes (including related accrued interest) 210,549 Preferred redeemable securities (including related accrued interest) - CRESTS 197,218 Accounts payable 22,698 Accrued liabilities (including accrued interest of $1,027) 9,655 -------- $925,894 ========
18 Summary of Reorganization Items The results for the year ended December 31, 2001 include charges which relate to the reorganization process and the Chapter 11 Cases. The table below summarizes these reorganization charges (amounts in thousands): Write-off of deferred financing costs $21,517 ------- Other reorganization items: Legal and professional fees 3,179 Other 320 ------- 3,499 ------- $25,016 =======
Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999 REVENUES At December 31, 2000, the Company owned 111 hotels, had a minority interest in one hotel and managed one hotel for a third party owner compared with 132 hotels owned, a minority interest in one hotel and one hotel managed for a third party at December 31, 1999. Revenues for the Company were $580.9 million for 2000, a 1.9% decrease over revenues of $592.4 million for 1999. This decrease is primarily a result of the reduction of twenty-one hotels in the owned portfolio. RevPAR, however, was $49.62 for 2000, an increase of 5.5% over 1999, primarily due to the completion of several renovation projects in the latter part of 1999 and early 2000. The following table summarizes certain operating data for the Company's hotels for the year ended December 31, 2000 and 1999:
2000 1999 ---- ---- (1) (1) Number of hotels at end of period.................... 111 132 RevPar............................................ $49.62 $47.03 Occupancy......................................... 64.6% 63.10% ADR ............................................ $76.73 $74.58
- ------------ (1) Excludes one hotel managed for a third party and one non-consolidated hotel. OPERATING EXPENSES Direct operating expenses for the Company were $230.9 million (39.7% of direct revenues) for 2000 and $233.9 million (39.4% of direct revenue) for 1999. This $3.0 million decrease was primarily attributable to the reduction of twenty-one hotels in the owned portfolio during 2000 and an improvement in the operating margins in the food and beverage area offset by a decrease in the operating margins for rooms. General, administrative and other expenses were $223.1 million (38.4% of direct revenues) in 2000 and $223.9 million (37.8% of direct revenues) in 1999. Included in general, administrative and other expenses are $7.5 million related to professional fees related to the completion of accounting, tax, systems and other merger integration matters, $2.0 million related to certain legal matters, including legal and other costs associated with Whitehall, Edgecliff and certain hotel asset dispositions and $2.6 million relating principally to provisions for certain sales and other taxes and receivable write-offs. 19 The 1999 charge of $12.5 million related to certain charges recorded in the fourth quarter of 1999 after the completion of certain account reconciliations. Depreciation and amortization expense was $64.8 million in 2000 and $59.3 million in 1999. The $5.5 million increase is primarily a result of the completion of a significant number of renovation projects and the opening of 3 hotels in the latter part of 1999 as well as in the first quarter of 2000, offset by a decrease in depreciation related to hotels sold. In addition, as of September 30, 2000 the Company recorded depreciation expense of $1.6 million representing nine months of expense related to the seven hotels previously considered held for sale as of December 31, 1999 and that were no longer being actively marketed for sale. Impairment of long-lived assets was $60.7 million in 2000. This comprises charges recorded throughout 2000 of $11.3 million related to revised estimates of fair value for properties held for sale at December 31, 1999, $3.5 million related to one property held for use, $56.6 million related to the ten hotels sold to Sunstone Investors, LLC on August 31, 2000, net of a recapture of $10.7 million of impairment charges recorded in 1999 and 2000 as seven hotels previously considered held for sale as of December 31, 1999 were no longer being actively marketed for sale. The impairment charge for 1999 was $38.0 million, representing a reduction in the carrying value of hotels the Company had targeted for sale, pursuant to the Company's previous strategy to reduce the number of non-core hotels in its portfolio. Also, in 1999, based on asset impairment indicators and the market capitalization of the Company's common stock, the Company wrote-off goodwill of $20.7 million in accordance with the market value method of accounting for the impairment of the goodwill arising from the Merger. OTHER INCOME AND EXPENSE Interest expense was $97.3 million in 2000 and $77.4 million in 1999. This increase is primarily attributable to an increase in the level of debt for the majority of 2000 as well as an increase in the cost of debt, primarily due to rising interest rates in early 2000, offset by approximately $155.9 million of debt repayments occurring in the latter half of 2000. During the third quarter, the Company paid a $4.3 million interest hedge break fee to break the interest rate lock agreement on one of its credit facilities. The acquisition termination fees of $3.5 million recorded during 2000 related to a reimbursement of expenses to Whitehall due to the non-consummation of a definite agreement for the sale of the Company. Minority interest expense was $13.1 million in 2000 and $14.5 million in 1999. This $1.4 million decrease is partially attributable to lower net income levels for those hotels which the Company co-owns with its third-party-minority equity partners. NET INCOME After a benefit for income taxes of $28.7 million in 2000 and of $20.1 million in 1999, the Company had a loss before extraordinary item of $88.0 million $(3.12 loss per share) in 2000 compared with $52.9 million $(1.95 per share) in 1999. In 1999 the Company had an extraordinary item, net of income tax benefit of $7.8 million $(.28 loss per share) from the loss on early extinguishment of debt. Net loss for 2000 amounted to $88.0 million $(3.12 loss per share) compared with a net loss of $60.7 million $(2.23 per share) for 1999, for the reasons discussed above. 20 INCOME TAXES As of December 31, 2001, Lodgian had net operating loss carryforwards of approximately $235 million for federal income tax purposes, which expire in 2004 through 2021. It is likely that under the plan of reorganization, substantial amounts of net operating losses will be utilized relating to debt cancellations. The Company's ability to use these net operating loss carryforwards to offset future income is subject to other limitations, and may be subject to additional limitations in the future. Due to these limitations, a portion or all of these net operating loss carryforwards could expire unused. In addition, the Company recognized an income tax provision of $2.8 million during 2001, which related primarily to a provision for state income taxes on the gain on sale of one hotel. LIQUIDITY AND CAPITAL RESOURCES Lodgian's principal sources of liquidity consist of existing cash balances, cash flow from operations and financing. On December 20, 2001, the Company and eighty one of its subsidiaries filed for voluntary reorganization with the United States Bankruptcy Court for the Southern District of New York under Chapter 11 of the Bankruptcy Code. The Chapter 11 Cases have been consolidated for purposes of administration under case number 01-16345. The filing was precipitated by the weaker US economy, the decline in travel since the events of September 11 and the Company's heavy debt load. The Debtors are currently operating their businesses as debtors-in-possession and are subject to the jurisdiction of the Bankruptcy Court while a reorganization plan is being formulated. As a result of the Chapter 11 filing, the Company is prohibited from paying pre-petition claims (unless these are approved by the courts) and creditors are prohibited from attempting to collect loans or debts arising prior to December 20, 2001. The Company, at its option, may assume or reject contracts entered into prior to the date of filing. Rejected contracts entered into prior to the date of the petition would be treated as unsecured claims. The Company has received approval from the Bankruptcy Court to pay pre and post-petition employee wages, salaries, benefits and other employee obligations. The Bankruptcy Court also approved orders granting the debtors authority to pay, among other things, certain pre-petition claims of its critical service vendors. The Company has been and intends to continue to pay its post-petition obligations arising in the ordinary course of business. The Debtors have received debtor-in-possession financing of $25 million from a group of lenders led by Morgan Stanley Funding Inc. and Lehman Brothers Inc. The DIP facility, along with the rights of the Debtors to use the cash collateral of these lenders expires, one year from the date of filing or the effective date of the reorganization plan, whichever is earlier. This financing will allow the Company to operate in the normal course during the bankruptcy proceedings. In addition, the Company has received approval from the courts to pay the post-petition interest on debts relating to 75 of its properties. The Company has not paid any post-petition interest in relation to the Senior Subordinated Notes, CRESTS and the other 29 properties. Contractual interest not accrued at December 31, 2001 amounted to $1.3 million including interests on the CRESTS. As of March 22, 2002, the Debtor had not yet filed its plan of reorganization with the Bankruptcy courts but management believes that the Plan will result in most unsecured claims being settled for less than 100% of their face value and that the interests of the common stock holders will be significantly diluted. Under the DIP facility, the Company has the option to borrow at either base rates plus 2.5% or at LIBOR plus 3.5%. The Company is currently in compliance with the terms of the DIP facility. As of March 22, 2002, the Company had not borrowed from the facility but had issued one letter of credit totaling $750,000 against it. The Company had earnings from operations before interest, taxes, depreciation and amortization ("EBITDA"), as adjusted in 2001 of $80.7 million, a 36.3% decrease from the $126.8 million in 2000. The Company has computed EBITDA without regard to the unusual items. During 2001 these items consisted of impairment charges of $67.3 million, reorganization costs of $25.0 million and severance and other costs of $2.3 million. The unusual charges for 2000 consisted of 21 professional fees and restructuring costs of $1.5 million and impairment charges of $60.7 million. EBITDA is a widely regarded industry measure of lodging performance used in the assessment of hotel property values, although EBITDA is not indicative of and should not be used as an alternative to net income or net cash provided by operations as specified by generally accepted accounting principles. Net cash provided by operating activities in 2001 was $9.3 million as compared with $22.4 million in 2000. Cash flows provided by investing activities were $37.3 million and $124.6 million in 2001 and 2000, respectively. The 2001 amount includes capital expenditures of $28.8 million, net proceeds from the sale of assets of $67.9 million and deposits for capital expenditure escrows of $1.8 million. The 2000 amount includes capital expenditures of $78.7 million, net proceeds from the sale of assets of $205.5 million and deposits for capital expenditure escrows of $2.2 million. Cash flows used in financing activities were $53.6 million and $140.6 million in 2001 and 2000, respectively. The 2001 and 2000 amounts consist primarily of the net proceeds from the issuance and repayment of long-term obligations, as well as payments of deferred loan fees. In 2000, the financing activities also comprised minority interest distributions of $0.8 million. At December 31, 2001, the Company had a working capital surplus of $50,000 compared with a working capital deficit of $103.5 million at December 31, 2000. The improved working capital position is primarily due to the classification of all debts subject to compromise (both long and short term) as current. The Company has a capital improvement program to address the capital improvements required at the hotels related to product improvement plans specified by license agreements with franchisors, re-branding of several hotels and general renovation projects intended to ultimately improve the operations of the hotels. As of December 31, 2001, the Company's anticipated expenditures for such projects are approximately $59.4 million and the Company has approximately $15.8 million escrowed for such improvements. Most of the approximately $59.4 million, is expected to be spent in 2002 with the balance to be spent in 2003. The Company expects to fund its capital expenditures from a combination of amounts escrowed for such expenditures, its current cash position, cash from operations and if needed, from its DIP facility. In June 1998, the Company issued $175 million of CRESTS. The CRESTS bear interest at 7% and are convertible into shares of the Company's common stock at an initial conversion price of $21.42 per share. The sale of CRESTS generated $168.5 million in net proceeds, substantially, all of which were used to repay debt prior to their maturity. Payment restrictions contained in the Company's Notes allowed the Company to defer the dividend payments on the CRESTS beginning June 30, 2000. Pursuant to the terms of the agreement, the Company had the right to defer the dividend payment for up to twenty quarters. On July 23, 1999, the Company sold $200 million of 12.25% Senior Subordinated Notes due in 2009 (the "Notes"). In addition, the Company entered into a new, multi-tranche Senior Secured loan credit facility. The facility consisted of development loans with a maximum capacity of $75 million (the tranche A and C loans), a $240 million tranche B term loan and a $50 million revolving facility. The tranche A and C loans were to be used for hotel development projects. At December 31, 1999, $238.8 million was outstanding on the tranche B term loan and no amounts were outstanding from the tranche A and C portion of the loan credit facility. The tranche B loan, along with the proceeds from the Notes, were used to repay a substantial portion of the financing entered into to consummate the Merger and, in September 1999, a $132.5 million loan, part of the credit facilities. The Company was unable to deliver its 1999 annual audited and March 31, and June 30, 2000 quarterly unaudited financial statements to its Senior Secured loan facility lenders on a timely basis. The Company received a waiver for the late delivery of these financial statements and the time period for delivery of quarterly 2000 financial statements was extended. In addition, on July 31, 2000, the Company entered into an amendment to its Senior Secured loan credit facility which provided for a 0.5% increase in the interest rate, termination of the tranche A facility which reduced the maximum credit facility by $25 million and provided for additional amortization payment requirements for tranche B term loans of (i) $25 million on or prior to December 31, 2000, (ii) an additional $35 million on or prior to June 30, 2001 and (iii) an additional $40 million on or prior to December 31, 2001. Prior to the amendment, amortization payment requirements were effectively 1% per year of the outstanding tranche B term loans during that period. The amendment modified various covenants and coverage ratios. The 22 amendment provided for access to the $25 million unused portion of the revolving credit facility and provided increased flexibility for the sale of hotel assets. The Company paid an amendment fee of approximately $1.4 million. The Company paid the $25 million required amortization payment due December 31, 2000, the $35 million required amortization payment due June 30, 2001, and $4 million of the $40 million due December 31, 2001. On August 31, 2000, in conjunction with the sale of nine hotels, principally located in the Western United States, the Company and the lenders amended the terms of the credit facilities. Under this amendment two former credit facilities were amended into one new facility and the Company paid down approximately $106.2 million of the debt with proceeds from the sale, extended the maturity date to September 2003 after considering a one year option to extend and converted the remaining balance owed, approximately $108.7 million, to a floating rate facility. In addition, the Company paid approximately $4.3 million to "break" the interest rate lock agreement on $54 million related to this debt. With regard to the mortgage notes with an interest rate of 9%, on August 31, 2000 the Company sold one hotel, located in the Western United States, securing this facility and used the proceeds to reduce principal, pay origination and extension fees of approximately $1.9 million, and exercised its option to extend the maturity date to November 2002 from November 2000. On May 15, 2001, the Company and the lenders of its Senior Secured Loan Credit Facility reached an agreement to amend that facility. Prior to the amendment, the Company would have been in violation of two financial covenant ratios based on its first quarter 2001 operating results. The amendment increased the interest rate spread (which was then LIBOR plus 4.25%) by 25 basis points in each month from August 2001 to February 2002 up to a maximum of LIBOR plus 6.00% until maturity. The amendment also provided that the interest rate spread would increase an additional 25 basis points up to a maximum of LIBOR plus 6.00% if the company's debt was downgraded by a rating agency subsequent to the amendment date (the downgrade occurred in May 2001). In addition, the interest rate spread would decrease 50 basis points for each aggregate $60.0 million of principal reductions made subsequent to the amendment date as long as the Company was in compliance with certain financial coverage ratios. The amendment also required additional amortization payments on the tranche B term loans of $7.5 million on April 30, 2002, June 30, 2002, September 30, 2002 and December 31, 2002, respectively. The amendment also modified various covenants and financial coverage ratios. The Company paid an amendment fee of $565,000 on the date of the amendment. In addition, on the amendment date, $25.0 million of the outstanding balance on the working capital revolver was converted to the tranche B term loan, thereby reducing the commitment on the working capital revolver to $25.0 million as of May 15, 2001. Based on its third quarter 2001 results, the Company was not in compliance with the financial covenants related to its Senior Secured Loan Credit Facility (the senior facility), on which, as of November 14, 2001 the Company had outstanding borrowings of $192.6 million. However, on November 13, 2001, the Company reached an agreement with the lenders of the facility (the senior lenders) with respect to the financial covenant violations, pursuant to which the senior lenders agreed to forbear from the exercise of their default-related remedies against the Company until December 31, 2001 (unless an additional event of default occurred earlier). The forbearance agreement also reduced the commitment on the working capital revolver from $25.0 million to $13.4 million leaving the Company $3.0 million of unused availability on the working capital revolver portion of the senior facility. The forbearance agreement also required that the remaining $3.0 million be used only to pay the interest in respect of the senior facility. The Company did not make the remaining $36.0 million of required special amortization payments to its senior lenders due December 31, 2001. As of December 31, 2001, the Company had outstanding borrowings on the Senior Secured Loan Credit Facility of $195.6 million. In addition, the Company did not make the $12.3 million interest payment due January 15, 2002 to the holders of the Company's Senior Subordinated Notes. As a result of the events of default with respect to its Senior Secured Loan Facility, the Company's Senior Subordinated Notes and the CRESTS were also in default due to cross-default provisions in those agreements. On May 20, 2001, promissory notes of approximately $3.9 million secured by the pledge of 100% of the ownership interests of Macon Hotel Associates, L.L.C. ("MHA") were due. The Company owns a 60% controlling interest in MHA. MHA's sole asset is the Crowne Plaza Hotel located in Macon, Georgia. MHA did not make this payment on May 20, 2001. MHA is in discussions with the note holders with respect to the default. MHA has made significant progress in its 23 negotiations with the note holders and hopes to have the default cured by the second quarter of 2002. During the first quarter of 2001, the Company recorded an impairment charge of $2.2 million to reduce the carrying value of the hotel to the outstanding debt balance, which includes the promissory notes discussed above and a $7.8 million first mortgage. Based on the estimated sales price of the property, which approximates the amount of the debt outstanding, there will not be any remaining net proceeds available for MHA. MHA was not included in the entities which filed for reorganization under Chapter 11. During the fourth quarter of 2001, the lenders of a $108.7 million credit facility with certain subsidiaries of the Company, notified the Company of a default under the loan agreement and called upon the Company to honor the guarantee it made in relation to this debt. On December 20, 2001, prior to the resolution of this matter, the Company filed for bankruptcy under Chapter 11. As a result of the Chapter 11 Cases, the Company is technically in default of its debt agreements with the exception of certain debt of the Company's joint ventures that were not included in the bankruptcy petition. All of the Company's pre-petition debt, with the exception of the debt of the joint ventures, are recorded in liabilities subject to compromise in the balance sheet as of December 31, 2001. The Company is subject to certain property maintenance and quality standard compliance requirements under its franchise agreements. The Company periodically receives notifications from its franchisors of events of noncompliance with such agreements and may continue to receive notifications if the liquidity and cash constraints of the Company limit its ability to comply with its franchise agreements. In the past, management has cured most cases of noncompliance within the applicable cure periods and the events of noncompliance did not result in events of default under the respective loan agreements. However, in selected situations, as warranted, based on economic evaluations, management may elect to not comply with the franchisor requirements. In such situations, the Company will either select an alternative franchisor or operate the property independent of any franchisor. As a result of the Company's petition for bankruptcy, the Company is technically in default of its franchise agreements. However, due to the automatic stay of proceedings, the franchisors are prohibited from proceeding with certain actions absent approval from the Bankruptcy Courts. Were the automatic stay, in respect of these franchise agreements, to be lifted, this could negatively impact operating results and the value of the Company's hotels. As discussed above, the Company had previously adopted strategic plans to reduce the size of the Company's non-core hotel portfolio and reduce the overall level of debt. With regard to these strategic plans, the Company sold twenty-five hotel properties and four other assets during 2000 and 2001. Gross sales price of these twenty-nine properties was $285.3 million while the reduction of debt was $216.6 million. The balance was used primarily to support capital expenditures related to major renovation projects and the construction of one new hotel, which was subsequently sold prior to completion. Management believes that the combination of its current cash position, cash flow from operations, and the DIP facility will provide sufficient liquidity to fund the Company's operating, capital expenditure and debt service obligations during the Chapter 11 proceedings. However, there can be no assurance that this will be achieved. The Company's recent losses and the Chapter 11 cases raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and the appropriateness of using the going concern basis is dependent upon, among other factors, the Company's ability (i) to comply with the debtor-in-possession financing agreements, (ii) to obtain exit financing to enable it to exit Chapter 11, (iii) to obtain confirmation of a plan of reorganization under the Bankruptcy Code, (iv) to achieve profitable operations after such confirmation, and (v) the Company's ability to generate sufficient cash from operations to meet its obligations. In addition, the Company's debtor-in-possession financing agreements expire in December 2002; there can be no assurance that the Company will be successful in obtaining confirmation of a plan of reorganization by December 2002 and, if not, there can be no assurance that the existing debtor-in-possession lenders will agree to continue to provide debtor-in-possession financing. Management believes that the DIP Facility, along with its current cash and cash provided by operations, will provide sufficient liquidity to fund its operations in the foreseeable future; however, there can be no assurance that the sources of liquidity will be available or sufficient to meet the Company's needs. INFLATION The rate of inflation has not had a material effect on the Company's revenues or costs and expenses in recent years and it is not anticipated that inflation will have a material effect on the Company in the near term. 24 CRITICAL ACCOUNTING POLICIES The Company's financial statements are prepared in accordance with the United States generally accepted accounting principles (GAAP). A summary of the significant accounting policies is included in Note 1 to the consolidated financial statements. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from these estimates. The critical accounting policies adopted by the Company relate to capitalization, useful/ depreciable lives of fixed assets, revenue recognition, impairment evaluations, income taxes and liabilities subject to compromise. Capitalization and depreciable lives of assets Capital improvements are capitalized when they extend the useful lives of the related asset. Management estimates the depreciable lives of the Company's fixed assets. All items considered to be repair and maintenance items are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets (buildings and improvements 10-40 years; furnishings and equipment 3-10 years). Property under capital leases is amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term. Revenue recognition Revenues are recognized when the services are rendered. Revenues are composed of rooms, food and beverage and other revenues. Room revenues are derived from guest room rentals, whereas food and beverage revenues primarily include sales from hotel restaurants, room service and hotel catering. Other revenues include charges for guests' long-distance telephone service, laundry service and use of meeting facilities. Asset impairment evaluation Under GAAP, real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. As required by GAAP, the Company periodically evaluates its real estate assets to determine if there has been any impairment in carrying value and records impairment losses if there are indicators of impairment and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. The impairment loss recognized in 2001, 2000 and 1999 respectively was $67.3 million, $60.7 million and $38.0 million. As a result of the filing of the Chapter 11 Cases and related circumstances, the Company may ultimately sell or otherwise dispose of its hotel assets for amounts less than the carrying value of such assets and future actions by the Company, its creditors or the Bankruptcy Court could adversely impact the Company's ability to hold its assets for periods sufficient for it to recover the carrying value of its assets on an undiscounted cash flow basis. As a result, the Company could recognize additional impairment losses in future periods. Of the impairment charges in the 2001 period, $69.0 million of the impairment charges and the recapture of $8.5 million of previously recognized impairment reserves were recorded in the fourth quarter. In connection with its bankruptcy petition on December 20, 2001, the Company determined that 29 of its hotels were significantly overleveraged in that the estimated fair value of these hotels did not exceed the outstanding debt on these hotels. Therefore, with the approval of the Bankruptcy Court, the Company ceased paying interest to the secured lenders of these properties from the date of the bankruptcy petition. The Company also concluded that it no longer had the ability to hold these hotels for a period sufficient for their estimated future undiscounted cash flows to cover their carrying values. Therefore in accordance with the provisions of FAS 121, the Company determined that an impairment charge of $69 million was necessary to reduce the carrying value of these assets. In connection with the bankruptcy petition, the Company also ceased marketing for sale, four properties that were previously classified as held for sale. Since these assets were not considered impaired as the estimated future cash flows from the use of these properties exceeded their carrying values, the Company recaptured $8.5 million of impairment reserves previously recorded in 1999, 2000 and 2001. Income taxes 25 The Company accounts for income taxes under Statement of Financial Accounting Standards (SFAS 109) "Accounting for Income Taxes", which requires the use of the liability method of accounting for deferred income taxes. See note 9 for the components of the Company's deferred taxes. As a result of the Company's financial condition, continued losses and the Chapter 11 Cases, the Company has provided a full valuation allowance against its deferred tax asset as it is more likely than not that the deferred tax asset will not be realized. Liabilities subject to compromise Liabilities subject to compromise refers to known liabilities incurred prior to the commencement of the Chapter 11 Cases, including those considered by the Bankruptcy Court to be pre-petition claims. These liabilities consist primarily of amounts outstanding under long-term debt and also include accounts payable, accrued interest and other accrued expenses. These amounts represent the Company's estimate of known or potential claims to be resolved in the Chapter 11 Cases. Such claims remain subject to future adjustments. Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy Court; (3) further development with respect to disputed claims; (4) proofs of claim; or (5) other events. Payment terms for these amounts will be established under a plan of reorganization. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The risk inherent in the Company's market risk sensitive instruments is the potential loss arising from adverse changes in interest rates. The Company does not purchase or hold any derivative financial instruments for trading purposes. Hotel owners and operators are inherently capital intensive, as the vast majority of assets are hotels, which are long-lived. Lodgian's exposure to market risk associated with changes in interest rates relates primarily to its debt obligations. Prior to the Chapter 11 filing, the Company had significant exposure to changes in cash flows resulting from changes in interest rates as approximately 43% of its long-term debt carried floating rates of interest. For the balance of long-term debt, the nature of fixed rate obligations did not expose the Company to the risk of changes in the fair value of these instruments, except for the Company's Senior Subordinated Notes. The Company has outstanding debt of $701.1 million, including current maturities at December 31, 2001. The table below provides information about the Company's debt obligations.
ORIGINAL MATURITY DATE 2002 2003 2004 2005 2006 THEREAFTER TOTAL FAIR VALUE ------- -------- ------- ------- ------ ---------- ------- ---------- (DOLLARS IN THOUSANDS) Mortgage notes payable with interest at LIBOR plus 5.75% (matures 2005) ............ $68,996 $ 2,400 $19,200 $99,029 $ -- $ -- $189,625 $189,625 Credit facilities with interest at LIBOR plus 2.75% (matures 2003) ..................... -- 108,652 -- -- -- -- 108,652 108,652 Mortgage notes with an interest rate of 9.65% (matures 2002) ....................... 54,565 -- -- -- -- -- 54,565 54,565 Mortgage notes with fixed rates ranging from 7.9% to 10.7% (matures 2003 to 2010) ..................................... 4,426 35,335 26,616 4,018 4,440 38,816 113,651 113,651 Senior Subordinated notes with interest rates at 12.25% (matures 2009) ................ -- -- -- -- -- 200,000 200,000 87,000(1) Revolving credit facility with interest at LIBOR plus 5.75% (matures 2004) ............... -- -- 6,000 -- -- -- 6,000 6,000 Other facilities with interest rates ranging from 0 to 14% ......................... 14,577 8,238 95 104 114 5,523 28,651 28,651
- -------------- (1) Based on quoted market prices at December 31, 2001. At December 31, 2001, the Company had approximately $304.3 million of debt instruments outstanding that are subject to changes in the LIBOR or PRIME rate. Without regard to additional borrowings under those instruments or scheduled amortization, the annualized effect of each twenty five basis point increase in the LIBOR rate would be a reduction in income before income taxes in 2001 by approximately $0.8 million. 26 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants........................................................................... 28 Report of Independent Auditors..................................................................................... 29 Consolidated Balance Sheets as of December 31, 2001 and 2000....................................................... 30 Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000, and 1999........................ 31 Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2001, 2000 and 1999..... 32 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999......................... 33 Notes to Consolidated Financial Statements......................................................................... 34
27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Lodgian, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Lodgian, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lodgian, Inc. and subsidiaries as of December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company filed a voluntary petition with the United States Bankruptcy Court for reorganization under Chapter 11. This matter raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are described in Note 2. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. Arthur Andersen LLP Atlanta, Georgia March 22, 2002 28 REPORT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors Lodgian, Inc. We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Lodgian, Inc. (formerly known as Servico Inc.) and Subsidiaries for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Lodgian, Inc. (formerly known as Servico Inc.) and Subsidiaries for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Atlanta, Georgia July 14, 2000 29 LODGIAN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------------- 2001 2000 ----------- ----------- (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS Current assets: Cash and cash equivalents ...................................................... $ 14,007 $ 21,002 Cash, restricted ............................................................... 3,218 2,237 Accounts receivable, net of allowances ......................................... 12,489 20,624 Inventories .................................................................... 7,223 7,805 Prepaid expenses and other current assets ...................................... 6,284 5,658 ----------- ----------- Total current assets .................................................... 43,221 57,326 Property and equipment, net ......................................................... 913,968 1,059,048 Deposits for capital expenditures ................................................... 15,813 14,005 Other assets, net ................................................................... 2,360 29,965 ----------- ----------- $ 975,362 $ 1,160,344 =========== =========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Liabilities Not Subject to Compromise Current liabilities: Accounts payable .............................................................. $ 2,706 $ 25,088 Accrued interest .............................................................. 1,192 16,795 Other accrued liabilities ..................................................... 29,785 37,203 Advance deposits .............................................................. 1,771 1,854 Current portion of long-term debt and capital lease obligations ............... 7,717 79,843 ----------- ----------- Total current liabilities ..................................................... 43,171 160,783 Other long-term debt and capital lease obligations ................................ 7,652 674,038 Liabilities Subject to Compromise ................................................... 925,894 -- Minority interests: Preferred redeemable securities (including related accrued interest) .......... -- 184,349 Other ......................................................................... 5,326 4,294 Commitments and contingencies ....................................................... -- -- Stockholders' (deficit) equity: Common stock, $.01 par value, 75,000,000 shares authorized; 28,479,837 and 28,290,424 issued and outstanding at December 31, 2001 and December 31, 2000, respectively ................................................. 284 282 Additional paid-in capital ....................................................... 263,320 263,320 Accumulated deficit .............................................................. (268,306) (125,542) Accumulated other comprehensive loss ............................................. (1,979) (1,180) ----------- ----------- Total stockholders' (deficit) equity ...................................... (6,681) 136,880 ----------- ----------- $ 975,362 $ 1,160,344 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 30 LODGIAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ------------------------------------------ 2001 2000 1999 ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues: Rooms ................................................................... $ 328,852 $ 422,475 $ 424,530 Food and beverage ....................................................... 98,574 131,333 139,474 Other ................................................................... 20,130 27,089 28,416 ---------- ---------- ---------- Total revenue ....................................................... 447,556 580,897 592,420 ---------- ---------- ---------- Operating expenses: Direct: Rooms ................................................................. 91,415 119,159 114,590 Food and beverage ..................................................... 70,665 94,950 102,045 Other ................................................................. 12,202 16,829 17,312 General, administrative and other ......................................... 192,526 223,232 223,856 Depreciation and amortization ............................................. 62,545 64,794 59,317 Impairment of long-lived assets ........................................... 67,340 60,688 37,977 Write-off of goodwill ..................................................... -- -- 20,748 Severance and restructuring expenses ...................................... 2,309 1,502 500 ---------- ---------- ---------- Total operating expenses ............................................ 499,002 581,154 576,345 ---------- ---------- ---------- (51,446) (257) 16,075 Other income (expenses): Interest income and other ............................................... 709 1,458 1,579 Interest expense ........................................................ (75,326) (97,306) (77,409) Interest hedge break fee ................................................ -- (4,294) -- Acquisition-termination fees ............................................ -- (3,500) -- Gain on asset dispositions ............................................... 23,975 298 1,242 Minority interests: Preferred redeemable securities ......................................... (12,869) (12,412) (13,224) Other ................................................................... 38 (665) (1,300) ---------- ---------- ---------- Loss before income taxes and reorganization items ......................... (114,919) (116,678) (73,037) Reorganization items: Write-off of deferred financing costs .................................... (21,517) -- -- Other reorganization items ............................................... (3,499) -- -- ---------- ---------- ---------- Loss before income taxes, reorganization items and ....................... (139,935) (116,678) (73,037) extraordinary items (Provision) benefit for income taxes ..................................... (2,829) 28,723 20,094 ---------- ---------- ---------- Loss before extraordinary item ........................................... (142,764) (87,955) (52,943) Extraordinary item: Loss on extinguishment of indebtedness, net of income tax benefit of $4,914 in 1999 ................................... -- -- (7,750) ---------- ---------- ---------- Net loss .................................................................. $ (142,764) $ (87,955) $ (60,693) ========== ========== ========== Loss per common share, basic and diluted: Loss before extraordinary item ..................................... $ (5.04) $ (3.12) $ (1.95) Extraordinary item ................................................. -- -- (0.28) ---------- ---------- ---------- Net loss per common share ......................................... $ (5.04) $ (3.12) $ (2.23) ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 31 LODGIAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
RETAINED ACCUMULATED ADDITIONAL EARNINGS OTHER TOTAL COMMON STOCK PAID-IN (ACCUMULATED COMPREHENSIVE STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT) LOSS EQUITY (DEFICIT) ---------- ------ ----------- ------------ ------------- ---------------- (IN THOUSANDS, EXCEPT SHARE DATA) Balance at December 31, 1998 ........... 27,937,057 $278 $261,976 $ 23,106 $(1,593) $ 283,767 401(k) Plan contribution ............ 143,160 2 547 -- -- 549 Exercise of stock options ........... 30,000 1 119 -- -- 120 Tax benefit from exercise of stock options .................... -- -- 20 -- -- 20 Director compensation ............... 20,108 -- 98 -- -- 98 Net loss ............................ -- -- -- (60,693) -- (60,693) Currency translation adjustments .... -- -- -- -- 681 681 --------- Comprehensive loss .................. -- -- -- -- -- (60,012) ---------- ---- -------- --------- ------- --------- Balance at December 31, 1999 ........... 28,130,325 281 262,760 (37,587) (912) 224,542 ---------- ---- -------- --------- ------- --------- 401(k) Plan contribution ............ 144,131 1 504 -- -- 505 Director compensation ............... 15,968 -- 56 -- -- 56 Net loss ............................ -- -- -- (87,955) -- (87,955) Currency translation adjustments .... -- -- -- -- (268) (268) --------- Comprehensive loss .................. -- -- -- -- -- (88,223) ---------- ---- -------- --------- ------- --------- Balance at December 31, 2000 ........... 28,290,424 282 263,320 (125,542) (1,180) 136,880 401(k) Plan contribution ............ 189,413 2 -- -- -- 2 Net loss ............................ -- -- -- (142,764) -- (142,764) Currency translation adjustments .... -- -- -- -- (799) (799) --------- Comprehensive loss .................. -- -- -- -- -- (143,563) ---------- ---- -------- --------- ------- --------- Balance at December 31, 2001 ........... 28,479,837 $284 $263,320 $(268,306) $(1,979) $ (6,681) ========== ==== ======== ========= ======= =========
The accompanying notes are an integral part of these consolidated financial statements. 32 LODGIAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------------------- 2001 2000 1999 --------- --------- --------- (IN THOUSANDS) Operating activities: Net loss .......................................................... $(142,764) $ (87,955) $ (60,693) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization .................................... 62,545 64,794 59,317 Impairment of long-lived assets .................................. 67,340 60,688 37,977 Write-off of goodwill ............................................ -- -- 20,748 Loss on extinguishment of indebtedness ........................... -- -- 12,664 Deferred income tax benefit ...................................... -- (30,063) (25,008) Minority interests ............................................... 12,831 10,014 1,300 401 (k) plan contributions ....................................... 2 505 549 Compensation in stock issued to directors ........................ -- 56 98 Equity in income of unconsolidated entities ...................... -- (84) (278) Gain on sale of assets ........................................... (23,975) (298) (1,242) Write-off and amortization of deferred financing costs ........... 26,273 5,654 7,243 Other ............................................................ 561 (3,520) -- Changes in operating assets and liabilities, net of acquisitions: Accounts receivable .......................................... 8,135 5,896 (1,022) Inventories .................................................. 582 1,385 73 Prepaid expenses and other assets ............................ (1,607) 1,013 30,462 Accounts payable ............................................. 2,277 (3,499) (22,921) Accrued liabilities .......................................... (2,818) (1,704) 9,339 Advance deposits ............................................. (83) (530) (1,415) --------- --------- --------- Net cash provided by operating activities ............................ 9,299 22,352 67,191 --------- --------- --------- Investing activities: Acquisitions of property and equipment ............................. -- -- (1,929) Capital improvements, net .......................................... (28,844) (78,716) (118,925) Purchase of minority interests ..................................... -- -- (10,200) Proceeds from sale of assets, net .................................. 67,910 205,523 22,068 (Deposits) withdrawals for capital expenditures ................... (1,808) (2,184) 18,029 --------- --------- --------- Net cash provided by (used in) investing activities .................. 37,258 124,623 (90,957) --------- --------- --------- Financing activities: Proceeds from borrowings on working capital revolver ............... 21,000 30,000 -- Proceeds from issuance of long-term obligations .................... -- 2,326 487,521 Proceeds from issuance of common stock ............................. -- -- 120 Principal payments on long-term obligations ........................ (58,954) (163,868) (448,220) Principal payments on working capital revolver ..................... (15,000) (5,000) -- Payments of deferred loan costs .................................... (598) (3,300) (18,479) Distributions to minority interests ................................ -- (775) (1,717) --------- --------- --------- Net cash (used in) provided by financing activities .................. (53,552) (140,617) 19,225 --------- --------- --------- Net (decrease) increase in cash and cash equivalents ................. (6,995) 6,358 (4,541) Cash and cash equivalents at beginning of period ..................... 21,002 14,644 19,185 --------- --------- --------- Cash and cash equivalents at end of period ........................... $ 14,007 $ 21,002 $ 14,644 ========= ========= ========= Supplemental cash flow information: Cash paid during the period for: Interest, net of amount capitalized ................................ $ 73,131 $ 88,247 $ 69,574 ========= ========= ========= Income taxes, net of refunds ....................................... $ 120 $ 584 $ 3,810 ========= ========= ========= Net non-cash debt reduction ........................................ $ -- $ 1,656 $ -- ========= ========= ========= Operating cash receipts and payments resulting from Chapter 11 proceedings: Interest received ................................................... $ 3 $ -- $ -- Professional fees paid .............................................. (3,772) -- -- Other reorganization payments ....................................... (24) -- -- --------- --------- --------- $ (3,793) $ -- $ -- ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 33 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business On December 11, 1998, Servico, Inc. (Servico) merged with Impac Hotel Group, LLC (Impac), pursuant to which Servico and Impac formed a new company Lodgian, Inc. ("Lodgian" or the "Company"). This transaction (the "Merger") was accounted for under the purchase method of accounting, whereby Servico was considered the acquiring company. As of December 31, 2001, Lodgian, its wholly owned subsidiaries and consolidated joint ventures (collectively, the "Company"), owned or managed 106 hotels in 32 states and Canada. At December 31, 2000, the Company owned or managed 113 hotels. Principles of Consolidation The financial statements consolidate the accounts of Lodgian, its wholly-owned subsidiaries and four joint ventures in which Lodgian exercises control. Lodgian believes it has control of the joint ventures when the Company manages and has control of the joint venture's assets and operations, has the ability and authority to enter into financing agreements on behalf of the entity or to sell the assets of the entity within reasonable business guidelines. An unconsolidated entity (owning 1 hotel) is accounted for on the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation. Inventories Inventories consist primarily of food and beverage, linens, china, tableware and glassware and are valued at the lower of cost (computed on the first-in, first-out method) or market. Minority Interests--Other Minority interests represent the minority interests' proportionate share of equity of joint ventures that are accounted for by the Company on a consolidated basis. The Company generally allocates to minority interests their share of any profits or losses in accordance with the provisions of the applicable agreements. However, if the loss applicable to a minority interest exceeds its total investment and advances, such excess is charged to the Company. Minority Interests--Preferred Redeemable Securities Minority interests-preferred redeemable securities, represents Convertible Redeemable Equity Structure Trust Securities ("CRESTS"). The CRESTS bear interest at 7% and are convertible into shares of the Company's common stock. For further discussion of The CRESTS, see Note 7. Property and Equipment Property and equipment is stated at cost, less reserves for impairment, where applicable. Capital improvements are capitalized when they extend the useful lives of the related asset. All repair and maintenance items are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Property under capital leases is amortized using the straight line method over the shorter of the estimated useful lives of the assets or the lease term. 34 The Company capitalizes interest costs incurred during the renovation and construction of capital assets. During the years ended December 31, 2001, 2000 and 1999, the Company capitalized $861,000, $747,000, and $8,428,000 of interest, respectively. Management periodically evaluates the Company's property and equipment to determine if there has been any impairment in the carrying value of the assets in accordance with Financial Accounting Standards Board Statement ("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121 was superceded by SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" effective January 1, 2002 (see Recent Accounting Pronouncements below). SFAS 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Impairment losses for assets held for sale are recognized when the assets' carrying values are greater than the fair value less estimated selling costs. See Note 5 for further discussion of the Company's charges for asset impairment. Goodwill Goodwill was being amortized over twenty years. Impairment of enterprise level goodwill arising from the Merger was accounted for under the market value method. All of the goodwill arising from the Merger was written of in 1999. Deferred Costs Deferred franchise and other deferred costs of $2,360,000 and $3,320,000 at December 31, 2001 and 2000, respectively, are included in other assets, net of accumulated amortization. Deferred financing costs were all written off during 2001 and are included in reorganization items since the related debt is subject to compromise in accordance with the Company's bankruptcy petition. Deferred financing costs, net at December 31, 2000 was $26,645,000. Deferred franchise and other costs are amortized using the straight-line method over the terms of the related franchise or other agreements, while deferred financing costs were being amortized using the interest method over the related term of the debt. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Restricted cash consists of amounts reserved for capital improvements, debt service, taxes and insurance. Fair Values of Financial Instruments The fair values of current assets and current liabilities are assumed equal to their reported carrying amounts. The fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. In the opinion of management, the carrying value of long-term debt approximates market value as of December 31, 2001 and 2000. Quoted market prices were not readily available for the CRESTS. Management estimates the fair market value of the Company's CRESTS at December 31, 2001 to be $11.8 million (based on informal quotes of between 5% to 7% of face value) compared with $53.4 million at December 31, 2000. Management has estimated the fair market value of the Company's Senior Subordinated notes at December 31, 2001 to be $87 million (based on quoted market prices at December 31, 2001) compared with $184 million at December 31, 2000. Concentration of Credit Risk Concentration of credit risk associated with cash and cash equivalents is considered low due to the credit quality of the issuers of the financial instruments held by the company and due to their short duration to maturity. Accounts receivable are primarily from major credit card companies, airlines and other travel related companies. The Company performs ongoing evaluations of its significant customers and generally does not require collateral. The Company maintains an allowance for doubtful accounts at a level which management believes is sufficient to cover potential credit losses. At December 31, 2001 and 2000, these allowances were $1,237,000 and $1,400,000, respectively. 35 Earnings Per Common and Common Equivalent Share The Company adopted SFAS 128 "Earnings Per Share" effective for the year ended December 31, 1998. Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the periods and include common stock contributed by the Company to its employees 401(k) Plan (the "401(k)"). Dilutive earnings per common share include the Company's outstanding stock options and shares convertible under the Company's CRESTS, if dilutive. See Note 11 for computation of basic and diluted earnings per share. Stock Based Compensation The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations. Under APB 25, because the exercise price of the Company's employee stock options is equal to the market price of the underlying stock on the date of grant, no compensation expense is recognized. Under SFAS 123, "Accounting for Stock-Based Compensation", compensation cost is measured at the grant date based on the value of the award and is recognized over the service (or vesting) period. The Financial Accounting Standards Board issued an interpretation of APB 25 (the "Interpretation") in March 2000. One of the key areas affected by the interpretation is the accounting for stock option repricings. The interpretation is applied prospectively to transactions that occur after December 15, 1998 commencing on the effective date of July 1, 2000. The Interpretation requires that once an option granted to an employee is repriced, that option would be accounted for as if it were a variable plan, giving rise to compensation expense for the subsequent changes in stock price, from the date the option is repriced to the date it is exercised. Under the interpretation, no compensation expense is recorded on the date of the repricing. However, compensation expense is recorded quarterly through the date of exercise to the extent that the fair market value of the common stock is in excess of the exercise price of the options adjusted for the repricing. The interpretation requires, in measuring compensation expense, the use of the higher of the repriced exercise price of the options or the fair market value of the stock on the date the interpretation is effective. On December 18, 1998, the Company repriced options totaling 997,800, net of forfeitures, that were subject to these requirements. There was no impact on the Company's operating results for the years ended December 31, 2001 and 2000. Revenue Recognition Revenues are recognized when the services are rendered. Revenues are composed of rooms, food and beverage and other revenues. Room revenues are derived from guest room rentals, whereas food and beverage revenues primarily include sales from hotel restaurants, room service and hotel catering. Other revenues include charges for guests' long-distance telephone service, laundry service and use of meeting facilities. Advertising Expense The cost of advertising is expensed as incurred. The Company incurred $2,684,000, $3,492,000 and $3,997,000 in advertising cost during 2001, 2000 and 1999, respectively. Foreign Currency Translation The financial statements of foreign subsidiaries have been translated into U.S. dollars in accordance with SFAS 52 "Foreign Currency Translation." All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet dates. Income statement amounts have been translated using the average rate for the year. The gains and losses 36 resulting from the changes in exchange rates from year to year have been reported in other comprehensive income. The effects on the statements of operations of transaction gains and losses is insignificant for all years presented. Business Segments The Company's only business segment is the ownership and management of hotels. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards for derivative instruments embedded in other contracts, and derivatives used for hedging purposes. SFAS No. 133 requires that entities recognize all derivative financial instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 as amended by SFAS No. 137 and 138, was adopted by the Company in the first quarter of 2001. The adoption had no impact on the Company's financial statements. In June 2001, SFAS No. 141, "Business Combinations" (effective for transactions initiated after June 30, 2001) and SFAS 142 "Goodwill and other Intangible Assets" (effective for fiscal years beginning after December 15, 2001) were issued. SFAS No. 141 prohibits pooling-of interests accounting for acquisitions. SFAS No. 142 specifies that goodwill and some intangible assets will no longer be amortized but instead will be subject to periodic impairment testing. SFAS No. 141 was adopted by the Company in the third quarter of 2001. The adoption had no impact on the Company's financial statements. SFAS No. 142, which will be implemented in January 2002, is also expected to have no impact on the Company's financial statements. In August 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations," (effective for fiscal periods commencing after June 15, 2002) was issued. SFAS No. 143 requires that entities recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. We believe that the adoption of SFAS No. 143 will not have a significant impact on our financial statements. In August 2001, SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets," (effective for fiscal periods commencing December 15, 2001) was issued. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. The statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and among other factors, establishes criteria beyond that previously specified in SFAS No. 121 to determine when long-lived asset is to be considered held for sale. We currently believe that the implementation of SFAS No. 144 will require operating results of real estate assets sold to be included in discontinued operations in the statements of operations. We believe that the impairment provisions of SFAS No. 144 are similar to SFAS No. 121 and that the adoption thereof will not have a significant impact on our financial statements. Reclassifications Certain reclassifications have been made to prior year financial statements in order to conform to the current year presentation. 37 2. BANKRUPTCY FILING AND GOING CONCERN MATTERS On December 20, 2001, the Company and eighty one of its subsidiaries filed for voluntary reorganization with the United States Bankruptcy Court for the Southern District of New York under Chapter 11 of the Bankruptcy Code (the "Chapter 11 Cases"). The Chapter 11 Cases have been consolidated for purposes of administration under case number 01-16345. The filing was precipitated by the weaker US economy, the decline in travel since the events of September 11 and the Company's heavy debt load. The Debtors are currently operating their businesses as debtors-in-possession and are subject to the jurisdiction of the Bankruptcy Court while a reorganization plan is being formulated. All operating subsidiaries of the Company are included in the Chapter 11 Cases except for two subsidiaries each owning one hotel. The Chapter 11 Cases also exclude 66 non-operating subsidiaries of the Company. The assets and liabilities of the operating and non-operating subsidiaries excluded from the Chapter 11 cases are as follows (amounts in thousands): Assets $ 20,639 Liabilities $(35,309)
As a result of the Chapter 11 filing, the Company is prohibited from paying pre-petition claims (unless these are approved by the courts) and creditors are prohibited from attempting to collect loans or debts arising prior to December 20, 2001. The Company, at its option, may assume or reject contracts entered into prior to the date of filing. Rejected contracts entered into prior to the date of the petition would be treated as unsecured claims. The Company has received approval from the Bankruptcy Court to pay pre and post-petition employee wages, salaries, benefits and other employee obligations. The Bankruptcy Court also approved orders granting the debtors authority to pay, among other things, certain pre-petition claims of its critical service vendors. The Company has been and intends to continue to pay its post-petition obligations arising in the ordinary course of business. The Debtors have received debtor-in-possession financing of $25 million from a group of lenders led by Morgan Stanley Funding Inc. and Lehman Brothers Inc. The DIP facility, along with the rights of the Debtor to use the cash collateral of these lenders expires one year from the date of filing or the effective date of the reorganization plan, whichever is earlier. This financing will allow the Company to operate in the normal course during the bankruptcy proceedings. As of March 22, 2002, the Debtor had not yet filed its plan of reorganization with the Bankruptcy courts but management believes that the Plan will result in most unsecured claims being settled for less than 100% of their face value and that the interests of the common stock holders will be significantly diluted. GOING CONCERN The accompanying consolidated financial statements have been prepared on a going concern basis of accounting and do not reflect adjustments that might result if the Company is unable to continue as a going concern. The Company's recent losses and the Chapter 11 Cases, raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and the appropriateness of using the going concern basis is dependent upon, among other things, (i) the Company's ability to comply with the debtor-in-possession financing (DIP Facility) agreements, (ii) the Company's ability to obtain financing upon expiration of the DIP Facility, (iii) confirmation of a plan of reorganization under the Bankruptcy Code; (iv) the Company's ability to achieve profitable operations after such confirmation, and (v) the Company's ability to generate sufficient cash from operations to meet its obligations. In addition, the Company's debtor-in-possession financing agreements expire in December 2002; there can be no assurance that the Company will be successful in obtaining confirmation of a plan of reorganization by December 2002 and, if not, there can be no assurance that the existing debtor-in-possession lenders will agree to continue to provide debtor-in-possession financing. 38 The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company not be able to continue as a going concern. A plan of reorganization could materially change the amounts currently recorded in the consolidated financial statements. The consolidated financial statements do not give effect to any adjustments to the carrying value of assets or amounts and classifications of liabilities that might be necessary as a result of the Chapter 11 Cases. 39 3. ACCOUNTING DURING REORGANIZATION PROCEEDINGS The Company continues to apply generally accepted accounting principles in the preparation of its consolidated financial statements while in Chapter 11. However, in accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7 - "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" (SOP 90-7): 1) the consolidated financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business; 2) the Company's consolidated balance sheets segregate liabilities subject to compromise from liabilities not subject to compromise; and 3) where the underlying collateral in respect of certain debt is considered to be less than the debt obligation, the Company ceased accruing interest on those debts. Management believes that 29 of its hotels are significantly overleveraged in that the estimated fair value of these hotels does not exceed the outstanding debt on these hotels. Therefore, with the approval of the Bankruptcy Court, the Company ceased paying interest to the secured lenders of these properties from the date of the bankruptcy petition. With respect to the remaining 75 hotels that are in Chapter 11, management presently believes the value of these hotels exceeds the outstanding debt on these properties. Accordingly, with the approval of the Bankruptcy Court, the Company agreed to pay interest on these debts. However, while the Company is in Chapter 11, the value of these properties may be adversely affected by changes in the economy, changes in the hospitality industry, actions taken or that may be taken by the franchisors, and the Company's ability to obtain exit financing and achieve a consensual plan of reorganization. Furthermore, management believes that the significant terms of these debts could also be compromised as a result of the Chapter 11 Cases. Accordingly, management considers that all of its secured debt is subject to compromise and is classified as liabilities subject to compromise in the accompanying balance sheet at December 31, 2001. Liabilities subject to compromise Liabilities subject to compromise refers to known liabilities incurred prior to the commencement of the Chapter 11 Cases, including those considered by the Bankruptcy Court to be pre-petition claims. These liabilities consist primarily of amounts outstanding under long-term debt and also include accounts payable, accrued interest, and other accrued expenses. These amounts represent the Company's estimate of known or potential claims to be resolved in the Chapter 11 Cases. Such claims remain subject to future adjustments. Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy Court; (3) further development with respect to disputed claims; (4) proofs of claim; or (5) other events. Payment terms for these amounts will be established under a plan of reorganization. The principal categories of claims classified as liabilities subject to compromise in the Chapter 11 Cases as of December 31, 2001, are identified below: (amounts in thousands) Long-term debt and capital lease obligations $485,774 Senior subordinated Notes (including related accrued interest) 210,549 Minority interest - preferred redeemable securities (including related accrued interest) - CRESTS 197,218 Accounts payable 22,698 Accrued liabilities (including accrued interest of $1,027) 9,655 -------- $925,894 ========
Summary of Reorganization Items The results for the year ended December 31, 2001 include charges which relate to the reorganization process and the Chapter 11 Cases. The table below summarizes these reorganization charges (amounts in thousands): Write-off of deferred financing costs $ 21,517 -------- Other reorganization items: Legal and professional fees 3,179 Other 320 -------- 3,499 -------- $ 25,016 ========
40 4. STRATEGIC PLANS PRIOR TO CHAPTER 11 FILING At the end of 1999, the Company adopted strategic plans to reduce the size of the Company's non-core hotel portfolio and in 2000, adopted a strategic plan to reduce the level of overall debt. With regard to this strategic plan to reduce the size of the Company's non-core hotel portfolio and reduce the level of overall debt, the Company sold twenty-five hotel properties and four other assets between January 1, 2000 and December 31, 2001. The gross sales price of these twenty-nine properties was $285.3 million while the reduction of debt was $216.6 million. 5. PROPERTY AND EQUIPMENT At December 31, 2001 and 2000, property and equipment consisted of the following:
USEFUL LIVES (YEARS) 2001 2000 ------------------------------ (IN THOUSANDS) Land................................................................... -- $ 116,434 $ 127,749 Buildings and improvements............................................. 10-40 849,549 920,351 Furnishings and equipment.............................................. 3-10 190,081 212,936 ----------- ----------- 1,156,064 1,261,036 Less accumulated depreciation and amortization......................... (249,882) (206,599) Construction in progress............................................... 7,786 4,611 ---------- ----------- $ 913,968 $ 1,059,048 =========== ===========
Included in property and equipment at December 31, 2000 is $39.8 million (10 properties) related to properties identified as held for sale at December 31, 2000. As discussed in Note 4, the Company had previously adopted strategic plans to reduce the size of the Company's non-core hotel portfolio and reduce the level of overall debt of the Company. In this regard, in 1999 and 2000, the Company had identified certain properties as held for sale to meet these objectives. At December 31, 2001, no properties were identified as held for sale. All previously identified properties were either sold during 2001 (5 properties) or were no longer classified as held for sale (5 properties). With the filing of bankruptcy, the Company is no longer actively marketing any of its hotels for sale. With regard to the properties no longer classified as held for sale, the Company recorded additional depreciation expense totaling $4.8 million in 2001 and $1.6 million in 2000. During 2001, the Company sold six properties for gross sales price of $76.5 million. The gain on the sale was $24.0 million which arose mainly from one hotel (Westin William Penn). The Company has evaluated the recoverability of its long-lived assets in accordance with SFAS 121 as of December 31, 2001 and has recorded impairment losses for assets held for use, where the estimated future undiscounted cash flows were insufficient to recover the carrying value of those assets. However, as a result of the filing of the Chapter 11 Cases, the Company may ultimately sell or otherwise dispose of its hotel assets for amounts less than the carrying value of these assets and future actions by the Company, its creditors or the Bankruptcy Court could adversely impact the Company's ability to hold its assets for periods sufficient for it to recover the carrying value of its assets on an undiscounted cash flow basis. As a result, the Company could recognize impairment losses in future periods. Impairment of long-lived assets was $67.3 million in 2001, $60.7 million in 2000 and $38.0 million in 1999. The charge for the 2001 period was comprised of $6.6 million related to revised estimates of fair value for properties held for sale, $4.0 million related to one property which was identified as held for sale and also sold in 2001 and $69.0 million 41 relating to a charge to reduce the carrying value of certain of the Company's hotels held for future use, offset by a recapture of $12.3 million of impairment charges related to six hotels that were previously considered held for sale that were no longer being actively marketed for sale. Of the impairment charges in the 2001 period, $69.0 million of the impairment charges and the recapture of $8.5 million of previously recognized impairment reserves were recorded in the fourth quarter. In connection with its bankruptcy petition on December 20, 2001, the Company determined that 29 of its hotels were significantly overleveraged in that the estimated fair value of these hotels did not exceed the outstanding debt on these hotels. Therefore, with the approval of the Bankruptcy Court, the Company ceased paying interest to the secured lenders of these properties from the date of the bankruptcy petition. The Company also concluded that it no longer had the ability to hold these hotels for a period sufficient for their estimated future undiscounted cash flows to cover their carrying values. Therefore in accordance with the provisions of FAS 121, the Company determined that an impairment charge of $69 million was necessary to reduce the carrying value of these assets. In connection with the bankruptcy petition, the Company also ceased marketing for sale, four operating properties that were previously classified as held for sale. Since these assets were not considered impaired as the estimated future cash flows from the use of these properties exceeded their carrying values, the Company recaptured $8.5 million of impairment reserves previously recorded in 1999, 2000 and 2001. Impairment charges for 2000 comprised $11.3 million related to revised estimates of fair value for properties held for sale at December 31, 1999, $3.5 million related to one property held for use, $56.6 million related to the ten hotels sold to Sunstone Investors, LLC on August 31, 2000, net of a recapture of $10.7 million of impairment charges recorded in 1999 and 2000 as seven hotels previously considered held for sale as of December 31, 1999 were no longer being actively marketed for sale. The impairment charge for 1999 was $38.0 million, representing a reduction in the carrying value of hotels the Company had targeted for sale, pursuant to the Company's previous strategy to reduce the number of non-core hotels in its portfolio. The following unaudited pro forma results of operations for 2000 and 1999 are presented as if the Company had completed the sale of the ten hotels to Sunstone Investors LLC, discussed above, as of January 1, 1999. In management's opinion, all adjustments necessary to reflect the effect of this transaction have been made. These unaudited pro forma results of operations are not necessarily indicative of what the actual results of operations would have been for the years ended December 31, 2000 and 1999, nor do they purport to represent the results of operations for future periods. No pro forma balance sheet is presented as the effects of the transaction are reflected in the accompanying consolidated balance sheet as of December 31, 2000.
2000 1999 ------------------ (UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA) Total revenues.......................................................................... $ 543,310 $ 550,591 Net loss before extraordinary item...................................................... (51,465) (51,267) Net loss after extraordinary item....................................................... (51,465) (59,017) Net loss per common share, before extraordinary item, basic and diluted................. (1.83) (1.89) Net loss per common share, basic and diluted............................................ (1.83) (2.17)
Summary results of operations included in the Statement of Operations with respect to the properties identified as held for sale at December 31, 2000 are as follows (in thousands):
YEAR ENDED DECEMBER 31, 2000 Revenues ............................................................................. $ 24,198 ========= Loss before income taxes.............................................................. $ (3,787)(1) =========
- ------------------------ (1) Includes impairment charges of $8.8 million. 42 6. OTHER ACCRUED LIABILITIES At December 31, 2001 and 2000, other accrued liabilities consisted of the following:
2001 2000 ------------------ (IN THOUSANDS) Salaries and related costs..................................................... $ 13,105 $ 15,874 Property and sales taxes....................................................... 16,518 13,649 Professional fees.............................................................. 1,048 1,289 Other.......................................................................... 7,742 6,391 ----------- ----------- 38,413 37,203 Less amounts included in liabilities subject to compromise..................... (8,628) -- ----------- ----------- $ 29,785 $ 37,203 =========== ===========
7. OTHER LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS AND PREFERRED REDEEMABLE SECURITIES Long-term obligations consisted of the following at December 31:
2001 2000 -------- ------ (IN THOUSANDS) Mortgage notes payable with interest at LIBOR plus 5.75%. (See Senior Secured Loan Credit Facility description below) the notes are payable through 2005.......................................... $ 189,625 $ 195,219 Credit facilities with interest at LIBOR plus 2.75% maturing 2003. (See description of August 31, 2000 amendment below)............................. 108,652 108,652 Mortgage notes with an interest rate of 9.65% maturing 2002.................... 54,565 54,565 Mortgage notes with fixed rates ranging from 7.9% to 10.7% payable through 2010 113,651 139,346 Senior Subordinated Notes payable with interest at 12.25% due in 2009.......... 200,000 200,000 Revolving credit facility with interest at LIBOR plus 5.75%, maturing 2004..... 6,000 25,000 Other.......................................................................... 28,651 31,099 ----------- ----------- 701,144 753,881 Less current portion of long-term obligations.................................. (7,717) (79,843) Less obligations included in "liabilities subject to compromise"............... (685,775) -- ----------- ----------- $ 7,652 $ 674,038 ========== ===========
The Company has received debtor-in-possession financing of $25 million from a group of lenders led by Morgan Stanley Funding Inc. and Lehman Brothers Inc. The DIP facility along with the rights of the debtors to use the cash collateral of these lenders expires one year from the filing or the effective date of the reorganization plan, whichever is earlier. Under the DIP facility, the Company has the option to borrow at either base rates plus 2.5% or at LIBOR plus 3.5%. As of March 22, 2002, the Company had not borrowed from the facility but had issued one letter of credit totaling $750,000 against it. In addition, the Company believes that the underlying collateral on certain of its debt is less than the principal obligation outstanding. Therefore, in accordance with SOP 90-7, the Company has ceased accruing interest on these debts as well as the Senior Subordinated Notes and the CRESTS. Contractual interest not accrued at December 31, 2001 amounted to $1.3 million including interest on the Senior Subordinated Notes and the CRESTS. 43 Substantially, all the Company's property and equipment are pledged as collateral for long-term obligations of which approximately $497 million has been guaranteed by Lodgian, Inc. Certain of the mortgage notes are subject to a prepayment penalty if repaid prior to their maturity. In June 1998, the Company issued $175 million of CRESTS. The CRESTS bear interest at 7% and are convertible into shares of the Company's common stock at an initial conversion price of $21.42 per share. The sale of CRESTS generated $168.5 million in net proceeds, substantially, all of which were used to repay existing debt prior to maturity. Payment restrictions contained in the Company's Notes allowed the Company to defer the dividend payments on the CRESTS beginning June 30, 2000. Pursuant to the terms of the agreement, the Company has the right to defer the dividend payment for up to twenty quarters. The Company does not anticipate resumption of the quarterly dividend payment on the CRESTS in the near future. On July 23, 1999, the Company sold $200 million of 12.25% Senior Subordinated Notes due in 2009 (the "Notes"). In addition, the Company entered into a new, multi-tranche Senior Secured loan credit facility. The facility consisted of development loans with a maximum capacity of $75 million (the tranche A and C loans), a $240 million tranche B term loan and a $50 million revolving facility. The tranche A and C loans were to be used for hotel development projects. At December 31, 1999, $238.8 million was outstanding on the tranche B term loan and no amounts were outstanding from the tranche A and C portion of the loan credit facility. The tranche B loan, along with the proceeds from the Notes, were used to repay a substantial portion of the financing entered into to consummate the Merger and, in September 1999, a $132.5 million loan, part of the credit facilities. The Company was unable to deliver its 1999 annual audited and March 31, and June 30, 2000 quarterly unaudited financial statements to its Senior Secured loan facility lenders on a timely basis. The Company received a waiver for the late delivery of these financial statements and the time period for delivery of quarterly 2000 financial statements was extended. In addition, on July 31, 2000, the Company entered into an amendment to its Senior Secured loan credit facility which provided for a 0.5% increase in the interest rate, termination of the tranche A facility which reduced the maximum credit facility by $25 million and provided for additional amortization payment requirements for tranche B term loans of (i) $25 million on or prior to December 31, 2000, (ii) an additional $35 million on or prior to June 30, 2001 and (iii) an additional $40 million on or prior to December 31, 2001. Prior to the amendment, amortization payment requirements were effectively 1% per year of the outstanding tranche B term loans during that period. The amendment also modified various covenants and coverage ratios. The amendment provided for immediate access to the $25 million unused portion of the revolving credit facility and provided increased flexibility for the sale of hotel assets. The Company paid an amendment fee of approximately $1.4 million. The Company paid the $25 million required amortization payment due December 31, 2000, the $35 million required amortization payment due June 30, 2001, and $4 million of the $40 million due December 31, 2001. On August 31, 2000, in conjunction with the sale of nine hotels, principally located in the Western United States, the Company and the lenders amended the terms of the credit facilities. Under this amendment, two former credit facilities were amended into one new facility and the Company paid down approximately $106.2 million of the debt with proceeds from the sale, extended the maturity date to September 2003 after considering a one year option to extend and converted the remaining balance owed, approximately $108.7 million, to a floating rate facility. In addition, the Company paid approximately $4.3 million to "break" the interest rate lock agreement on $54 million related to this debt. With regard to the mortgage notes with an interest rate of 9%, on August 31, 2000 the Company sold one hotel, located in the western United States, securing this facility and used the proceeds to reduce principal, pay origination and extension fees of approximately $1.9 million, and exercised its option to extend the maturity date to November 2002 from November 2000. On May 15, 2001, the Company and the lenders of its Senior Secured Loan Credit Facility reached an agreement to amend that facility. Prior to the amendment, the Company would have been in violation of two financial covenant ratios based on its first quarter 2001 operating results. The amendment increased the interest rate spread (which was then LIBOR plus 4.25%) by 25 basis points in each month from August 2001 to February 2002 up to a maximum of LIBOR plus 6.00% until maturity. The amendment also provided that the interest rate spread would increase an additional 25 basis points up to a 44 maximum of LIBOR plus 6.00% if the Company's debt was downgraded by a rating agency subsequent to the amendment date (the downgrade occurred in May 2001). In addition, the interest rate spread would decrease 50 basis points for each aggregate $60.0 million of principal reductions made subsequent to the amendment date as long as the Company was in compliance with certain financial coverage ratios. The amendment also required additional amortization payments on the tranche B term loans of $7.5 million on April 30, 2002, June 30, 2002, September 30, 2002 and December 31, 2002, respectively. The amendment also modified various covenants and financial coverage ratios. The Company paid an amendment fee of $565,000 on the date of the amendment. In addition, on the amendment date, $25.0 million of the outstanding balance on the working capital revolver was converted to the tranche B term loan, thereby reducing the commitment on the working capital revolver to $25.0 million as of May 15, 2001. Based on its third quarter 2001 results, the Company was not in compliance with the financial covenants related to its Senior Secured Loan Credit Facility, on which, as of November 14, 2001 the Company had outstanding borrowings of $192.6 million. However, on November 13, 2001, the Company reached an agreement with the lenders of the facility with respect to the financial covenant violations, pursuant to which the senior lenders agreed to forbear from the exercise of their default-related remedies against the Company until December 31, 2001 (unless an additional event of default occurred earlier). The forbearance agreement also reduced the commitment on the working capital revolver from $25.0 million to $13.4 million leaving the Company $3.0 million of unused availability on the working capital revolver portion of the senior facility. The forbearance agreement also required that the remaining $3.0 million be used only to pay the interest in respect of the senior facility. The Company also did not make the remaining $36.0 million of required special amortization payments to its senior lenders due December 31, 2001. As of December 31, 2001, the Company had outstanding borrowings on the Senior Secured Loan Credit Facility of $195.6 million. In addition, the Company did not make the $12.3 million interest payment due January 15, 2002 to the holders of the Company's Senior Subordinated Notes. In addition, as a result of the events of default with respect to its Senior Secured Loan Facility, the Company's Senior Subordinated Notes and the CRESTS were also in default due to cross-default provisions in those agreements. On May 20, 2001, promissory notes of approximately $3.9 million secured by the pledge of 100% of the ownership interests of Macon Hotel Associates, L.L.C. ("MHA") were due. The Company owns a 60% controlling interest in MHA. MHA's sole asset is the Crowne Plaza Hotel located in Macon, Georgia. MHA did not make this payment on May 20, 2001. MHA is in discussions with the note holders with respect to the default. MHA has made significant progress in its negotiations with the note holders and hopes to have the default cured by the second quarter of 2002. During the first quarter of 2001, the Company recorded an impairment charge of $2.2 million to reduce the carrying value of the hotel to the outstanding debt balance, which includes the promissory notes discussed above and a $7.8 million first mortgage. Based on the estimated sales price of the property, which approximates the amount of the debt outstanding, there will not be any remaining net proceeds available for MHA. MHA was not included in the entities which filed for reorganization under Chapter 11. During the fourth quarter of 2001, the lenders of a $108.7 million credit facility with certain subsidiaries of the Company, notified the Company of a default under the loan agreement and called upon the Company to honor the guarantee it made in relation to this debt. On December 20, 2001, prior to the resolution of this matter, the Company filed for bankruptcy under Chapter 11. As a result of the Chapter 11 Cases, the Company is technically in default of its debt agreements with the exception of certain debt of the Company's joint ventures that were not included in the bankruptcy petition. All of the Company's pre-petition debt, with the exception of the debt of the joint ventures, are recorded in liabilities subject to compromise in the balance sheet as of December 31, 2001. The Company is subject to certain property maintenance and quality standard compliance requirements under its franchise agreements. The Company periodically receives notifications from its franchisors of events of noncompliance with such agreements and may continue to receive notifications if the liquidity and cash constraints of the Company limit its ability to comply with its franchise agreements. In the past, management has cured most cases of noncompliance within the applicable cure periods and the events of noncompliance did not result in events of default under the respective loan 45 agreements. However, in selected situations, as warranted, based on economic evaluations, management may elect to not comply with the franchisor requirements. In such situations, the Company will either select an alternative franchisor or operate the property independent of any franchisor. As a result of the Company's petition for bankruptcy, the Company is technically in default of its franchise agreements. However, due to the automatic stay of proceedings, the franchisors are prohibited from proceeding with certain actions absent approval from the Bankruptcy Courts. Were the automatic stay, in respect of these franchise agreements, to be lifted, this could negatively impact operating results and the value of the Company's hotels. As discussed in Note 4, the Company previously adopted strategic plans to reduce the size of the Company's non-core hotel portfolio and reduce the overall level of debt. With regard to these strategic plans, the Company sold twenty-five hotel properties and four other assets during 2000 and 2001. Gross sales price of these twenty-nine properties was $285.3 million while the reduction of debt was $216.6 million. The balance was used primarily to support capital expenditures related to major renovation projects and the construction of one new hotel, which was subsequently sold prior to completion. Notwithstanding the Chapter 11 Cases, original maturities of long-term obligations for each of the five years after December 31, 2001 and thereafter are as follows:
(IN THOUSANDS) 2002........................................................................... $ 142,564 2003........................................................................... 154,625 2004........................................................................... 51,911 2005........................................................................... 103,151 2006........................................................................... 4,554 Thereafter..................................................................... 244,339 ----------- $ 701,144 ===========
8. DERIVATIVE TRANSACTIONS On August 31, 2000, the Company paid $4.3 million to "break" the interest rate lock agreement on $54 million of debt related to its credit facilities. As of December 31, 2001 and 2000, the Company was not party to any derivative transactions. 9. INCOME TAXES Provision (benefit) for income taxes for the Company is as follows:
YEAR ENDED DECEMBER 31, 2001 2000 1999 CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL -------- -------- -------- -------- -------- -------- --------- --------- --------- (IN THOUSANDS) Federal............... $ -- $ -- $ -- $ -- $(28,187) $(28,187) $ -- $ (16,329) $ (16,329) State and local....... 2,829 -- 2,829 1,340 (1,876) (536) -- (3,765) (3,765) -------- -------- -------- -------- -------- -------- --------- --------- --------- $ 2,829 $ -- $ 2,829 $ 1,340 $(30,063) $(28,723) $ -- $ (20,094) $ (20,094) ======== ======== ======== ======== ======== ======== ========= ========= =========
The components of the cumulative effect of temporary differences in the deferred income tax (liability) and asset balances at December 31, 2001 and 2000 are as follows: 46
2001 2000 TOTAL CURRENT NON-CURRENT TOTAL CURRENT NON-CURRENT ----------- ----------- ----------- ----------- ------------ ----------- (IN THOUSANDS) Property and equipment.............. $ (36,208) $ -- $ (36,208) $ (65,659) $ -- $ (65,659) Net operating loss carryforward..... 94,471 -- 94,471 75,318 -- 75,318 Loan Costs.......................... 8,349 -- 8,349 -- -- -- Legal and workers' compensation reserves........................ 1,880 1,880 -- 3,096 1,984 1,112 AMT and FICA credit carryforwards... 2,245 -- 2,245 1,966 -- 1,966 Other operating accruals............ 2,586 2,586 -- 1,619 1,619 -- Miscellaneous other................. (304) -- (304) (268) -- (268) Total...................... 73,019 4,466 68,553 16,072 3,603 12,469 Less valuation allowance... (73,019) (4,466) (68,553) (16,072) (3,603) (12,469) ----------- ----------- ----------- ----------- ------------ ----------- -- $ -- $ -- $ -- $ -- $ -- =========== =========== =========== =========== =========== ===========
The difference between income taxes using the effective income tax rate and the federal income tax statutory rate of 34% is as follows:
YEAR ENDED DECEMBER 31, 2001 2000 1999 ----------- ----------- ----------- (IN THOUSANDS) Federal income tax (benefit) at statutory federal rate.............. $ (47,578) $ (39,670) $ (24,833) State income tax (benefits), net.................................... (6,717) (5,601) (2,485) Non-deductible items................................................ 177 476 7,224 Change in valuation allowance....................................... 56,947 16,072 -- ----------- ----------- ----------- $ 2,829 $ (28,723) $ (20,094) =========== =========== ===========
In 1999, non-deductible items consist primarily of the write-off of goodwill. The Company has established a valuation allowance of $73.0 million to reduce the net deferred tax assets to zero. Due to the financial condition of the Company, its continuing operating losses and the Chapter 11 Cases, the Company did not believe that it was more likely than not that its net deferred tax assets would be realized and thus provided a valuation allowance to fully reserve against such amounts. Of the $73.0 million, $56.9 and $16.1 million was generated in 2001 and 2000, respectively. At December 31, 2001, the Company has available net operating loss carry forwards of approximately $235,000,000 for federal income tax purposes, which expire in years 2004 through 2021. It is likely that under the plan of reorganization, substantial amounts of net operating loss carryforwards will be utilized relating to debt cancellations. The Company's ability to use these net operating loss carry forwards to offset future income is subject to other limitations, and may be subject to additional limitations in the future. Due to these limitations, a portion or all of these net operating loss carryforwards could expire unused. 10. RELATED PARTY TRANSACTIONS Robert Cole, a member of the Board of Directors was a minority shareholder of Impac Hotel Development ("IHD"), which provided acquisition and property development services to Impac for a development fee of four percent of the total project cost of each property acquired or developed. Impac agreed to terminate this agreement prior to the consummation of the Merger so that Impac and its subsidiaries would have no further obligations under the agreement after the Merger other than the payment of up to a four percent development fee (not to exceed $2.5 million in the aggregate) in the event Lodgian acquired or developed any of the hotels or properties identified in the Merger Agreement as Impac's acquisition and development pipeline. During 1999, the Company paid $1.0 million in connection with this arrangement. Of this amount, 47 Robert Cole received $225,000. No payments were made in 2001 or 2000 to IHD or Robert Cole under this agreement. The Company's obligation to make any future development fees was terminated in March 2001. Robert Cole, a member of the Board of Directors had been an 8% limited partner in the partnership that owns the Courtyard by Marriott in Tifton, Georgia since 1996. The Company previously managed this hotel in accordance with a management agreement, which provided that the Company be paid a base fee calculated as a percentage of gross revenues, an accounting services fee and an incentive management fee. The base fee was 3% of gross revenues and the incentive fee was a percentage of the amount by which gross operating profit exceeded a negotiated amount. The Company earned fees of $15,000, $71,400 and $69,300 during 2001, 2000, and 1999, respectively. The management agreement was terminated in March 2001. On December 15, 2000, the Company sold a partially constructed hotel located in Richmond, Virginia to an entity controlled by a shareholder who is a 10.9% beneficial owner of the Company's common stock. The Company received net proceeds of approximately $12.3 million from the sale and recorded a loss on the sale of approximately $0.5 million. In addition, the Company entered into a separate management contract with the purchaser to provide construction management oversight until completion of the project. Richard Cartoon, the Company's Executive Vice President and Chief Financial Officer, is a principal in a business that the Company retained in November 2001 to provide Richard Cartoon's services as Chief Financial Officer and other restructuring support and services. In addition to amounts paid for Richard Cartoon's services, the Company has been billed $220,000 for other support and services provided by associates of Richard Cartoon, LLC for the period October 4, 2001 to February 28, 2002. The Company expects to continue to utilize such support and services as needed through the restructuring process. Thomas Eppich, Chief Executive Officer between June 1, 2000 and June 15, 2001 was employed by Jay Alix and Associates, a business that the Company retained to provide financial and accounting assistance between June 1, 2000 and June 19, 2001. In addition to amounts paid for Mr. Eppich's services, the Company was billed $1,855,000 and $1,839,000 for such services for 2001 and 2000, respectively. 11. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
2001 2000 1999 Numerator: Loss before extraordinary item........................ $(142,764,000) $ (87,955,000) $ (52,943,000) Extraordinary item.................................... -- -- (7,750,000) ------------- ------------- ------------- Net loss........................................ $(142,764,000) $ (87,955,000) $ (60,693,000) ============= ============= ============= Denominator: Denominator for basic and diluted loss per share-- weighted-average shares............................ 28,350,000 28,186,000 27,222,000 ============= ============= ============= Basic and diluted loss per share: Loss before extraordinary item........................ $ (5.04) $ (3.12) $ (1.95) Extraordinary item.................................... -- -- (.28) ------------- ------------- ------------- Net loss........................................ $ (5.04) $ (3.12) $ (2.23) ============= ============= =============
The computation of diluted EPS as calculated above did not include shares associated with the assumed conversion of the CRESTS (8,169,935 shares) or stock options because their inclusion would have been antidilutive. 12. COMMITMENTS AND CONTINGENCIES 48 Sixteen of the Company's hotels are subject to long-term ground leases, parking and other leases expiring from 2002 through 2075 which provide for minimum payments as well as incentive rent payments. In addition, most of the Company's hotels have noncancellable operating leases, mainly for operating equipment. For the years ended December 31, 2001, 2000 and 1999, lease expense for the noncancellable ground, parking and other leases was approximately $3,683,000, $3,646,000 and $3,400,000 respectively. At December 31, 2001, the future minimum commitments for noncancellable ground, parking and other leases were as follows:
(IN THOUSANDS) 2002........................................................................... $ 3,337 2003........................................................................... 2,913 2004........................................................................... 2,337 2005........................................................................... 2,333 2006........................................................................... 2,299 Thereafter..................................................................... 67,575 ----------- $ 80,794 ===========
The Company has entered into license agreement with various hotel chains which require annual payments for license fees, reservation services and advertising fees. The license agreements generally have an original ten year term. The majority of the Company's license agreements have five to ten years remaining on the term. The licensors may require the Company to upgrade its facilities at any time to comply with the licensor's then current standards. Upon the expiration of the term of a license, the Company may apply for a license renewal. In connection with the renewal of a license, the licensor may require payment of a renewal fee, increase license, reservation and advertising fees, as well as substantial renovation of the facility. Costs incurred in connection with these agreements totaled approximately $28,584,000, $34,904,000 and $31,833,000 for the years ended December 31, 2001, 2000, and 1999, respectively. The license agreements are subject to cancellation in the event of a default, including the failure to operate the hotel in accordance with the quality standards and specification of the licensors. The Company believes that the loss of a license for any individual hotel would not have a material adverse effect on the Company's financial condition and results of operations. The Company believes it will be able to renew its current licenses or obtain replacements of a comparable quality. The Company has maintenance agreements, primarily on a one to three year basis, which resulted in expenses of approximately $4,509,000, $5,473,000 and $5,026,000, for the years ended December 31, 2001, 2000 and 1999, respectively. The Company is contingently liable in respect to four (4) irrevocable letters of credit totaling $8.2 million issued as guarantees to Zurich Insurance Company and Safeco Insurance Company of America. The letters of credit expire in the third and fourth quarters of 2002 but may require renewal beyond those dates. Included in the letters of credit of $8.2 million is $750,000 issued against the DIP facility. The Company is a party in litigation with Hospitality Restoration and Builders, Inc. ("HRB"), a general contractor hired to perform work on six of the Company's hotels. The litigation involves hotels in Texas, Illinois, and New York. In general, HRB claims that the Company breached contracts to renovate the hotels by not paying for work performed. The Company contends that it was over-billed by HRB and that a significant portion of the completed work was defective. In August 2001, the parties agreed to settle the litigation pending in Texas and Illinois. In exchange for mutual dismissals and full releases, the Company has paid HRB $750,000. With respect to the matter pending in the state of New York, HRB claims that it is owed $10.7 million. The Company asserted a counterclaim of $7 million and believes that it has valid defenses and counterclaims to the contractor's remaining claims. On October 13, 2000, Winegardner & Hammons, Inc. ("WH") filed an arbitration claim against the Company claiming breach of contract relating to a January 4, 1992 contract. WH claimed entitlement to profit participation relating to 49 the sale of certain hotel properties by an affiliate and predecessor of the Company. The Company settled this matter by paying WH $100,000. The Company and individual directors are parties to a lawsuit alleging violations of federal securities laws and breach of fiduciary duty in connection with certain investments made in affiliates of Impac Hotel Group, LLC, a predecessor of the Company. The Company believes that it has valid defenses to this matter. The Company is a party to other legal proceedings arising in the ordinary course of business, the impact of which would not, either individually or in the aggregate, in management's opinion, have a material adverse effect on its financial position or results of operations. 13. EMPLOYEE BENEFIT PLANS AND STOCK OPTION PLAN The Company makes contributions to several multi-employer pension plans for employees of various subsidiaries covered by collective bargaining agreements. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts. Certain withdrawal penalties may exist, the amount of which are not determinable at this time. The cost of such contributions during the years ended December 31, 2001, 2000 and 1999, was approximately $269,000, $503,000, $580,000 respectively. The Company adopted the 401(k) plan for the benefit of its non-union employees under which participating employees may elect to contribute up to 10% of their compensation. The Company may match an employee's elective contributions to the 401(k) plan, subject to certain conditions, with shares of the Company's common stock equal to up to 100% of the amount of such employee's elective contributions. These employer contributions vest at a rate of 20% per year beginning in the third year of employment. The cost of these contributions during the years ended December 31, 2001, 2000 and 1999 was $410,000, $505,000 and $549,000 respectively. The 401(k) plan does not require a contribution by the Company. The Company has also adopted the Lodgian, Inc. Stock Option Plan, as amended, (the "Option Plan"). In accordance with the Option Plan, options to acquire up to 3,250,000 shares of common stock may be granted to employees, directors, independent contractors and agents as determined by a committee appointed by the Board of Directors. Options may be granted at an exercise price not less than fair market value on the date of grant. These options will generally vest over five years. In addition, in June 2001 and October 2000, each non-employee director was awarded an option to acquire 5,000 shares of common stock at an exercise price equal to the fair market price on date of grant. Such options became exercisable upon date of grant and were granted under the Company's Non-Employee Directors' Stock Plan. On December 18, 1998, the Company re-priced its options. See discussion of impact of accounting pronouncement related to stock option repricings in Note 1. Presented below is a summary of the stock option plan activity for the years shown:
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE Balance, December 31, 1998................................................. 2,369,900 $5.80 Granted............................................................... 690,000 5.42 Exercised............................................................. (30,000) 4.00 Forfeited............................................................. (425,900) 5.72 ----------- Balance, December 31, 1999................................................. 2,604,000 4.14 Granted............................................................... 60,000 3.39 Exercised............................................................. -- --
50 Forfeited............................................................. (528,900) 5.98 ----------- Balance, December 31, 2000................................................. 2,135,100 $5.56 Granted............................................................... 2,500,000(1) 0.90 Exercised............................................................. -- -- Forfeited............................................................. (3,130,500)(1) $2.01 ----------- Balance, December 31, 2001................................................. 1,504,600 $5.44 ==========
- ------------ (1) Includes 2 million options granted to and forfeited by Thomas Arasi during 2001 and does not include 1,000,000 options granted to Mr. Hawthorne, which were never issued and which expired on the Company's bankruptcy filing. Options exercisable and the weighted average exercise price of these options at December 31, 2001, 2000 and 1999 were, 1,341,200 and $5.21, 1,664,100 and $5.45 and 1,118,420 and $5.58 respectively. The following table summarizes information for options outstanding and exercisable at December 31, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE RANGE OF EXERCISE PRICES NUMBER REMAINING LIFE EXERCISE PRICE NUMBER EXERCISE PRICE - ------------------------ ------ -------------- -------------- ------ -------------- (YEARS) $0.69 to 1.50................. 55,000 9 0.73 25,000 $ 0.74 1.51 to 2.50................. -- -- -- -- -- 2.51 to 3.50................. -- -- -- -- -- 3.51 to 4.50................. 307,500 2 yrs 4.00 301,500 3.99 4.51 to 5.50................. 415,000 7 yrs 5.00 406,000 5.00 5.51 to 6.50................. 712,100 5 yrs 6.14 602,700 6.14 6.51 to 7.13................. 15,000 7 yrs 6.88 6,000 6.88 ----------- ----------- $0.69 to 7.13................. 1,504,600 5 yrs $5.19 1,341,200 $5.21 =========== ===========
The income tax benefit, if any, associated with the exercise of stock options is credited to additional paid-in capital. Also at December 31, 2001, there were 112,500 Stock Appreciation Rights exercisable at $6.13 per right. Had compensation cost of the Company's Stock Option Plan been recognized under SFAS 123, based on the fair market value at grant dates, the Company's pro forma net loss and net loss per share would have been reflected as follows:
2001 2000 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA) Loss before extraordinary item: As reported.................................................... $ (142,764) $ (87,955) $ (52,943) Pro forma...................................................... (144,745) (91,048) (56,546) Net loss: As reported.................................................... (142,764) (87,955) (60,693) Pro forma...................................................... (144,745) (91,048) (64,296) Loss per common share: Loss before extraordinary item: As reported.................................................... $ (5.04) $ (3.12) $ (1.95) Pro forma...................................................... (5.11) (3.23) (2.08) Net loss: As reported.................................................... (5.04) (3.12) (2.23) Pro forma...................................................... (5.11) (3.23) (2.36)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for those options granted in 2001, 2000 and 1999: 51
2001 2000 1999 Expected life of option............................................. 5yrs 5 yrs 5 yrs Risk free interest rate............................................. 4.56% 6.7% 6.3% Expected volatility................................................. 81.60% 47.4% 45.3% Expected dividend yield............................................. -- -- --
The fair values of options granted during 2001, 2000 and 1999 are as follows:
2001 2000 1999 Weighted average fair value of options granted...................... $ 0.50 $ 1.70 $ 2.61 Total number of options granted (in thousands)...................... 55(1) 60 690 Total fair value of all options granted (in thousands).............. $27.50 $ 102.1 $ 1,802.1
- ------------ (1) Amount is net of forfeitures. 14. SIGNIFICANT FOURTH QUARTER EVENTS 2001 As more fully discussed in Note 3, on December 20, 2001, the Company filed for bankruptcy under Chapter 11. In connection with its bankruptcy petition, the Company determined that 29 of its hotels were significantly overleveraged. As a result, the Company determined that it no longer controlled the ability to hold these assets for a period sufficient for the estimated future undiscounted cash flows on the use of these properties to cover the carrying value of those assets. Therefore, the Company recorded an impairment charge of $69.0 million to reduce the carrying value of those hotels to the outstanding debt on those hotels. 1999 During the fourth quarter of 1999, the Company initiated an internal review of its accounting records. As discussed below, the Company experienced significant difficulty in the integration and conversion of information and accounting systems subsequent to the Merger. In addition, the Company determined that a significant number of reconciliations involving cash, accounts receivable, fixed assets, accounts payable, payroll and other accounts had not been completed during 1999. As a result of these systems and reconciliation issues, the Company experienced a significant delay in accurately preparing its 1999 annual financial statements. Certain charges were recorded in the fourth quarter of 1999 after the account reconciliation process was completed in 2000. Also during the fourth quarter of 1999, the Company adopted a strategy to reduce the number of its non-core hotel portfolio. In connection therewith, the Company identified certain hotel assets for sale and reduced the carrying value of these assets to estimated fair value, net of estimated selling costs. Further, based on asset impairment indicators and market capitalization for the Company's common stock, the Company wrote off its goodwill in accordance with the market value method of accounting for impairment of goodwill arising from the Merger. 52 The charges and adjustments described in the preceding paragraphs had a material effect on the Company's financial statements for the year ended December 31, 1999. The following is a summary of these charges and adjustments:
(IN THOUSANDS) Impairment of long-lived assets......................................................... $ 37,977 Write-off of goodwill................................................................... 20,748 Other expenses (included in general, administrative and other operating expenses in the statement of operations)........................................................... 12,470 Severance............................................................................... 500
Asset Impairment. In connection with the adoption of a strategy to reduce its non-core hotel portfolio, the Company identified 26 hotels which were designated held for sale. In accordance with the requirements of SFAS 121 the Company had recorded a non-cash charge of $38.0 million to reduce the carrying value of these assets to estimated fair value, net of estimated selling costs. For this purpose fair value was determined to be the amount a willing buyer would pay a willing seller for the individual assets in a current transaction that is other than a forced or liquidation sale. Goodwill. The Company initially recorded approximately $11.0 million of goodwill in connection with the Merger based on its preliminary allocation of the purchase price of Impac. During 1999, the Company revised and finalized its preliminary allocation, resulting in (among other adjustments) a net increase of $9.7 million to the preliminary estimate of goodwill arising from the Merger. In addition, since the Company did not have goodwill prior to the Merger, it had not previously adopted an accounting policy for measuring impairment of goodwill prior to the Merger. The Company selected the market value approach to measuring goodwill. Based on asset impairment indicators and market capitalization for the Company's common stock, the Company selected the market value method of accounting for goodwill and recorded a non-cash charge of $20.7 million to write-off the adjusted balance of goodwill. Included in general, administrative and other operating expenses in the statement of operations are $12.5 million of unusual expenses as described following: Accounting, Systems and Merger Integration. During the fourth quarter, the Company incurred substantial incremental fees and expenses primarily related to the final phase of integration of accounting systems from legacy systems used by Servico and Impac to the financial systems used by Lodgian. The total amount either incurred or accrued at December 31, 1999, including severance and a significant provision for increased professional fees, approximated $6.4 million. This amount also includes expenses associated with ensuring compliance in the "Y2K" matter. Litigation Costs. At December 31, 1999, the Company accrued litigation costs to be incurred related to several legal matters. Additionally, the Company incurred other litigation settlement charges during 1999. The aggregate litigation costs either incurred or accrued for these matters aggregated approximately $2.7 million for 1999. Audit Matters. During the fourth quarter an unclaimed property audit was initiated by the State of Florida. Additionally, several audits of the Company's compliance with ERISA requirements were in various stages of completion. The provision recorded in the fourth quarter for these and other audit matters was approximately $1.3 million. Other. Other expenses, including significant payments to terminate the franchise agreements on two hotels, were approximately $2.1 million. The Company, after consultation with its prior independent auditors, concluded that its internal controls for the preparation of interim financial information did not provide an adequate basis for its prior independent auditors to complete reviews of the quarterly financial data for the quarters during 1999. The Company believes that certain charges that were recorded in the fourth quarter of 1999 may relate to individual prior 1999 quarters; however the Company does not have sufficient information to identify all specific charges attributable to prior 1999 quarters. 53 15. SEVERANCE AND RESTRUCTURING Severance and restructuring charges were $2.3 million in 2001 and $1.5 million in 2000. The charge for 2001 related principally to senior level management changes during 2001. In addition, during 2001, the Company, in an effort to reduce expenses, instituted a plan to reduce hotel level employees and to eliminate certain positions at the corporate office. As part of this plan, the equivalent of over 1,600 full time employees were expected to be terminated at the hotels while 47 employees were terminated at the Corporate office. Approximately 1,800 full time equivalents were terminated under the plan. In 2001, the Company recognized a charge of approximately $0.8 million to implement this plan. All of this charge related to salary and benefits of the terminated employees. As of December 31, 2001, all but $83,000 had been paid. The corporate component of this charge, $0.8 million for the year is reflected in severance and restructuring expenses on the Statement of Operations while the hotel level component is reflected in direct operating expenses and in general, administrative and other expenses. The 2000 charges related to a plan instituted in June 2000 to close four of the Company's six regional offices, close the Company's reservation center located in Baton Rouge, Louisiana and eliminate certain positions in the corporate office. Approximately 65 employees were terminated in this restructuring. The Company recognized a charge of approximately $1.5 million to implement this plan. Of the $1.5 million charge, approximately $1.3 million was related to salary and benefits of the terminated employees and $.2 million related to the costs of closing the physical regional offices and the reservation center. These costs were paid in 2000. In connection with the Merger, Servico incurred approximately $3.4 million of expenses in 1998 primarily associated with the closing and relocation of Servico's corporate headquarters and termination and relocation of certain Servico employees. Severance expenses in 1999 were $0.5 million. On February 9, 2001, Mr. Cole and the Company entered into a Separation Agreement. On this date, Mr. Cole, with the Company's consent, resigned his position as President and Chief Executive Officer and continued as a non-officer employee through March 2, 2001. Mr. Cole received a severance payment of $750,000 in full settlement of all amounts due Mr. Cole by reason of the termination of his employment agreement. During the period March 3, 2001 to March 31, 2002, Mr. Cole will provide transition assistance and strategic and financial advisory services to Lodgian. Mr. Cole received $750,000 for his consulting services. 16. SHAREHOLDERS RIGHTS PLAN On March 30, 1999, the board of directors adopted a Shareholder Rights Plan and declared one Right on each outstanding share of the Company's common stock. The dividend was paid on April 19, 1999 to stockholders of record on April 14, 1999. Initially the Rights will trade with the common stock of the Company and will not be exercisable. The Right will separate from the common stock and become exercisable upon the occurrence of events typical of shareholder rights plans. In general, such separation will occur when any person or group of affiliated persons acquire 15% or more of the Company's common stock. Thereafter, separate Right Certificates will be distributed and each Right will entitle its holder to purchase one-hundredth of a share of the Company's Participating Preferred Stock for an exercise price of $25. Each one-hundredth of a share of Preferred Stock has economic and voting terms equivalent to those of one share of the Company's common stock. 17. SUPPLEMENTAL GUARANTOR INFORMATION In connection with the Company's sale of Notes, certain of the Company's subsidiaries (the "Subsidiary Guarantors") have guaranteed the Company's obligations to pay principal and interest with respect to the Notes. Each Subsidiary Guarantor is wholly-owned and management has determined that separate financial statements for the Subsidiary Guarantors are not material to investors. The subsidiaries of the Company that are not Subsidiary Guarantors are referred to in this note as the "Non-Guarantor Subsidiaries." As discussed in Note 14 during the fourth quarter of 1999, the Company recorded charges to the respective Parent, Subsidiary Guarantors and Non-Guarantor Subsidiaries financial statements. However, net charges of $580,000 were recorded at Lodgian's Management Company, which is part of the Non-Guarantor Subsidiaries financial statements because the Company does not have sufficient information to allocate these net charges to specific subsidiaries. The Company considers these net amounts to be immaterial to the financial statements herein. 54 The following supplemental consolidating financial statements present balance sheets as of December 31, 2001 and 2000 and statements of operations and cash flows for the years ended December 31, 2001, 2000 and 1999. In the consolidating financial statements, Lodgian, Inc. (the "Parent") accounts for its investments in wholly-owned subsidiaries using the equity method. 55 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2001
SUBSIDIARY NON-GUARANTOR TOTAL PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- --------- ------------ ------------- ------------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents ................... $ 6 $ 6,550 $ 7,451 $ -- $ 14,007 Cash, restricted ............................ -- -- 3,218 -- 3,218 Accounts receivable, net of allowances ...... -- 5,921 6,568 -- 12,489 Inventories ................................. -- 3,320 3,903 -- 7,223 Prepaid expenses and other current assets ... -- 143 6,141 -- 6,284 --------- --------- --------- --------- --------- Total current assets ................. 6 15,934 27,281 -- 43,221 Property and equipment, net ...................... -- 532,163 381,805 -- 913,968 Deposits for capital expenditures ................ -- 91 15,722 -- 15,813 Investment in consolidated entities .............. (361,752) -- -- 361,752 -- Due from (to) affiliates ......................... 556,300 (247,346) (308,954) -- -- Other assets, net ................................ -- 1,122 1,238 -- 2,360 --------- --------- --------- --------- --------- $ 194,554 $ 301,964 $ 117,092 $ 361,752 $ 975,362 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Liabilities Not Subject to Compromise: Current liabilities: Accounts payable ........................... $- $ 280 $ 2,426 $ -- $ 2,706 Accrued interest ........................... -- -- 1,192 -- 1,192 Other accrued liabilities .................. -- 4,837 24,948 -- 29,785 Advance deposits ........................... -- 896 875 -- 1,771 Current portion of long-term debt and capital lease obligations ............... -- -- 7,717 -- 7,717 --------- --------- --------- --------- --------- Total current liabilities ............ -- 6,013 37,158 -- 43,171 Other long-term debt and capital lease obligations ........................... -- -- 7,652 -- 7,652 Liabilities Subject to Compromise ................ 199,256 428,528 298,110 -- 925,894 Minority interests - other ....................... -- -- 5,326 -- 5,326 Commitments and contingencies Stockholders' (deficit) equity: Common stock .............................. 284 33 448 (481) 284 Additional paid-in capital ................ 263,320 22,619 (46,924) 24,305 263,320 Accumulated deficit ....................... (268,306) (153,250) (184,678) 337,928 (268,306) Accumulated other comprehensive loss ...... -- (1,979) -- -- (1,979) --------- --------- --------- --------- --------- Total stockholders' (deficit) equity. (4,702) (132,577) (231,154) 361,752 (6,681) --------- --------- --------- --------- --------- $ 194,554 $ 301,964 $ 117,092 $ 361,752 $ 975,362 ========= ========= ========= ========= =========
56 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS December 31, 2000
SUBSIDIARY NON-GUARANTOR TOTAL PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- ---------- ------------- ------------ ----------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents $ 6 $ 20,653 $ 343 $ -- $ 21,002 Cash, restricted -- -- 2,237 -- 2,237 Accounts receivable, net of allowances -- 8,031 12,593 -- 20,624 Inventories -- 3,609 4,196 -- 7,805 Prepaid expenses and other current assets -- 110 5,548 -- 5,658 --------- --------- --------- ----------- ----------- Total current assets 6 32,403 24,917 -- 57,326 Property and equipment, net -- 553,941 505,107 -- 1,059,048 Deposits for capital expenditures -- 917 13,088 -- 14,005 Investment in consolidated entities (210,629) -- -- 210,629 -- Due from (to) affiliates 530,018 (231,804) (298,214) -- -- Other assets, net 5,052 16,501 8,412 -- 29,965 --------- --------- --------- ----------- ----------- $ 324,447 $ 371,958 $ 253,310 $ 210,629 $ 1,160,344 ========= ========= ========= =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ -- $ 9,107 $ 15,981 $ -- $ 25,088 Accrued interest -- 15,200 1,595 -- 16,795 Other accrued liabilities -- 9,095 28,108 -- 37,203 Advance deposits -- 855 999 -- 1,854 Current portion of long-term obligations -- 67,190 12,653 -- 79,843 --------- --------- --------- ----------- ----------- Total current liabilities -- 101,447 59,336 -- 160,783 Long-term obligations, less current portion 2,038 355,185 316,815 -- 674,038 Deferred income taxes -- -- -- -- -- Minority interests: Preferred redeemable securities (including related accrued interest) 184,349 -- -- -- 184,349 Other -- -- 4,294 -- 4,294 --------- --------- --------- ----------- ----------- Total liabilities 186,387 456,632 380,445 -- 1,023,464 --------- --------- --------- ----------- ----------- Commitments and contingencies -- -- -- -- -- Stockholders' equity: Common stock 282 33 446 (479) 282 Additional paid-in capital 263,320 22,619 (46,924) 24,305 263,320 Accumulated deficit (125,542) (106,146) (80,657) 186,803 (125,542) Accumulated other comprehensive loss -- (1,180) -- -- (1,180) --------- --------- --------- ----------- ----------- Total stockholders' equity (deficit) 138,060 (84,674) (127,135) 210,629 136,880 --------- --------- --------- ----------- ----------- $ 324,447 $ 371,958 $ 253,310 $ 210,629 $ 1,160,344 ========= ========= ========= =========== ===========
57 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2001
SUBSIDIARY NON-GUARANTOR TOTAL PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- --------- --------- --------- --------- (IN THOUSANDS) Revenues: Rooms ....................................... $ -- $ 160,698 $ 168,154 $ -- $ 328,852 Food and beverage ........................... -- 48,962 49,612 -- 98,574 Other ....................................... -- 9,600 10,530 -- 20,130 --------- --------- --------- --------- --------- Total revenue ................................. -- 219,260 228,296 -- 447,556 --------- --------- --------- --------- --------- Operating expenses: Direct: Rooms ..................................... -- 44,645 46,770 -- 91,415 Food and beverage ......................... -- 35,114 35,551 -- 70,665 Other ..................................... -- 5,962 6,240 -- 12,202 General, administrative and other ............. -- 84,585 107,941 -- 192,526 Depreciation and amortization ................. -- 30,630 31,915 -- 62,545 Impairment of long-lived assets ............... -- (5,022) 72,362 -- 67,340 Severance and restructuring expenses ......... -- -- 2,309 -- 2,309 --------- --------- --------- --------- --------- Total operating expenses .......... -- 195,914 303,088 -- 499,002 --------- --------- --------- --------- --------- -- 23,346 (74,792) -- (51,446) Other income (expenses): Interest income and other ................... -- -- 709 -- 709 Interest expense ............................ -- (48,089) (27,237) -- (75,326) (Loss) gain on asset dispositions ........... -- (576) 24,551 -- 23,975 Equity in losses of consolidated subsidiaries (139,935) -- -- 139,935 -- Minority interests: Preferred redeemable securities ............. -- -- (12,869) -- (12,869) Other ....................................... -- (152) 190 -- 38 --------- --------- --------- --------- --------- Loss before income taxes and reorganization items ........................ (139,935) (25,471) (89,448) 139,935 (114,919) Reorganization items: ......................... -- Write-off of deferred financing costs ........ -- (13,143) (8,374) -- (21,517) Other reorganization items ................... -- -- (3,499) -- (3,499) --------- --------- --------- --------- --------- Loss before income taxes ..................... (139,935) (38,614) (101,321) 139,935 (139,935) Provision for income taxes ................... (2,829) (129) (2,700) 2,829 (2,829) --------- --------- --------- --------- --------- Net loss ...................................... $(142,764) $ (38,743) $(104,021) $ 142,764 $(142,764) ========= ========= ========= ========= =========
58 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2000
SUBSIDIARY NON-GUARANTOR TOTAL PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- ---------- ------------- ------------ ------------ (IN THOUSANDS) Revenues: Rooms ........................................ $ -- $ 189,963 $ 232,512 $ -- $ 422,475 Food and beverage ............................ -- 56,898 74,435 -- 131,333 Other ........................................ -- 10,904 16,185 -- 27,089 --------- --------- --------- --------- --------- -- 257,765 323,132 -- 580,897 Operating expenses: Direct: Rooms ...................................... -- 54,366 64,793 -- 119,159 Food and beverage .......................... -- 41,175 53,775 -- 94,950 Other ...................................... -- 7,634 9,195 -- 16,829 General, administrative and other ............ -- 93,223 130,009 -- 223,232 Depreciation and amortization ................ -- 26,530 38,264 -- 64,794 Impairment of long-lived assets .............. -- 3,576 57,112 -- 60,688 Write-off of goodwill ........................ -- -- -- -- -- Severance and restructuring expenses ......... -- -- 1,502 -- 1,502 --------- --------- --------- --------- --------- Total operating expenses ............... -- 226,504 354,650 -- 581,154 --------- --------- --------- --------- --------- -- 31,261 (31,518) -- (257) Other income (expenses): Interest income and other .................... -- -- 1,458 -- 1,458 Interest expense ............................. -- (56,308) (40,998) -- (97,306) Interest hedge break fee ..................... -- (4,294) -- (4,294) Acquisition termination fees ................. -- -- (3,500) -- (3,500) Gain (loss) on asset dispositions ............ -- 459 (161) -- 298 Equity in loss of consolidated subsidiaries .. (116,678) -- -- 116,678 -- Minority interests: Preferred redeemable securities .............. -- -- (12,412) -- (12,412) Other ........................................ -- -- (665) -- (665) --------- --------- --------- --------- --------- Loss before income taxes ........................ (116,678) (24,588) (92,090) 116,678 (116,678) Benefit for income taxes ........................ (28,723) (8,360) (20,363) 28,723 (28,723) --------- --------- --------- --------- --------- Net loss ................................. $ (87,955) $ (16,228) $ (71,727) $ 87,955 $ (87,955) ========= ========= ========= ========= =========
59 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1999
SUBSIDIARY NON-GUARANTOR TOTAL PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------ ---------- ------------ ------------ ------------ (IN THOUSANDS) Revenues: Rooms ........................................ $ -- $ 195,863 $ 228,667 $ -- $ 424,530 Food and beverage ............................ -- 61,353 78,121 -- 139,474 Other ........................................ -- 12,501 15,915 -- 28,416 --------- --------- --------- --------- --------- -- 269,717 322,703 -- 592,420 Operating expenses: Direct: Rooms ...................................... -- 52,839 61,751 -- 114,590 Food and beverage .......................... -- 44,260 57,785 -- 102,045 Other ...................................... -- 8,351 8,961 -- 17,312 General, administrative and other ............ -- 96,128 127,728 -- 223,856 Depreciation and amortization ................ -- 25,560 33,757 -- 59,317 Impairment of long-lived assets .............. -- 26,428 11,549 -- 37,977 Write-off of goodwill ........................ -- -- 20,748 -- 20,748 Severance and restructuring expenses ......... -- -- 500 -- 500 --------- --------- --------- --------- --------- Total operating expenses ............... -- 253,566 322,779 -- 576,345 --------- --------- --------- --------- --------- -- 16,151 (76) -- 16,075 Other income (expenses): Interest income and other .................... -- -- 1,579 -- 1,579 Interest expense ............................. -- (36,939) (40,470) -- (77,409) Gain on asset dispositions ................... -- -- 1,242 -- 1,242 Equity in loss of consolidated subsidiaries .. (73,037) -- -- 73,037 -- Minority interests: Preferred redeemable securities .............. -- -- (13,224) -- (13,224) Other ........................................ -- -- (1,300) -- (1,300) --------- --------- --------- --------- --------- Loss before income taxes and extraordinary Item ......................................... (73,037) (20,788) (52,249) 73,037 (73,037) Benefit for income taxes ........................ 20,094 8,066 12,028 (20,094) 20,094 --------- --------- --------- --------- --------- Loss before extraordinary item .................. (52,943) (12,722) (40,221) 52,943 (52,943) Extraordinary item, net of tax .................. (7,750) (6,543) (1,207) 7,750 (7,750) --------- --------- --------- --------- --------- Net loss ............................... $ (60,693) $ (19,265) $ (41,428) $ 60,693 $ (60,693) ========= ========= ========= ========= =========
60 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 2001
PARENT AND SUBSIDIARY NON-GUARANTOR TOTAL ELIMINATIONS GUARANTORS SUBSIDIARIES CONSOLIDATED ------------ ---------- ------------- ------------ (IN THOUSANDS) Operating activities: Net loss ...................................................... $ -- $ (38,743) $(104,021) $(142,764) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization ................................ -- 30,630 31,915 62,545 Impairment of long-lived assets .............................. -- (5,022) 72,362 67,340 Minority interests ........................................... 12,831 152 (152) 12,831 401 (k) plan contributions ................................... 2 0 2 Loss (gain) on sale of assets ................................ -- 576 (24,551) (23,975) Write-offs and amortization of deferred financing costs ...... 5,052 15,804 5,417 26,273 Other ........................................................ 38 (3,214) 3,737 561 Changes in operating assets and liabilities: Accounts receivable .......................................... -- 2,110 6,025 8,135 Inventories .................................................. -- 289 293 582 Prepaid expenses and other assets ............................ -- (33) (1,574) (1,607) Accounts payable ............................................. -- 3,824 (1,547) 2,277 Accrued liabilities .......................................... -- (1,682) (1,136) (2,818) Advance deposits ............................................. -- 41 (124) (83) -------- --------- --------- --------- Net cash provided by (used in) operating activities ........... 17,923 4,732 (13,356) 9,299 -------- --------- --------- --------- Investing activities: Capital improvements, net .................................... -- (13,999) (14,845) (28,844) Proceeds from sale of assets, net ............................ -- 12,181 55,729 67,910 Net withdrawals (deposits) for capital expenditures ......... -- 826 (2,634) (1,808) --------- --------- Net cash (used in) provided by investing activities ......... -- (992) 38,250 37,258 --------- --------- Financing activities: Proceeds from borrowings on working capital revolver ......... -- 21,000 -- 21,000 Proceeds (paid to) received from related parties ............. (17,923) 7,181 10,742 -- Principal payments on long-term obligations .................. -- (30,426) (28,528) (58,954) Principal payments on working capital revolver ............... -- (15,000) -- (15,000) Payments of deferred loan costs .............................. -- (598) -- (598) -------- --------- --------- --------- Net cash used in financing activities ...................... (17,923) (17,843) (17,786) (53,552) -------- --------- --------- --------- Net (decrease) increase in cash and cash equivalents ........... -- (14,103) 7,108 (6,995) Cash and cash equivalents at beginning of period ............... 6 20,653 343 21,002 -------- --------- --------- --------- Cash and cash equivalents at end of period ..................... $ 6 $ 6,550 $ 7,451 $ 14,007 ======== ========= ========= =========
61 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 2000
PARENT AND SUBSIDIARY NON-GUARANTOR TOTAL ELIMINATIONS GUARANTORS SUBSIDIARIES CONSOLIDATED ------------ ---------- ------------ ------------ (IN THOUSANDS) Operating activities: Net loss ..................................................... $ -- $(16,228) $ (71,727) $ (87,955) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization .............................. -- 26,530 38,264 64,794 Impairment of long-lived assets ............................ -- 3,576 57,112 60,688 Deferred income tax benefits ............................... (30,063) -- -- (30,063) Minority interests--other .................................. -- -- 10,014 10,014 401(k) plan contributions .................................. 505 -- -- 505 Compensation in stock issued to directors .................. 56 -- -- 56 Equity in income of unconsolidated entities ................ (84) -- -- (84) (Gain) loss on sale of assets .............................. -- (459) 161 (298) Amortization of deferred loan fees ......................... -- 3,272 2,382 5,654 Other ...................................................... 457 (403) (3,574) (3,520) Changes in operating assets and liabilities Accounts receivable ...................................... -- 226 5,670 5,896 Inventories .............................................. -- 507 878 1,385 Prepaids and other assets................................. (496) (46) 1,555 1,013 Accounts payable ......................................... -- (2,182) (1,317) (3,499) Accrued liabilities ...................................... -- 6,303 (8,007) (1,704) Advance deposits ......................................... -- (233) (297) (530) -------- -------- --------- --------- Net cash (used in) provided by operating activities ........................................... (29,625) 20,863 31,114 22,352 Investing activities: Capital improvements, net .................................... -- (50,123) (28,593) (78,716) Proceeds from sale of assets and withdrawals (deposits) for capital expenditures ........................ -- 74,814 128,525 203,339 -------- -------- --------- --------- Net cash provided by investing activities .............. -- 24,691 99,932 124,623 Financing activities: Proceeds from issuance of long-term obligations .............. -- 30,000 2,326 32,326 Proceeds received from (paid to) related parties ............. 29,572 (14,653) (14,919) -- Principal payments of long-term obligations .................. -- (48,758) (120,110) (168,868) Payments of deferred loan costs .............................. -- (1,400) (1,900) (3,300) Distributions to minority interests .......................... -- -- (775) (775) -------- -------- --------- --------- Net cash provided by (used in) financing activities ........................................... 29,572 (34,811) (135,378) (140,617) -------- -------- --------- --------- Net (decrease) increase in cash and cash equivalents ............ (53) 10,743 (4,332) 6,358 Cash and cash equivalents at beginning of period ................ 59 9,910 4,675 14,644 -------- -------- --------- --------- Cash and cash equivalents at end of period ...................... $ 6 $ 20,653 $ 343 $ 21,002 ======== ======== ========= =========
62 LODGIAN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LODGIAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 1999
PARENT AND SUBSIDIARY NON-GUARANTOR TOTAL ELIMINATIONS GUARANTORS SUBSIDIARIES CONSOLIDATED ------------ ---------- ------------- ------------ (IN THOUSANDS) Operating activities: Net loss .................................................... $ -- $ (19,265) $(41,428) $ (60,693) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization ............................. -- 25,560 33,757 59,317 Impairment of long-lived assets ........................... -- 26,428 11,549 37,977 Write-off of goodwill ..................................... -- -- 20,748 20,748 Loss on extinguishment of indebtedness .................... -- -- 12,664 12,664 Deferred income tax benefits .............................. (25,008) -- -- (25,008) Minority interests--other ................................. -- -- 1,300 1,300 401(k) plan contributions ................................. 549 -- -- 549 Compensation in stock issued to directors ................. 98 -- -- 98 Equity in income of unconsolidated entities ............... -- -- (278) (278) Gain on sale of assets .................................... -- -- (1,242) (1,242) Amortization of deferred loan fees ........................ -- 4,346 2,897 7,243 Changes in operating assets and liabilities: Accounts receivable ..................................... -- (978) (44) (1,022) Inventories ............................................. -- (1,074) 1,147 73 Prepaid expenses and other assets ....................... (84) 30,671 (125) 30,462 Accounts payable ........................................ (132) (19,349) (3,440) (22,921) Accrued liabilities ..................................... -- 6,238 3,101 9,339 Advance deposits ........................................ -- (950) (465) (1,415) -------- --------- -------- --------- Net cash (used in) provided by operating activities ............................. (24,577) 51,627 40,141 67,191 Investing activities: Acquisitions of property and equipment ...................... -- -- (1,929) (1,929) Capital improvements, net ................................... -- (101,768) (17,157) (118,925) Purchase of minority interests .............................. -- -- (10,200) (10,200) Proceeds from sale of assets and withdrawals (deposits) for capital expenditures ....................... -- (551) 40,648 40,097 -------- --------- -------- --------- Net cash (used in) provided by investing activities .......................................... -- (102,319) 11,362 (90,957) Financing activities: Proceeds from issuance of long-term obligations ............. -- 452,600 34,921 487,521 Proceeds from issuance of common stock ...................... 120 -- -- 120 Proceeds received from (paid to) related parties ............ 26,901 34,234 (61,135) -- Principal payments of long-term obligations ................. (4,033) (416,010) (28,177) (448,220) Payments of deferred loan costs ............................. -- (17,362) (1,117) (18,479) Distributions to minority interests ......................... -- -- (1,717) (1,717) -------- --------- -------- --------- Net cash provided by (used in) financing activities .......................................... 22,988 53,462 (57,225) 19,225 -------- --------- -------- --------- Net (decrease) increase in cash and cash equivalents ........... (1,589) 2,770 (5,722) (4,541) Cash and cash equivalents at beginning of period ............... 1,648 7,140 10,397 19,185 -------- --------- -------- --------- Cash and cash equivalents at end of period ..................... $ 59 $ 9,910 $ 4,675 $ 14,644 ======== ========= ======== =========
63 18. SELECTED QUARTERLY FINANCIAL DATA, UNAUDITED In the opinion of management, the 1999 internal control weaknesses discussed in Note 14 existed during the first and second quarters of 2000 and to a lesser extent in the third quarter of 2000. These internal control weaknesses caused a significant delay in preparing the Company's Form 10-Q's. The Company's March 31, 2000 and June 30, 2000 Form 10-Q's were filed on December 15, 2000 and the September 30, 2000 Form 10-Q was filed January 10, 2001. The Company has committed substantial resources to mitigate the previously identified control weaknesses including contracting with outside consulting accountants to ensure the Company has the corporate financial personnel needed to provide reasonable assurances that it can comply with the record keeping and internal control requirements applicable to SEC registrants. Management believes these efforts have enabled the Company to produce reliable interim and annual financial statements since the end of 2000. The Company implemented a plan that enabled it to timely comply with the financial statement reporting requirements applicable to SEC registrants beginning with its 2000 Annual Report on Form 10-K and, in management's opinion, has substantially developed and implemented an adequate control environment as of this date. As part of this plan, during the third and fourth quarters of 2000, the Company implemented the following action steps: (i) developed and implemented numerous new controls and policies, (ii) implemented a process to insure that material transactions are recorded on a timely basis, (iii) implemented an account closing process so that all material accounts are reconciled and reviewed on a timely basis and (iv) reorganized and changed personnel in the accounting and finance functions to improve the accuracy and timeliness of the financial accounting processes. The Company believes the implementation of this plan has allowed it to timely comply with the financial statement reporting requirements applicable to SEC registrants. The following table summarizes unaudited financial data:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER --------- --------- --------- --------- (IN THOUSANDS, EXCEPT SHARE DATA) Year Ended December 31, 2001 Revenues ................................. $ 114,773 $ 125,897 $ 111,374 $ 95,512 Operating expenses (1) ................... 114,427 115,796 107,964 160,815 Income (loss) before income taxes ........ 844 (11,802) (18,204) (110,773) Net loss ................................. (1,856) (11,802) (18,333) (110,773) Loss per share, basic and diluted: Net loss ........................ (0.07) (0.42) (0.64) (3.91)
- --------- (1) Operating expenses include impairment of long-lived asset charges, (in thousands) of $565, $4,000, $2,270 and $60,505 in the first, second, third and fourth quarters, respectively.
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER --------- --------- -------- --------- (IN THOUSANDS, EXCEPT SHARE DATA) Year Ended December 31, 2000 Revenues ....................................... $ 138,435 $ 161,123 $155,204 $ 126,135 Operating expenses(1) .......................... 136,919 193,073 123,145 127,933 (Loss) income before income taxes .............. (25,519) (60,891) 802 (31,070) Net (loss) income .............................. (16,842) (40,188) 527 (31,452) (Loss) earnings per share, basic and diluted: Net (loss) income ..................... (0.60) (1.43) 0.02 (1.11)
- --------- (1) Operating expenses include impairment of long-lived asset charges (recapture) of (in thousands) $9,613, $56,549, $(10,712) and $5,238, in the first, second, third and fourth quarters, respectively. 64 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The table below sets forth the names and ages of the directors and executive officers of the Company, as well as the positions and offices held by such persons. A summary of the background and experience of each of these individuals is set forth after the table.
NAME AGE POSITION WITH LODGIAN DIRECTORS WHOSE TERMS EXPIRE IN 2002: Peter R. Tyson 55 Director Joseph C. Calabro 50 Director and Chairman of the Office of the Chairman of the Board DIRECTORS WHOSE TERMS EXPIRE IN 2003: John M. Lang 47 Director and Member of the Office of the Chairman of the Board DIRECTORS WHOSE TERMS EXPIRE IN 2004: Robert S. Cole 40 Director Richard H. Weiner 52 Director EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS: David Hawthorne 51 Chief Executive Officer and President Michael Amaral 44 Senior Vice President of Operations Richard Cartoon 52 Executive Vice President and Chief Financial Officer
DAVID HAWTHORNE has been Chief Executive Officer and President of the Company since November 1, 2001. Between 1996 and 2001, Mr. Hawthorne held positions with Tower Records, a Sacramento based Company, Premier Cruise Lines and Alliance Entertainment Corporation. During this period, he also led a redevelopment effort in the downtown areas of Central Florida which resulted in the purchase and renovation of 13 historic buildings. Between 1990 and 1996, Mr. Hawthorne was the Chairman and CEO of Servico, Inc., the predecessor of Lodgian. Prior to joining Servico, Mr. Hawthorne held positions with Kendavis Holding Company in Texas, was a consultant at Zolfo, Cooper and Co., in New York, a consulting firm and worked with Gardinier, Inc. in Tampa, a French owned phosphate miner and producer of phosphate products. RICHARD CARTOON was appointed Executive Vice President and Chief Financial Officer on November 13, 2001. A member of the Georgia State Society of Certified Public Accountants and of the Institute of Chartered Accountants (S.A.), Mr. Cartoon is the President of Richard Cartoon LLC, a firm which provides advisory services to companies undergoing change. The firm of Richard Cartoon LLC is currently providing advisory services to Lodgian while the Company is in Chapter 11. Between 1986 and 1989, Mr. Cartoon served as Senior Manager and from 1989 to 1999 as partner with Ernst & Young's Restructuring and Reorganization Group. 65 MICHAEL AMARAL was appointed Senior Vice President of Operations of Lodgian on November 13, 2001. Mr. Amaral brings over 20 years of hospitality experience to his position. Prior to his appointment he was the Vice President of Operations for the Company's Eastern Region, a position he held since December 1998. Between August 1990 and December 1998, Mr. Amaral was employed by Servico Inc. where he held the position of Regional Vice President of the Pittsburg Region. Prior to joining Servico, Mr. Amaral held other senior positions within the hospitality industry including general manager of Atlantic Hospitality and Director of Operations of Prime Motor Inns Fairfield in New Jersey, where he also served as general manager. JOSEPH C. CALABRO has been a director of Lodgian since the Merger, is currently Chairman of the Office of the Chairman of the Board and was a director of Servico from August 1992 until the Merger. Mr. Calabro has been a principal of Joseph C. Calabro C.P.A, a Devon, Pennsylvania accounting firm, since 1982. Mr. Calabro has also been an officer and director of Bibsy Corporation, which previously owned and operated a Holiday Inn hotel in Bensalem, Pennsylvania, since 1971. ROBERT S. COLE has been a director of Lodgian since the Merger. He was Chief Executive Officer and President of the Company from the Merger until February 9, 2001. Between 1990 and the date of the Merger, Mr. Cole was the President of Impac and its predecessors and affiliates. Mr. Cole is currently the Chief Executive Officer of Hospitality Ventures, LLC. Prior to that time, Mr. Cole held a variety of general manager positions in hotels throughout the United States. JOHN M. LANG has been a director of Lodgian since the Merger. Mr. Lang is the President of Lang Capital Partners, LLC, a private venture investment firm based in Atlanta, Georgia. From June 1996 until May 1998, Mr. Lang served as Chief Executive Officer of ProTrust Capital, Inc., an investment firm based in Atlanta, Georgia. Prior to 1996, Mr. Lang, an attorney, was the managing partner of an Atlanta law firm. PETER R. TYSON has been a director of Lodgian since the Merger and was a director of Servico from August 1992 until the Merger. From December 1990 to the present, Mr. Tyson has been President of Peter R. Tyson & Associates, Inc., a firm offering consulting services to clients in the hospitality industry. Prior to forming Peter R. Tyson & Associates, Inc., Mr. Tyson was the partner-in-charge of the hospitality industry consulting practice in the Philadelphia office of the accounting and consulting firm of Laventhol & Horwath, with which he was associated for 20 years. RICHARD H. WEINER has been a director of Lodgian since the Merger and was a director of Servico from August 1992 until the Merger. Mr. Weiner is a senior partner in the Albany, New York law firm of Cooper, Erving, Savage, Nolan & Heller, where he has practiced law since 1975. 66 A. Director Compensation Lodgian pays non-executive Board members a $24,000 total annual retainer, as well as fees of $1,500 per board meeting, $1,000 per board committee meeting, and $500 per telephonic board or board committee meeting. This amount is payable in either cash or stock of the Company or a combination of both at the discretion of the Director. In addition, Mr. Joseph C. Calabro, in lieu of the normal annual retainer and per meeting fees, is receiving annual director compensation of $100,000 for services rendered to Lodgian in his capacity as Chairman of the Office of the Chairman of the Board. During 2001, Mr. Thomas Arasi as an executive officer of the Company, received no compensation for serving as a member of Lodgian's Board and Mr. Robert Cole received no compensation for being on the board for the period when he was an executive officer. Lodgian also reimbursed directors for expenses associated with attending Board and committee meetings of the Company. Under the Company's Non-Employee Directors' Stock Plan, each non-employee director is automatically granted, on the date such director's term of office commences, and each year thereafter on the day following any annual meeting of stockholders (as long as such director's term as a director is continuing for the ensuing year), an option to acquire 5,000 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant. All options granted to non-employee directors become exercisable upon grant. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth certain summary information concerning compensation paid or accrued by the Company, to or on behalf of the Chief Executive Officer and to each of the Company's executive officers other than the Chief Executive Officer for the three years ended December 31, 2001.
COMPENSATION ANNUAL COMPENSATION AWARDS OTHER SECURITIES ANNUAL UNDERLYING ALL OTHER YEAR SALARY ($) BONUS ($) COMPENSATION ($)OPTIONS/SARS (8) COMPENSATIONS ---- ---------- --------- -------------------------------- -------------- David Hawthorne (1)................. 2001 90,770 150,000 -- -- -- Chief Executive Officer and President Richard Cartoon (2)................. 2001 162,439 -- -- -- -- Executive Vice President and Chief Financial Officer Michael Amaral (3).................. 2001 184,570 93,995 -- 68,000 -- Senior Vice President of Operations Thomas Arasi 4)..................... 2001 378,294 243,750 -- -- -- Former Chief Executive Officer and President Robert S. Cole (5).................. 2001 832,564 -- -- -- 750,000 Former Chief Executive Officer and 2000 302,349 -- -- -- -- President 1999 293,524 -- -- -- -- Karyn Marasco (6)................... 2001 302,358 220,610 -- -- -- Former Chief Operating Officer and 2000 284,840 75,000 -- -- -- Executive Vice President 1999 257,862 121,000 -- -- --
67 Thomas Eppich (7)................... 2001 636,252 -- -- -- -- Former Chief Financial Officer 2000 582,327 -- -- -- --
(1) Mr. Hawthorne's employment with the Company commenced on October 1, 2001 (as interim Chief Executive Officer and President with formal appointment on November 1, 2001). (2) Mr. Cartoon's appointment with the Company began on October 4, 2001. The amount shown as salary represents fees charged by Richard Cartoon, LLC for the services of Richard Cartoon from October 4, 2001 to December 31, 2001. (3) Mr. Amaral was appointed Senior Vice President of Operations on November 13, 2001. (4) Mr. Arasi was Chief Executive Officer between February 9, 2001 and October 1, 2001. (5) Mr. Cole served as Chief Executive Officer and President from December 11, 1998 to February 9, 2001. Salary information includes $82,564 in salary and $750,000 for consulting services. Other compensation represents severance payments made to Mr. Cole. (6) Ms. Marasco's employment with Servico began in May 1997 and continued through the Merger. She resigned effective November 30, 2001. (7) Mr. Thomas Eppich was Chief Financial Officer between June 1, 2000 and June 15, 2001. Salary information represents amounts paid to Jay Alix and Associates for services provided by Mr. Eppich. (8) Represents the number of shares of common stock underlying the options/SARs. B. Stock Option Plan The Company's Stock Option Plan provides for the issuance of incentive stock options within the meaning of Section 422A of the Internal Revenue Code of 1986 ("The Internal Revenue Code") and non-qualified stock options not intended to meet the requirements of Section 422A of the Internal Revenue Code. The plan is administered by a committee of the Board of Directors which, subject to the terms of the plan, determines to whom grants are made and the vesting, timing and amounts of such grants. There were no stock option grants made during 2001 to the executive officers named in the "Summary Compensation Table". Accordingly, the table of "Stock Option Grants in Fiscal Year 2001" has not been included. Options granted to Mr. Thomas Arasi were all forfeited by him during 2001 and Mr. Hawthorne's options, which were never issued, all expired on the filing of bankruptcy. The following table sets forth certain summary information concerning exercised and unexercised stock options to purchase the Company's Common Stock as of March 15, 2002, under Lodgian's Stock Option Plan held by executive officers named in the "Summary Compensation Table." STOCK OPTION EXERCISES IN FISCAL YEAR 2001 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN- OPTIONS/SARS HELD AT THE-MONEY OPTIONS/SARS NAME AND POSITION ACQUIRED ON VALUE FISCAL YEAR END(#) AT FISCAL YEAR-END($) ------------------ ---------------------- DURING 2001 FISCAL YEAR EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ----------------------- ----------- ----------- ----------- ------------- ----------- ------------- Michael Amaral...................... -- -- 65,000 3,000 -- -- Senior Vice President of Operations
68 C. Employment Agreements and Termination of Employment Employment Agreements DAVID HAWTHORNE entered into an employment agreement with Lodgian relating to his employment as President and Chief Executive Officer as of November 1, 2001. This employment agreement is for an initial term of three years with a base salary of not less that $400,000. Annual increases are at the discretion of the Board of Directors. During the initial three year term Mr. Hawthorne is eligible to receive an annual bonus of up to 100% of base salary limited to 50% of base salary for any fiscal year in which the Executive is paid a reorganization bonus. The reorganization bonus will be paid to Mr. Hawthorne if during his employment with the Company or 180 days following the date of termination, the Company consummates a successful restructuring as further defined in the agreement. The reorganization bonus has been set at $900,000 if the Post Restructuring Equity Percentage is greater than 1% but not less than 10% on a fully diluted basis or $1,200,000 if the Restructuring Equity Percentage is 10% or more on a fully diluted basis. The remainder of the annual bonus will be determined based on the achievement of performance objectives that are mutually agreed to by the Board, the Compensation Committees of the Board of Directors and Mr. Hawthorne. Mr. Hawthorne receives paid health insurance, paid disability insurance, paid life insurance, a company car and is entitled to participate, to the extent eligible, under any benefit plans provided to other executives of Lodgian. Mr. Hawthorne is entitled to a minimum of four weeks vacation annually. He was granted options to acquire 1,000,000 shares of Lodgian's Common Stock, which were to vest equally over a period of three years. However, in accordance with the employment agreement, the options terminated automatically upon the Company's commencement of bankruptcy proceedings. Mr. Hawthorne is also entitled to reimbursement of expenses in accordance with the Company's policy, payments in respect of temporary housing, living expenses for a period of six months from date of the Agreement and relocation expenses in the event the executive relocates to Atlanta. Mr. Hawthorne's employment agreement contains provisions for payments to him in the event of termination or change of control as described more fully under "Arrangements Regarding Termination of Employment and Change of Control". THOMAS ARASI entered into an employment agreement with Lodgian relating to his employment as President and Chief Executive Officer, as of February 9, 2001. This employment agreement was for an initial term of three years with a base salary of not less that $550,000. Annual increases were at the discretion of the Board of Directors. During the initial three year term Mr. Arasi was eligible to receive an annual bonus of up to 100% of base salary. During the first, second and third year of the employment period $325,000, $275,000 and $225,000, respectively, of the annual bonus was guaranteed and was to be paid quarterly. The remainder of the annual bonus was to be determined based on the achievement of performance objectives that were mutually agreed to by the Compensation Committees of the Board of Directors and Mr. Arasi. Mr. Arasi received paid health insurance, paid disability insurance, paid life insurance, a company car and was entitled to participate, to the extent eligible, under any benefit plans provided to other executives of Lodgian. Mr. Arasi was entitled to a minimum of four weeks vacation annually. Mr. Arasi was granted options to acquire 2,000,000 shares of Lodgian's Common Stock, which were to vest equally over a period of four years. These options were all forfeited on Mr. Arasi's resignation. The term of the options was ten years. The exercise price of the options was derived from a formula that would have yielded an exercise price that was less than the fair market value of the stock on the date of grant. The options granted to Mr. Arasi were granted outside of the Company's Stock Option Plan. Mr. Arasi's employment agreement also contained provisions for payments to him in the event of termination or change of control. On October 1, 2001, Mr. Arasi resigned to pursue other opportunities. There are no claims outstanding as a result of Mr. Arasi's resignation. ROBERT COLE entered into an employment agreement with Lodgian relating to his employment as President and Chief Executive Officer, as of December 11, 1998. This employment agreement provided for a base salary subject to increases and bonuses, in each case, at the discretion of the Board of Directors. The base salary paid to Mr. Cole during 2001 was $82,564. Mr. Cole also received paid health insurance, paid disability insurance and was entitled to participate, to the extent eligible, 69 under any benefit plans provided to other executives of Lodgian. Mr. Cole was entitled to a minimum of three weeks paid vacation annually. On February 9, 2001, Mr. Cole and Lodgian entered into a Separation Agreement. On this date, Mr. Cole, with the Company's consent, resigned his position as President and Chief Executive Officer and continued as a non-officer employee through March 2, 2001. Mr. Cole received a severance payment of $750,000 in full settlement of all amounts due Mr. Cole by reason of the termination of his employment agreement. During the period March 3, 2001 to March 31, 2002 Mr. Cole will provide transition assistance and strategic and financial advisory services to Lodgian. Mr. Cole received $750,000 for his consulting services. The Company and Mr. Cole released one another from all claims rising out of Mr. Cole's employment with the Company. KARYN MARASCO entered into a three-year employment agreement with Servico relating to her employment as Executive Vice President and Chief Operating Officer of Servico on May 2, 1997. On November 24, 1998, the agreement was extended for a period of one year and on July 28, 2000 was extended through September 2002. The employment agreement provided for a base salary of $257,862 subject to increases and bonuses at the discretion of the Board. Ms. Marasco was also entitled to receive the benefits offered other executive officers. Pursuant to the terms of her employment agreement, Ms. Marasco was granted options to acquire 50,000 shares of Lodgian Common Stock, with 10,000 of such shares vesting immediately and 10,000 vesting annually. The employment agreement was terminable upon 30 days notice but in the event Ms. Marasco was terminated other than "for Cause," as defined in the agreement, she would have been entitled to her base salary and benefits under the agreement for the greater of the unexpired term or one year. On November 1, 2001, Ms. Marasco resigned to pursue other opportunities. The resignation took effect on November 30, 2001. Arrangements Regarding Termination of Employment and Changes of Control The employment agreement between Lodgian and Mr. Hawthorne provides that in the event the Executive's employment is terminated for cause, no obligations are payable by the Company other than the obligations to pay outstanding salary and benefits due through the date of termination. In the event of a change in control resulting from the Company's termination of Mr. Hawthorne's employment (other than for cause) or from a material diminution of the position, duties, benefits and other terms of the Executive's employment with the Company, lump sum cash payments are due to the Executive within one year of a change of control. The sum due would be the greater of one and one-half times the base salary in effect upon consummation of the change of control or the base salary in effect upon consummation of the change of control multiplied by the number of years remaining (including partial years) in the employment period. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding ownership of Common Stock as of March 15, 2002, by (i) each person known to the Company to be the beneficial owner of more than 5% of the issued and outstanding Common Stock as of March 15, 2002, (ii) each of the members of the Company's Board of Directors, (iii) each of the Company's current executive officers named in the "Summary Compensation Table" under "Executive Compensation" and (iv) all directors and executive officers of the Company as a group. All shares were owned directly with sole voting and investment power unless otherwise indicated.
SHARES OF COMMON PERCENT OF COMMON NAME OF BENEFICIAL OWNER AND STOCK STOCK ADDRESS OF 5% BENEFICIAL OWNER BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (2) - ------------------------------ ---------------------- ---------------------- BENEFICIAL OWNERS OF 5% OR MORE OF OUTSTANDING COMMON STOCK:
70 William J. Yung................................................................. 3,157,050(3) 10.9% 201 Grandview Drive Fort Mitchell, KY 41017 Dimensional Fund Advisors....................................................... 1,565,800(4) 5.4% 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 DIRECTORS: Thomas Arasi.................................................................... 50,000 * Robert S. Cole.................................................................. 572,843(5) 2.0% Joseph C. Calabro............................................................... 288,224(6) 1% John M. Lang.................................................................... 383,061(7) 1.3% Peter R. Tyson.................................................................. 75,664(8) * Richard H. Weiner............................................................... 90,100(9) * NON DIRECTOR EXECUTIVE OFFICERS: David Hawthorne................................................................. -- -- Mike Amaral..................................................................... 130,000(10) * Karyn Marasco................................................................... 2,700 * Richard Cartoon................................................................. -- -- All directors and executive officers as a group (ten persons)................... 1,592,592(11) 5.5%
- --------------- * Represents less than 1% (1) This number does not include those shares of Lodgian to be distributed upon conversion of Servico shares and Impac units pursuant to the Merger which have as yet not been converted. (2) Ownership percentages are based on 28,479,837 shares of Common Stock outstanding as of March 15, 2002 and options to purchase 360,000 shares of Common Stock currently exercisable by the named individual or group. (3) William J. Yung filed a Schedule 13D/A dated October 15, 2001 with the Securities and Exchange Commission ("SEC") reporting beneficial ownership of 3,157,050 shares of Common Stock. Mr. Yung may be deemed to be the indirect beneficial owner of and have shared voting and dispositive power with respect to (i) the 1,563,350 Shares held by Edgecliff Holdings, LLC by virtue of his indirect control of Edgecliff Holdings, LLC and (ii) the 1,593,700 Shares held by Casuarina Cayman Holding, Ltd. by virtue of his direct control of Casaurina. (4) Dimensional Fund Advisors filed a Schedule 13G/A dated February 12, 2002 with the SEC reporting ownership of 1,565,800 shares of Common Stock with sole voting and dispositive power with respect to such shares. (5) Includes currently exercisable options to purchase 5,000 shares of Common Stock. (6) Includes currently exercisable options to purchase 70,000 shares of Common Stock. 71 (7) The shares in this table above do not include: (i) shares beneficially held by ProTrust Properties IV, Ltd., ProTrust Properties V, Ltd., Hotel Investors, LP, and ProTrust Equity Growth Fund I, LP (collectively the "Entities"), from which, as of June 8, 1999, Mr. Lang resigned his position as manager, and the shares held by which were formerly deemed to be beneficially owned by him; and (iii) shares beneficially owned by Hotel Capital II, LLC, a limited liability company whose manager, with sole voting and dispositive power, is Robert H. Woods (a partner in Lang Capital Partners, LLC), with respect to which Mr. Lang is not a member or a manager, and does not have voting or dispositive power with respect to those shares; therefore, such shares are not included in Mr. Lang's beneficial ownership. Includes currently exercisable options to purchase 15,000 shares. (8) Includes currently exercisable options to purchase 70,000 shares of Common Stock. (9) Includes currently exercisable options to purchase 70,000 shares of Common Stock. (10) Represents currently exercisable options to purchase 130,000 shares of Common Stock. (11) Includes currently exercisable options to purchase 360,000 shares of Common Stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The following parties have direct or indirect material interest in transactions with the Company since the beginning of its most recently completed fiscal year and such transactions are described below. Robert Cole, a member of the Board of Directors was a minority shareholder of Impac Hotel Development ("IHD"), which provided acquisition and property development services to Impac for a development fee of four percent of the total project cost of each property acquired or developed. Impac agreed to terminate this agreement prior to the consummation of the Merger so that Impac and its subsidiaries would have no further obligations under the agreement after the Merger other than the payment of up to a four percent development fee (not to exceed $2.5 million in the aggregate) in the event Lodgian acquired or developed any of the hotels or properties identified in the Merger Agreement as Impac's acquisition and development pipeline. During 1999, the Company paid $1.0 million in connection with this arrangement. Of this amount, Robert Cole received $225,000. No payments were made in 2001 or 2000 to IHD or Robert Cole under this agreement. The Company's obligation to make any future development fees was terminated in March 2001. Robert Cole, a member of the Board of Directors had been an 8% limited partner in the partnership that owns the Courtyard by Marriott in Tifton, Georgia since 1996. The Company previously managed this hotel in accordance with a management agreement, which provided that the Company be paid a base fee calculated as a percentage of gross revenues, an accounting services fee and an incentive management fee. The base fee was 3% of gross revenues and the incentive fee was a percentage of the amount by which gross operating profit exceeded a negotiated amount. The Company earned fees of $15,000, $71,400 and $69,300 during 2001, 2000, and 1999, respectively. The management agreement was terminated in March 2001. On December 15, 2000 the Company sold a partially constructed hotel located in Richmond, Virginia to an entity controlled by a shareholder who is a 10.9% beneficial owner of the Company's common stock. The Company received net proceeds of approximately $12.3 million from the sale and recorded a loss on the sale of approximately $.5 million. In addition, the Company entered into a separate management contract with the purchaser to provide construction management oversight until completion of the project. Richard Cartoon, the Company's Executive Vice President and Chief Financial Officer, is a principal in a business that the Company retained in November 2001 to provide Richard Cartoon's services as Chief Financial Officer and other restructuring support and services. In addition to amounts paid for Richard Cartoon's services, which amounts are disclosed in Item 11 re Executive Compensation, the Company has been billed $220,000 for other support and services provided by 72 associates of Richard Cartoon, LLC for the period October 4, 2001 through February 28, 2002. The Company expects to continue to utilize such support and services as needed through the restructuring process. Thomas Eppich, Chief Executive Officer between June 1, 2000 and June 15, 2001 was employed to Jay Alix and Associates, a business that the Company retained to provide financial and accounting assistance between June 1, 2000 and June 19, 2001. In addition to amounts paid for Mr. Eppich's services which amounts are disclosed in Item 11 re Executive Compensations, the Company was billed $1,855,000 and $1,839,000 for such services for 2001 and 2000, respectively. D. Compensation Committee Interlocks and Insider Participation During 2001, the following directors served on the Compensation Committee of the Board of Directors: John Lang, Peter R. Tyson and Richard H. Weiner. None of such persons is or has been an executive officer of the Company, and no interlocking relationships exist between any such person and the directors or executive officers of any other Company. PART IV ITEM 14. FINANCIAL STATEMENT SCHEDULES, EXHIBITS, AND REPORTS ON FORM 8-K (a) (1) Consolidated Financial Statements: Report of Independent Public Accountants Report of Independent Auditors Consolidated Balance Sheets as of December 31, 2001 and 2000 Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements (b) (2) Financial Statement Schedule: All Schedules are omitted because they are not applicable or required information is shown in the consolidated financial statements or notes thereto. (c) (3) Exhibits: The information called for by this paragraph is contained in the Exhibits Index of this report, which is incorporated herein by reference. (d) Reports on Form 8-K: A report on Form 8-k was filed on March 28, 2001 relating to pro forma financial statements on the sale of ten hotels. A report on Form 8-K was filed on January 2, 2002 relating to the voluntary filing of Lodgian Inc. and a number of its subsidiaries, for protection under Chapter 11 of the United States Bankruptcy Code in Federal Code in New York. 73 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION 1.1 -- Purchase Agreement, dated June 9, 1998, by Lodgian Capital Trust I and NationsBanc Montgomery Securities LLC.(h) 2.1 -- Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") among Lodgian, Inc., Servico, Inc., Impac Hotel Group, L.L.C., SHG-S Sub, Inc., SHG-I Sub,L.L.C., P-Burg Lodging Associates, Inc., SHG-II Sub, Inc., Hazard Lodging Associates, Inc., SHG-III Sub, Inc., Memphis Lodging Associates, Inc., SHG-IV Sub, Inc., Delk Lodging Associates, Inc., SHG-V Sub, Inc., Impac Hotel Development, Inc., SHG-VI Sun, Inc., Impac Design and Construction, Inc., SHG-VII Sub, Inc., Impac Hotel Group, Inc., and SHG-VIII Sub, Inc., as of July 22, 1998.(a) 2.2 -- Amendment to the Merger Agreement, dated as of September 16, 1998.(j) 3.1.1 -- Restated Certificate of Incorporation of Lodgian, Inc.(a) 3.1.2 -- Amended Restated Bylaws of Lodgian, Inc.(e) 3.2.1 -- Certificate of Incorporation of Lodgian Financing Corp.(f) 3.2.2 -- Bylaws of Lodgian Financing Corp.(f) 3.3.1 -- Amended and Restated Articles of Incorporation of Dothan Hospitality 3053, Inc.(f) 3.3.2 -- Bylaws of Dothan Hospitality 3053, Inc.(f) 3.4.1 -- Amended and Restated Articles of Incorporation of Dothan Hospitality 3071, Inc.(f) 3.4.2 -- Bylaws of Dothan Hospitality 3071, Inc.(f) 3.5.1 -- Second Amended and Restated Articles of Incorporation of Gadsden Hospitality, Inc.(f) 3.5.2 -- Bylaws of Gadsden Hospitality, Inc.(f) 3.6.1 -- Fourth Amended and Restated Articles of Incorporation of Sheffield Motel Enterprises, Inc.(f) 3.6.2 -- Bylaws of Sheffield Motel Enterprises, Inc.(f) 3.7.1 -- Articles of Incorporation of Lodgian Anaheim, Inc.(f) 3.7.2 -- Bylaws of Lodgian Anaheim, Inc.(f) 3.8.1 -- Articles of Incorporation of Lodgian Ontario Inc.(f) 3.8.2 -- Bylaws of Lodgian Ontario Inc.(f) 3.9.1 -- Amended and Restated Articles of Incorporation of Servico Ft. Pierce, Inc.(f) 3.9.2 -- Bylaws of Servico Ft. Pierce, Inc.(f)
74
EXHIBIT NO. DESCRIPTION 3.10.1 -- Amended and Restated Articles of Incorporation of Servico Pensacola 7200, Inc.(f) 3.10.2 -- Bylaws of Servico Pensacola 7200, Inc.(f) 3.11.1 -- Amended and Restated Articles of Incorporation of Servico Pensacola 7330, Inc.(f) 3.11.2 -- Bylaws of Servico Pensacola 7330, Inc.(f) 3.12.1 -- Amended and Restated Articles of Incorporation of Servico Pensacola, Inc.(f) 3.12.2 -- Bylaws of Servico Pensacola, Inc.(f) 3.13.1 -- Partnership Agreement of AMI Operating Partners, L.P., as amended.(f) 3.14.1 -- Second Amended and Restated Articles of Incorporation of Albany Hotel, Inc.(f) 3.14.2 -- Bylaws of Albany Hotel, Inc.(f) 3.15.1 -- Amended and Restated Articles of Incorporation of Servico Flagstaff, Inc.(f) 3.15.2 -- Bylaws of Servico Flagstaff, Inc.(f) 3.16.1 -- Amended and Restated Articles of Incorporation of Servico Northwoods, Inc.(f) 3.16.2 -- Bylaws of Servico Northwoods, Inc.(f) 3.17.1 -- Second Amended and Restated Articles of Incorporation of Servico Silver Spring, Inc.(f) 3.17.2 -- Bylaws of Servico Silver Spring, Inc.(f) 3.18.1 -- Second Amended and Restated Articles of Incorporation of Servico West Palm Beach, Inc.(f) 3.18.2 -- Bylaws of Servico West Palm Beach, Inc.(f) 3.19.1 -- Amended and Restated Articles of Incorporation of Servico Windsor, Inc.(f) 3.19.2 -- Bylaws of Servico Windsor, Inc.(f) 3.20.1 -- Amended and Restated Articles of Incorporation of Servico Winter Haven, Inc.(f) 3.20.2 -- Bylaws of Servico Winter Haven, Inc.(f) 3.21.1 -- Amended and Restated Articles of Incorporation of Brunswick Motel Enterprises, Inc.(f) 3.21.2 -- Bylaws of Brunswick Motel Enterprises, Inc.(f) 3.22.1 -- Operating Agreement of Atlanta-Hillsboro Lodging, LLC(f) 3.23.1 -- Operating Agreement of Lodgian Richmond, LLC(f)
75
EXHIBIT NO. DESCRIPTION 3.24.1 -- Partnership Agreement of Little Rock Lodging Associates I, L.P.(f) 3.25.1 -- Amended and Restated Articles of Incorporation of Servico Cedar Rapids, Inc.(f) 3.25.2 -- Bylaws of Servico Cedar Rapids, Inc.(f) 3.26.1 -- Amended and Restated Articles of Incorporation of Servico Rolling Meadows, Inc.(f) 3.26.2 -- Bylaws of Servico Rolling Meadows, Inc.(f) 3.27.1 -- Second Amended and Restated Articles of Incorporation of Servico Metairie, Inc.(f) 3.27.2 -- Bylaws of Servico Metairie, Inc.(f) 3.28.1 -- Amended and Restated Articles of Incorporation of Servico Colesville, Inc.(f) 3.28.2 -- Bylaws of Servico Colesvilles, Inc.(f) 3.29.1 -- Amended and Restated Articles of Incorporation of Servico Columbia, Inc.(f) 3.29.2 -- Bylaws of Servico Columbia, Inc.(f) 3.30.1 -- Amended and Restated Articles of Incorporation of Servico Maryland, Inc.(f) 3.30.2 -- Bylaws of Servico Maryland, Inc.(f) 3.31.1 -- Amended and Restated Articles of Incorporation of NH Motel Enterprises, Inc.(f) 3.31.2 -- Bylaws of NH Motel Enterprises, Inc. (formerly RRCHR, Inc.)(f) 3.32.1 -- Amended and Restated Articles of Incorporation of Minneapolis Motel Enterprises, Inc.(f) 3.32.2 -- Bylaws of Minneapolis Enterprises, Inc.(f) 3.33.1 -- Amended and Restated Articles of Incorporation of Servico Roseville, Inc.(f) 3.33.2 -- Bylaws of Servico Roseville, Inc.(f) 3.34.1 -- Amended and Restated Articles of Incorporation of Lodgian Mount Laurel, Inc.(f) 3.34.2 -- Bylaws of Lodgian Mount Laurel, Inc.(f) 3.35.1 -- Restated Certificate of Incorporation of Servico Grand Island, Inc.(f) 3.35.2 -- Bylaws of Servico Grand Island, Inc.(f) 3.36.1 -- Restated Certificate of Incorporation of Servico Jamestown, Inc.(f) 3.36.2 -- Bylaws of Servico Jamestown, Inc.(f)
76
EXHIBIT NO. DESCRIPTION 3.37.1 -- Restated Certificate of Incorporation of Servico New York, Inc.(f) 3.37.2 -- Bylaws of Servico New York, Inc.(f) 3.38.1 -- Restated Certificate of Incorporation of Servico Niagara Falls, Inc.(f) 3.38.2 -- Bylaws of Servico Niagara Falls, Inc.(f) 3.39.1 -- Amended and Restated Articles of Incorporation of Fayetteville Motel Enterprises, Inc.(f) 3.39.2 -- Bylaws of Fayetteville Motel Enterprises, Inc.(f) 3.40.1 -- Second Amended and Restated Articles of Incorporation of Apico Hills, Inc.(f) 3.40.2 -- Bylaws of Apico Inns of Green Tree, Inc.(f) 3.41.1 -- Second Amended and Restated Articles of Incorporation of Apico Inns of Green Tree, Inc.(f) 3.41.2 -- Bylaws of Apico Hills, Inc.(f) 3.42.1 -- Second Amended and Restated Articles of Incorporation of Servico Hilton Head, Inc.(f) 3.42.2 -- Bylaws of Servico Hilton Head, Inc.(f) 3.43.1 -- Amended and Restated Articles of Incorporation of Servico Austin, Inc.(f) 3.43.2 -- Bylaws of Servico Austin, Inc.(f) 3.44.1 -- Second Amended and Restated Articles of Incorporation of Servico Houston, Inc.(f) 3.44.2 -- Bylaws of Servico Houston, Inc.(f) 3.45.1 -- Second Amended and Restated Articles of Incorporation of Servico Market Center, Inc.(f) 3.45.2 -- Bylaws of Servico Market Center, Inc.(f) 3.46.1 -- Second Amended and Restated Articles of Incorporation of Palm Beach Motel Enterprises, Inc.(f) 3.46.2 -- Bylaws of Palm Beach Motel Enterprises, Inc.(f) 4.1.1 -- Indenture, dated as of July 23, 1999, by and among Lodgian Financing Corp., Lodgian, Inc., the subsidiary guarantors named therein and Bankers Trust Company, as Trustee.(f) 4.1.2 -- First Supplemental Indenture, dated as of September 13, 1999, among Lodgian Financing Corp., Lodgian, Inc., the subsidiary guarantors named therein, the subsidiary of the Company listed on Schedule A annexed thereto and Bankers Trust Company, as Trustee.(m) 4.2 -- Indenture, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc., and Wilmington Trust Company, as Trustee.(a)
77
EXHIBIT NO. DESCRIPTION 4.3 -- First Supplemental Indenture, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc., and Wilmington Trust Company, as Trustee.(a) 4.4 -- Registration Rights Agreement, dated as of June 17, 1998, among Lodgian Capital Trust I, Servico, Inc., and NationsBanc Montgomery Securities, LLC.(a) 4.5 -- Registration and Rights Agreement between Lodgian, Inc. and certain unitholders of Impac Hotel Group, LLC.(a) 4.6 -- Specimen Note.(f) 4.7 -- Specimen CRESTS.(a) 4.8 -- Specimen Convertible Debenture.(a) 10.1 -- Lodgian 1998 Short-Term, Incentive Compensation Plan.(a) 10.2 -- Lodgian 1998 Stock Incentive Plan.(a) 10.3 -- Lodgian Non-Employee Directors' Stock Plan.(a) 10.4 -- Guarantee Agreement, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc., and Wilmington Trust Company, as Guarantee Trustee.(a) 10.5 -- Amended and Restated Declaration of Trust of Lodgian Capital Trust I, dated as of June 17, 1998 between Servico, Inc., as Sponsor, David A. Buddemeyer, Charles M. Diaz and Phillip R. Hale, as Regular Trustees, and Wilmington Trust Company, as Delaware Trust and Property Trustee.(a) 10.6 -- Severance Agreement, dated November 10, 1998, between Servico, Inc., and David Buddemeyer.(g) 10.7 -- Severance Agreement, dated February 28, 1999, between Lodgian, Inc. and Warren M. Knight.(g) 10.8 -- Employment Agreement between Lodgian, Inc. and Robert S. Cole.(a) 10.9 -- Employment Agreement, dated May 2, 1997, between Karyn Marasco and Servico, Inc.(i) 10.10 -- Form of Employment Agreement, dated as of February 9, 2001 between the Lodgian, Inc. and Thomas Arasi.(m) 10.11 -- Form of Separation Agreement, dated as of February 9, 2001 between Lodgian, Inc. and Robert S. Cole.(m) 10.13 -- Voting Agreement, dated as of March 20, 1998, between Servico, Inc., and Certain Members of Impac.(c) 10.14 -- Voting Agreement, dated as of March 20, 1998, between Servico, Inc., and Certain Other Members of Impac.(c)
78
EXHIBIT NO. DESCRIPTION 10.15 -- Credit Agreement, dated as of July 23, 1999, among Lodgian Financing Corp., Lodgian, Inc., Impac Hotel Group, LLC, Servico, Inc., and other affiliate guarantors party thereto and the initial lenders and initial issuing bank named therein and Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent, and Morgan Stanley Senior Funding, Inc., as Co-Lead Arranger and Joint-Book Manager and Syndication Agent, and Lehman Brothers, Inc., as Co-Lead Arranger and Joint-Book Manager.(f) 10.16 -- Security Agreement, dated July 23, 1999, from Lodgian Financing Corp., Sevico, Inc., Impac Hotel Group, LLC, and the other grantors referred to therein to Morgan Stanley Senior Funding, Inc., as Collateral Agent.(f) 10.17.1 -- Loan Agreement, dated December 8, 1998, Sheraton Concord, Inc., and Banc One Capital Funding Corporation.(f) 10.17.2 -- Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian AMI, Inc., Penmoco, Inc., and Island Motel Enterprises, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.17.3 -- Limited Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.18.1 -- Loan Agreement, dated December 8, 1998, between Island Motel Enterprises, Inc., Penmoco, Inc., and Banc One Capital Funding Corporation.(f) 10.18.2 -- Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., and Lodgian AMI, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.18.3 -- Limited Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.19.1 -- Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc., and Banc One Capital Funding Corporation (relating to Holiday Inn--Lancaster East).(f) 10.19.2 -- Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco Inc., and Island Motel Enterprises, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.19.3 -- Limited Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.20.1 -- Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc., and Banc One Capital Funding Corporation (relating to Holiday Inn--International Airport).(f) 10.20.2 -- Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco Inc., and Island Motel Enterprises, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.20.3 -- Limited Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian, Inc., in favor of Banc One Capital Funding Corporation.(f)
79 10.21.1 -- Loan Agreement dated as of July 18, 1996, among GMAC Commercial Mortgage Corporation and Servico Council Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc., and Servico Wichita, Inc.(f)
80
EXHIBIT NO. DESCRIPTION 10.21.2 -- Mortgage Note in the amount of $16.84 million, dated as of July 18, 1996, by Servico Council Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc., and Servico Wichita, Inc., in favor of GMAC Commercial Mortgage Corporation.(f) 10.22.1 -- Loan Agreement dated as of May 7, 1996, between GMAC Commercial Mortgage Corporation and Servico Lansing, Inc.(f) 10.22.2 -- Mortgage Note in the original amount of $5.687 million, dated as of May 7, 1996, by Servico Lansing, Inc., in favor of GMAC Commercial Mortgage Corporation.(f) 10.23.1 -- Loan Agreement dated as of January 17, 1996, among Loan Services,Inc., and Brecksville Hospitality, L.P., Sioux City Hospitality, L.P., and 1075 Hospitality, L.P.(f) 10.23.2 -- Mortgage Note in original amount of $12.91 million by Brecksville Hospitality, L.P., Sioux City Hospitality, L.P., and 1075 Hospitality, L.P., in favor of GMAC Commercial Mortgage Corporation.(f) 10.24.1 -- Loan Agreement dated as of January 31, 1995, by and among Column Financial, Inc., and Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and Moon Airport Hotel Inc.(f) 10.24.2 -- Promissory Note in original amount of $60.5 million, dated as of January 31, 1995, by Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motels Associates, Ltd., Wilpen, Inc., Hilton Head Motels Enterprises, Inc., and Moon Airport Hotel Inc., in favor of Column Financial, Inc.(f) 10.25.1 -- Loan Agreement dated as of June 29, 1995, between Column Financial, Inc., and East Washington Hospitality Limited Partnership.(f) 10.25.2 -- Promissory Note in original amount of $11.0 million, dated as of June 29, 1995, by East Washington Hospitality Limited Partnership in favor Column Financial, Inc.(f) 10.26.1 -- Loan Agreement, dated as of January 31, 1995 and amended as of June 29, 1995, between Column Financial, Inc., and McKnight Motel, Inc.(f) 10.26.2 -- Promissory Note in original amount of $3.9 million, dated as of January 31, 1995 and amended as of June 29, 1995, by McKnight Motel, Inc., in favor of Column Financial, Inc.(f) 10.27.1 -- Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc., and Banc One Capital Funding Corporation (relating to Holiday Inn--Glen Burnie).(f) 10.27.2 -- Guaranty and Indemnity Agreement, dated December 8, 1998 by Servico Concord, Inc., Penmoco Inc., and Island Motel Enterprises, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.27.3 -- Limited Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.28.1 -- Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc., and Banc One Capital Funding Corporation (relating to Holiday Inn--Inner Harbor).(f)
81
EXHIBIT NO. DESCRIPTION 10.28.2 -- Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco Inc., and Island Motel Enterprises, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.28.3 -- Limited Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian, Inc., in favor of Banc One Capital Funding Corporation.(f) 10.29 -- Form of Amendment No. 1, Waiver and Consent to the Credit Agreement among Lodgian Financing Corp., Lodgian, Inc., Impac Hotel Group, LLC, Servico Inc., the other Affiliate Guarantors party hereto, the Lenders and Issuing Bank named herein, Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc., as Co-Lead Arranger, Joint-Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger, Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent.(k) 10.30 -- Form of Consolidated, Amended and Restated Loan Agreement dated as of August 31, 2000 by and among Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. and the Capital Company of America LLC.(k) 10.31 -- Employment Agreement dated November 1, 2001 between Lodgian, Inc. and David E. Hawthorne. (l) 10.32 -- Amendment No. 2 To The Credit Agreement And Amendment No. 1 To The Security Agreement (referred to herein as "this Amendment") among Lodgian Financing Corp. (the "Borrower"), Lodgian, Inc. (the "Parent"), Impac Hotel Group, LLC, Servico Inc., the other Affiliate Guarantors and Grantors party hereto, the Lenders and Issuing Bank named herein, Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc., as Co-Lead Arranger, Joint-Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger, Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent. 10.33 -- Forbearance Agreement dated as of October 17, 2001 with respect to the Credit Agreement dated July 23, 1999 (as heretofore amended, the "Credit Agreement") among Lodgian Financing Corp. (the "Borrower"), Lodgian, Inc. (the "Parent"), Impac Hotel Group LLC, Servico, Inc., the affiliate Guarantors party thereto, the Lenders party thereto (the "Lender"), Morgan Stanley Senior Funding, Inc., as Administrative Agent (the "Administrative Agent"), Collateral Agent, Co-Lead Arranger, Joint Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint Book Manager and Lehman Commercial Paper Inc., as Documentation Agent (collectively with the Administrative Agent, the "Agents"). 10.34 -- Forbearance Agreement dated as of November 14, 2001 with respect to the Credit Agreement dated July 23, 1999 (as amended, the "Credit Agreement") among Lodgian Financing Corp. (the "Borrower"), Lodgian, Inc. (the "Parent"), Impac Hotel Group LLC, Servico, Inc., the affiliate Guarantors party thereto, the Lenders party thereto (the "Lenders"), Morgan Stanley Senior Funding Inc., as Administrative Agent (the "Administrative Agent"), Collateral Agent, Co-Lead Arranger, Joint Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint Book Manager and Lehman Commercial Paper Inc., as Documentation Agent (collectively with the Administrative Agent, (the "Agents"). 10.35 -- Form of Voluntary Petition under Chapter 11 of the U. S. Bankruptcy Code filed with the United States Bankruptcy Court Southern District of New York by Lodgian Inc. and 81 of its subsidiaries. 10.36 -- Revolving Credit Agreement among Lodgian, Inc., a debtor in possession under Chapter 11 of the Bankruptcy Code as borrower and certain subsidiaries of the borrower and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent dated December 31, 2001.
82 10.37 -- Final order authorizing debtors to use cash collateral in which certain mortgage lenders claim an interest. 10.38 -- Final order (i) authorizing debtors (A) to obtain post-petition financing and (B) to utilize cash collateral and (ii) granting adequate protection to pre-petition secured parties. 10.39 -- Stipulation and Order among the debtors and JP Morgan Chase Bank as Successor Indenture Trustee, providing for (i) limited use of cash collateral and adequate protection and (ii) related relief. 10.40 -- Stipulation and order among the debtors and Crimi Mae Services, L.P. as special servicer, providing for (i) limited use of cash collateral and adequate protection and (ii) related relief (low leverage debtor). 10.41 -- Stipulation and order among debtors and Lennar Partners Inc. as special servicer, providing for (i) limited use of cash collateral and adequate protection and (ii) related relief. 10.42 -- Agreed order regarding debtor's motion of entry of orders (i) authorizing the debtors-in-possession to (A) obtain post-petition financing, (B) grant liens and priority administrative expense claims status, (C) modify the automatic stay, and (D) enter into financing agreement; and (ii) approving the use of cash collateral and granting adequate protection regarding Nationwide loans. 10.43 -- Affidavit and disclosure statement of Richard Cartoon LLC in support of application to employ Richard Cartoon LLC as Chief Financial Officer. 12.1 -- Statement Regarding Computation of Earnings to Fixed Charges.(h) 21.1 -- Subsidiaries of Lodgian, Inc.(m) 23.1 -- Consent of Arthur Andersen LLP with respect to Form S-8 in respect of the Company's 401 (k) Plan. 23.2 -- Consent of Ernst & Young LLP with respect to Form S-8 in respect of the Company's 401(k) Plan. 99 -- Letter relating to Arthur Andersen LLP's representation.
- --------------- (a) This exhibit is incorporated by reference to exhibits and appendices to the Company's Registration Statement on Form S-4, as amended, filed on July 17, 1998. (SEC File No. 333-59315) (b) This exhibit is incorporated by reference to Servico, Inc.'s Form 10-K for the year ended December 31, 1997, filed on March 31, 1998. (SEC File No. 001-11342) (c) This exhibit is incorporated by reference to Servico, Inc.'s Form 8-K dated March 20, 1998, filed on March 26, 1998. (SEC File No 00-11342) (d) This exhibit is incorporated by reference to the Company's Form 8-K dated December 11, 1998, filed on December 28, 1998. (SEC File No. 001-14537) (e) This exhibit is incorporated by reference to the Company's Form 8-K dated March 9, 2000, filed on March 9, 2000. (SEC File No. 001-14537) (f) This exhibit is incorporated by reference to exhibits and appendices to the Company's Registration Statement on Form S-4, as amended, filed on August 13, 1999. (SEC File No. 333-85235-01) (g) This exhibit is incorporated by reference to exhibits and appendices to the Company's Annual Report on Form 10-K, filed on March 31, 1999. (SEC File No. 001-14537) (h) This exhibit is incorporated by reference to exhibits and appendices to the Company's Registration Statement on Form S-1, as amended, filed on July 14, 1999. (SEC File No. 333-82859) (i) This exhibit is incorporated by reference to Servico's Form 10-Q for the period ended June 30, 1997, filed on August 14, 1997, (SEC File No. 001-11342) 83 (j) This exhibit is incorporated by reference to Servico's Form 8-K filed on September 17, 1998. (SEC File No. 001-11342) (k) This exhibit is incorporated by reference to the Company's Form 10-Q dated March 31, 2000, filed on December 15, 2000. (SEC File No. 001-14537) (l) This exhibit is incorporated by reference to the Company's Form 10-Q for the period ended September 30, 2001, filed on November 14, 2001 (SEC File No. 0001-14537) (m) This exhibit is incorporated by reference to the Company's Form 10-K for the year ended December 31, 2000 (SEC file No. 001-14537) 84 SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 29, 2002. LODGIAN, INC. By: /s/ David E. Hawthorne ------------------------------------ David E. Hawthorne President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company and in the capacities indicated, on March 29, 2002.
SIGNATURE TITLE /s/ David E. Hawthorne - ---------------------------------------------- President and Chief Executive Officer David E. Hawthorne /s/ Richard Cartoon - ---------------------------------------------- Executive Vice President and Chief Financial Officer Richard Cartoon /s/ Joseph. C. Calabro - ---------------------------------------------- Chairman of the Office of the Chairman Joseph. C. Calabro of the Board of Directors /s/ Robert S. Cole - ---------------------------------------------- Director Robert S. Cole /s/ John Lang - ---------------------------------------------- Director John Lang /s/ Peter R. Tyson - ---------------------------------------------- Director Peter R. Tyson /s/ Richard H. Weiner - ---------------------------------------------- Director Richard H. Weiner
85 EX-10.32 3 g75096ex10-32.txt AMENDMENT NO. 2 TO THE CREDIT AGREEMENT Exhibit 10.32 EXECUTION COPY AMENDMENT NO. 2 TO THE CREDIT AGREEMENT AND AMENDMENT NO. 1 TO THE SECURITY AGREEMENT Dated as of May 15, 2001 AMENDMENT NO. 2 TO THE CREDIT AGREEMENT AND AMENDMENT NO. 1 TO THE SECURITY AGREEMENT (referred to herein as "this Amendment") among Lodgian Financing Corp. (the "Borrower"), Lodgian, Inc. (the "Parent"), Impac Hotel Group, LLC, Servico Inc., the other Affiliate Guarantors and Grantors party hereto, the Lenders and Issuing Bank named herein, Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc., as Co-Lead Arranger, Joint-Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger, Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent. PRELIMINARY STATEMENTS: (1) The Borrower, the Parent, Impac Hotel Group, LLC, Servico, Inc., the other Affiliate Guarantors party thereto, the Initial Lenders and Initial Issuing Bank named therein, Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc. as Co-Lead Arranger, Joint-Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger, Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent have entered into that certain credit agreement dated as of July 23, 1999 and, as amended by an amendment thereto dated as of July 31, 2000 (such Credit Agreement, as so amended, the "Credit Agreement"). Capitalized terms not otherwise defined in this Amendment shall have the same meanings as specified in the Credit Agreement. (2) The Borrower has requested, and each Lender has agreed, to amend the Credit Agreement and to waive certain conditions therein as herein set forth. NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: SECTION 1. Amendments to the Credit Agreement. The Credit Agreement is, subject to the satisfaction of the conditions precedent set forth in Section 5, hereby amended as follows: (a) The definition of Applicable Margin in Section 1.01 is amended in full to read as follows: '"APPLICABLE MARGIN" means 4.25% in the case of Eurodollar Rate Advances and 3.25% in the case of Base Rate Advances, provided that 2 such percentages shall be increased by (i) 0.25% the first day of each month starting August 2001 and (ii) 0.25% if the Public Debt Rating is lowered at any time after the Amendment No. 2 Effective Date or if neither S&P or Moody's shall have in effect a Public Debt Rating; provided, however, that such percentages shall be at any time no more than 6.00% in the case of the Eurodollar Rate Advances and 5.00% in the case of Base Rate Advances; provided further, that such percentages shall be reduced by (i) 0.50% upon prepayment of the Term B Facility (on and after the Amendment No. 2 Effective Date) in an aggregate principal amount of $60,000,000 so long as the Senior Debt/Hotel Collateral EBITDA Ratio is less than 3.00:1, (ii) an additional 0.50% upon prepayment of the Term B Facility in an additional aggregate principal amount of $60,000,000 (it being understood that this clause (ii) is effective if the Term B Facility is reduced by at least $120 million on and after the Amendment No. 2 Effective Date) so long as the Senior Debt/Hotel Collateral EBITDA Ratio is less than 2.00:1 and (iii) an additional 0.50% upon prepayment of the Term B Facility in an additional aggregate principal amount of $60,000,000 (it being understood that this clause (iii) is effective if the Term B Facility is reduced by at least $180 million on and after the Amendment No. 2 Effective Date) so long as the Senior Debt/Hotel Collateral EBITDA Ratio is less than 2.00:1. The Applicable Margin in respect of the Term C Facility shall be as set forth in the Term C Supplement." (b) The definition of Debt/EBITDA Ratio in Section 1.01 is amended by inserting immediately before the phrase "of the Parent and its Subsidiaries" at the end of the first sentence thereof the phrase "(excluding EBITDA attributable to hotel or development properties sold during such fiscal quarter and the immediately preceding three fiscal quarters)". (c) The definition of Senior Debt/Hotel Collateral EBITDA Ratio in Section 1.01 is amended by inserting immediately before the phrase "of the Borrower and its Subsidiaries" at the end of the first sentence thereof the phrase "(excluding EBITDA attributable to Hotel Collateral Properties sold during such fiscal quarter and the immediately preceding three fiscal quarters)". (d) The definition of Fixed Charge Coverage Ratio in Section 1.01 is amended by inserting immediately before the period at the end thereof the following new phrase: "(excluding cash payments payable in respect of taxes from the sale, lease, transfer or other disposition of assets pursuant to clauses (i), (iii) and (iv) of Section 5.02(e) and only in an amount up to and including the Net Cash Proceeds therefrom)" (e) Section 1.01 is amended by adding in the appropriate alphabetical order the following new definition: 3 '"AMENDMENT NO.2 EFFECTIVE DATE" means the date on which Amendment No. 2 to this Agreement becomes effective." (f) Section 2.01 is amended by adding at the end thereof the following new clauses (g) and (h): "(g) Conversion of Working Capital Advances to Term B Advances. On the Amendment No. 2 Effective Date, $25,000,000 of the outstanding Working Capital Advances shall be deemed to be Term B Advances for all purposes of this Agreement and the other Loan Documents which shall be allocated on a pro rata basis among the Working Capital Lenders and the Working Capital Facility shall be automatically and permanently reduced, on a pro rata basis among the Working Capital Lenders, in an amount equal to $25,000,000. (h) Limitation on Working Capital Advances. Notwithstanding the provisions of Section 2.01(c), the outstanding Working Capital Advances shall not exceed $2,000,000 at any time during the period starting on the Amendment No. 2 Effective Date (after giving effect to the provisions of Section 2.01(g)) and ending on June 30, 2001." (g) Section 2.06(b)(ii) is amended by (i) deleting the letter "C" immediately before the phrase "Facility and the Term C Facility" in clause first thereof and replacing it with the letter "B" and (ii) deleting the amount of "$100,000,000" in clause first thereof and replacing it with the amount of "$130,000,000". (h) Clause (viii) in Section 2.06(b) is amended in full to read as follows: "(viii) The Borrower shall prepay (whether as an optional or mandatory prepayment) and aggregate principal amount of Term B Advances in an amount equal to (A) $25,000,000 on or before December 31, 2000, (B) an additional $35,000,000 on or prior to June 30, 2001, (C) an additional $40,000,000 on or prior to December 31, 2001, (D) an additional $7,500,000 on or prior to April 30, 2002, (E) an additional $7,500,000 on or prior to June 30, 2002, (F) an additional $7,500,000 on or prior to September 30, 2002 and (G) an additional $7,500,000 on or prior to December 31, 2002" (i) Section 2.08 is amended by adding at the end thereof the following new clause (d): "(d) The Borrower shall pay on January 2, 2002 to the Administrative Agent for the account of each Lender, a fee equal to 3/4 of 1% of the sum, as of such date, of (i) the aggregate outstanding principal amount of Advances and (ii) the aggregate Unused Working Capital Commitment of such Lender." 4 (j) Section 5.01(j) is amended by (i) deleting the word "and" at the end of clause (i) thereof, (ii) adding immediately after clause (i) thereof the following new clause as clause (ii): "(ii) The Parent and each Grantor under the Security Agreement shall use their best efforts to cause the appropriate bank or other financial institution to enter into a Pledge Account Letter (as such term is defined in the Security Agreement) with respect to each Grantor's deposit account on or prior to December 31, 2001; and" and (iii) renumbering clause (ii) thereof as clause (iii). (k) Section 5.02(e)(iv) is amended in full to read as follows: "(iv) the sale of any asset by the Parent or any Subsidiary (other than a bulk sale of inventory and a sale of receivables other than delinquent accounts for collection purposes only) so long as (A) the purchase price paid to the Parent or such Subsidiary for such asset shall be no less than (1) in the case of the Hotel Collateral referred to in Schedule 5.02(e), the percentage of the Appraised Value of such assets set forth opposite each such asset under the column "Waiver Request to" on such Schedule, (2) in the case of Hotel Collateral other than Hotel Collateral referred to in Schedule 5.02(e), 75% of the Appraised Value of such asset (provided, that the Parent or any subsidiary may sell Hotel Collateral for less than 75% of the Appraised Value of such asset with the consent of the Administrative Agent (such consent not to be unreasonably withheld)) and (3) in all other cases, 75% of the fair market value of such asset at the time of such sale and (B) the purchase price for such asset shall be paid to the Parent or such Subsidiary solely in cash." (l) Section 5.04(a) is amended by deleting the table thereof and replacing it with the following new table:
QUARTER ENDING RATIO September 30, 1999 6.25:1 December 31, 1999 6.25:1 March 31, 2000 6.25:1 June 30, 2000 6.50:1 September 30, 2000 6.25:1 December 31, 2000 6.00:1 March 31, 2001 6.50:1 June 30, 2001 7.25:1 September 30, 2001 7.35:1 December 31, 2001 7.25:1 March 31, 2002 7.25:1
5 June 30, 2002 7.25:1 September 30, 2002 7.25:1 December 31, 2002 5.50:1 March 31, 2003 5.50:1 June 30, 2003 5.50:1 September 30, 2003 5.50:1 December 31, 2003 5.00:1 March 31, 2004 5.00:1 June 30, 2004 5.00:1 September 30, 2004 5.00:1 December 31, 2004 4.75:1 March 31, 2005 4.75:1 June 30, 2005 4.75:1 September 30, 2005 4.75:1 December 31, 2005 and thereafter 4.50:1
(m) Section 5.04(b) is amended by deleting the table thereof and replacing it with the following new table:
QUARTER ENDING RATIO December 31, 1999 0.97:1 March 31, 2000 1.00:1 June 30, 2000 0.90:1 September 30, 2000 0.90:1 December 31, 2000 1.00:1 March 31, 2001 0.95:1 June 30, 2001 0.85:1 September 30, 2001 0.85:1 December 31, 2001 0.85:1 March 31, 2002 0.90:1 June 30, 2002 0.90:1 September 30, 2002 0.90:1 December 31, 2002 and thereafter 1.00:1
(n) Section 5.04(c) is amended by deleting the table thereof and replacing it with the following new table:
QUARTER ENDING RATIO September 30, 1999 1.75:1
6 December 31, 1999 1.75:1 March 31, 2000 1.75:1 June 30, 2000 1.45:1 September 30, 2000 1.45:1 December 31, 2000 1.50:1 March 31, 2001 1.40:1 June 30, 2001 1.35:1 September 30, 2001 1.35:1 December 31, 2001 1.35:1 March 31, 2002 1.40:1 June 30, 2002 1.40:1 September 30, 2002 1.40:1 December 31, 2002 1.70:1 March 31, 2003 1.70:1 June 30, 2003 1.70:1 September 30, 2003 1.70:1 December 31, 2003 And thereafter 1.80:1
(o) Section 5.04(d) is amended by deleting the table thereof and replacing it with the following new table:
QUARTER ENDING RATIO September 30, 1999 4.00:1 December 31, 1999 4.00:1 March 31, 2000 4.00:1 June 30, 2000 4.25:1 September 30, 2000 4.25:1 December 31, 2000 4.00:1 March 31, 2001 3.75:1 June 30, 2001 4.00:1 September 30, 2001 4.00:1 December 31, 2001 3.75:1 March 31, 2002 3.75:1 June 30, 2002 3.50:1 September 30, 2002 3.50:1 December 31, 2002 4.00:1 March 31, 2003 4.00:1 June 30, 2003 4.00:1 September 30, 2003 4.00:1
7 December 31, 2003 3.50:1 March 31, 2004 3.50:1 June 30, 2004 3.50:1 September 30, 2004 3.50:1 December 31, 2004 3.25:1 March 31, 2005 3.25:1 June 30, 2005 3.25:1 September 30, 2005 3.25:1 December 31, 2005 3.00:1 March 31, 2006 3.00:1 June 30, 2006 3.00:1 September 30, 2006 3.00:1 December 31, 2006 and thereafter 2.75:1
(p) A new schedule 5.02(e) is added to the Credit Agreement in the form of Exhibit A hereto. SECTION 2. Amendments to the Security Agreement. The Security Agreement is, subject to the satisfaction of the conditions precedent set forth in Section 5, hereby amended by deleting clause (g) in Section 9 thereof and replacing it with the following new clause (g): "(g) As of July 23, 1999, such Grantor has no deposit accounts other than the deposit accounts listed on Schedule IV hereto. Each such Grantor hereby agrees that (i) within 5 Business Days after the Amendment No. 2 Effective Date, they shall deliver to the Collateral Agent a new Schedule IV listing the deposit accounts that each such Grantor has as of the Amendment No. 2 Effective Date and (ii) each such Grantor shall deposit or cause to be deposited all payments received by it to such deposit accounts and that the amounts deposited shall be transferred to the Concentration Account on a daily basis, as practicable, but in any event such transfer shall be made at least once a week. Notwithstanding the foregoing, each Grantor may maintain in a deposit account for each of the Hotel Collateral Properties an aggregate amount not to exceed $25,000 for each such Hotel Collateral Property." SECTION 3. Waiver. Subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, each Lender agrees to waive the provisions of Section 2.07(b) of the Credit Agreement with respect to any Default that occurred prior to the Amendment Effective Date (as herein defined). SECTION 4. Consent and Acknowldgement. Subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, each Lender hereby: 8 (a) Consent. Consents to the request of the Borrower that any certification that is required to be signed by the Chief Financial Officer pursuant to the Loan Documents may, at any time that there is no Chief Financial Officer, be signed by the Chief Executive Officer and either the Chief Accounting Officer or the Senior VP of Finance, notwithstanding any other provision of the Loan Documents. (b) Acknowledgement. Acknowledges that any going concern opinion in the financial statements and reports of the Borrower or the Parent and related disclosures filed with the Securities and Exchange Commission does not by itself constitute a Material Adverse Change and that notwithstanding any such going concern opinion and related disclosures, the Borrower would still have access to Working Capital Borrowings in accordance with the Credit Agreement, so long as no other Default has occurred and is continuing. SECTION 5. Conditions of Effectiveness of this Amendment. This Amendment shall become effective as of the date first above written (the "Amendment Effective Date") when, and only when, the Administrative Agent shall have received counterparts of this Amendment executed by each of the Borrower, the Affiliate Guarantors and the Grantors and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender has executed this Amendment and the consent attached hereto by each Loan Party (other than the Borrower), and shall become effective when and only when the Administrative Agent shall have additionally received all of the following (which in the case of documents shall be in form and substance satisfactory to the Required Lenders and in sufficient copies for each Lender): (a) a certificate duly signed by a the Chief Financial Officer of the Borrower stating that the representations and warranties contained in the Credit Agreement and each Loan Document are correct on and as of the date of such certificate as though made on and as of the date hereof other than any such representation and warranties that, by their terms, refer to a date other than the date of such certificate; (b) a fee equal to 1/4 of 1% of the aggregate outstanding principal amount of Advances and the aggregate Unused Working Capital Commitments of each Lender executing this Amendment after giving effect to this Amendment; and (c) all invoiced reasonable and actual costs and expenses of each Agent (including consultant and advisor fees and expenses and all reasonable fees and expenses of counsel to the Agent). Section 6. Concerning the Financial Statements and the Calculation of the Financial Covenants. The parties hereto acknowledge that (i) all financial statements to be delivered pursuant to the Credit Agreement as amended by this Amendment and (ii) all calculations of financial covenants under Section 5.04 of the Credit Agreement as amended by this Amendment reflected in certificates to be delivered pursuant to the Credit Agreement as amended by this Amendment, in each case, were and will be prepared giving effect to the amendments to be effected by this Amendment. 9 Section 7. Representations and Warranties. Each of the Borrower, the Affiliate Guarantors and the Grantors represents and warrants as follows: (a) On the Amendment Effective Date, after giving effect to this Amendment, no event has occurred and is continuing, or would result from the effectiveness of this Amendment, that constitutes a Default. (b) No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery, recordation, filing or performance by the Borrower of this Amendment or other transactions contemplated hereby. (c) This Amendment has been duly executed and delivered by each of the Borrower, the Affiliate Guarantors and the Grantors. Each of this Amendment, the Credit Agreement and the Security Agreement is the legal, valid and binding obligations of each of the Borrower, the Affiliate Guarantors and the Grantors (as applicable), enforceable against each of the Borrower, the Affiliate Guarantors and the Grantors in accordance with its terms. Section 8. Reference to and Effect on the Loan Documents. (a) On and after the Amended Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment. (b) On and after the Amendment Effective Date, each reference in the Security Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Security Agreement, and each reference in each of the other Loan Documents to "the Security Agreement", "thereunder", "thereof" or words of like import referring to the Security Agreement, shall mean and be a reference to the Security Agreement, as amended by this Amendment. (b) Each of the Credit Agreement and the Security Agreement, as specifically amended by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all of the Obligations of the Loan Parties under the Loan Documents, as amended hereby. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any of the Lenders or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of, or a consent to depart from, any of the terms and conditions of any of the Loan Documents. 10 Section 10. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. Section 11. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by its officer thereunder duly authorized, as of the first written above. LODGIAN FINANCING CORP. By ---------------------------------------- Title: LODGIAN, INC. By ---------------------------------------- Title: MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent By ---------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent By ---------------------------------------- Title: AFFILIATE GUARANTORS AND GRANTORS SERVICO, INC. By ---------------------------------------- Title: IMPAC HOTEL GROUP, LLC By ---------------------------------------- Title: SHEFFIELD MOTEL ENTERPRISES, INC. DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. GADSDEN HOSPITALITY, INC. LODGIAN ANAHEIM INC. LODGIAN ONTARIO INC. SERVICO PENSACOLA, INC. SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO FT. PIERCE, INC. SERVICO WEST PALM BEACH, INC. SERVICO WINTER HAVEN, INC. ALBANY HOTEL, INC. SERVICO NORTHWOODS, INC. BRUNSWICK MOTEL ENTERPRISES, INC. SERVICO CEDAR RAPIDS, INC. SERVICO METAIRIE, INC. SERVICO COLUMBIA, INC. SERVICO COLESVILLE, INC. SERVICO MARYLAND, INC. NH MOTEL ENTERPRISES, INC. MINNEAPOLIS MOTEL ENTERPRISES, INC. SERVICO ROSEVILLE, INC. LODGIAN MOUNT LAUREL, INC. SERVICO JAMESTOWN, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO GRAND ISLAND, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. 2 APICO INNS OF GREEN TREE, INC. APICO HILLS, INC. SERVICO HILTON HEAD, INC. SERVICO AUSTIN, INC. SERVICO MARKET CENTER, INC. SERVICO HOUSTON, INC. By: ---------------------------------------- Title: Vice President AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., it general partner By: ---------------------------------------- Title: SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, its general partner By: ---------------------------------------- Title: LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Lodgian Richmond SPE Inc. By: ---------------------------------------- Title: ATLANTA HILLSBORO LODGING, LLC LODGIAN RICHMOND L.L.C. By: ---------------------------------------- Title: Manager LENDERS: MORGAN STANLEY SENIOR FUNDING, INC. By ---------------------------------------- Title: ARCHIMEDES FUNDING II, LTD. By: ING Capital Advisors LLC, as Collateral Manager By: ---------------------------------------- Title: ARCHIMEDES FUNDING III, LTD. By: ING Capital Advisors LLC, as Collateral Manager By: ---------------------------------------- Title: BLACK DIAMOND CLO 1998-1 LTD. By: ---------------------------------------- Title: BLACK DIAMOND CLO 2000-1 LTD. By: ---------------------------------------- Title: CHANG HWA COMMERCIAL BANK LTD., NEW YORK BRANCH By: ---------------------------------------- Title: CANADIAN IMPERIAL BANK OF COMMERCE By: ---------------------------------------- Title: ELF FUNDING TRUST I By: Highland Capital Management, as Collateral Manager By: ---------------------------------------- Title: ELF FUNDING TRUST II By: BLUE SQUARE FUNDING SERIES 3 By: Bankers Trust Company, as Trustee By: ---------------------------------------- Title: EMERALD ORCHARD LIMITED By: ---------------------------------------- Title: GLENEAGLES TRADING LLC By: ---------------------------------------- Title: HIGHLAND LEGACY LIMITED By: Highland Capital Management, L.P., as Collateral Manager By: ---------------------------------------- Title: THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. By: ING Capital Advisors LLC, as Investment Advisor By: ---------------------------------------- Title: KZH HIGHLAND-2 By: ---------------------------------------- Title: KZH STERLING LLC By: ---------------------------------------- Title: LEHMAN BROTHERS By: ---------------------------------------- Title: LONG LANE MASTER TRUST IV By: Fleet National Bank as Trust Administrator By: ---------------------------------------- Title: NEMEAN CLO, LTD. By: ING Capital Advisors LLC, as Investor Manager By: ---------------------------------------- Title: ML CBO IV By: Highland Capital Management, L.P., as Collateral Manager By: ---------------------------------------- Title: MERRIL LYNCH SENIOR FLOATING RATE FUND, INC. By: ---------------------------------------- Title: MERRIL LYNCH SENIOR FLOATING RATE FUND II, INC. By: ---------------------------------------- Title: PILGRIM CLO 1999-1 Ltd. By: ING Pilgrim Investments, as its Investment Manager By: ---------------------------------------- Title: PILGRIM PRIME RATE TRUST By: ING Pilgrim Investments, as its Investment Manager By: ---------------------------------------- Title: PROVIDENT By: ---------------------------------------- Title: SEQUILS-ING I (HBDGM), LTD. By: ING Capital Advisors LLC, as Collateral Manager By: ---------------------------------------- Title: SUTTER CBO 1998-1 By: ---------------------------------------- Title: SUTTER CBO 1999-1 By: ---------------------------------------- Title: TRANSAMERICA EQUIPMENT FINANCIAL SERVICES CORPORATION By: ---------------------------------------- Title: WELLS FARGO BANK By: ---------------------------------------- Title: SRV-HIGHLAND, INC. By; ---------------------------------------- Title: CONSENT Dated as of May 15, 2001 Each of the undersigned as a Loan Party under the Credit Agreement referred to in the foregoing Amendment, hereby consents to such Amendment and hereby confirms and agrees that (a) notwithstanding the effectiveness of such Amendment, each Loan Document to which such Loan Party is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on and after the effectiveness of such Amendment, each reference in each Loan Document to the "Credit Agreement", "thereunder", "thereof" or words of like import shall mean and be a reference to the Credit Agreement, as amended by such Amendment and each reference in each Loan Document to the "Security Agreement", "thereunder", "thereof" or words of like import shall mean and be a reference to the Security Agreement, as amended by such Amendment, and (b) the Collateral Documents to which such Loan Party is a party and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations (in each case, as defined therein). SERVICO, INC. By: ---------------------------------------- Title: IMPAC HOTEL GROUP, LLC By: ---------------------------------------- Title: SHEFFIELD MOTEL ENTERPRISES, INC. DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. GADSDEN HOSPITALITY, INC. LODGIAN ANAHEIM INC. LODGIAN ONTARIO INC. SERVICO PENSACOLA, INC. SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO FT. PIERCE, INC. SERVICO WEST PALM BEACH, INC. 2 SERVICO WINTER HAVEN, INC. ALBANY HOTEL, INC. SERVICO NORTHWOODS, INC. BRUNSWICK MOTEL ENTERPRISES, INC. SERVICO CEDAR RAPIDS, INC. SERVICO METAIRIE, INC. SERVICO COLUMBIA, INC. SERVICO COLESVILLE, INC. SERVICO MARYLAND, INC. NH MOTEL ENTERPRISES, INC. MINNEAPOLIS MOTEL ENTERPRISES, INC. SERVICO ROSEVILLE, INC. LODGIAN MOUNT LAUREL, INC. SERVICO JAMESTOWN, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO GRAND ISLAND, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. APICO INNS OF GREEN TREE, INC. APICO HILLS, INC. SERVICO HILTON HEAD, INC. SERVICO AUSTIN, INC. SERVICO MARKET CENTER, INC. SERVICO HOUSTON, INC. By: ---------------------------------------- Title: Vice President AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., it general partner By: ---------------------------------------- Title: SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, its general partner 3 By: ---------------------------------------- Title: LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Lodgian Richmond SPE Inc. By: ---------------------------------------- Title: ATLANTA HILLSBORO LODGING, LLC LODGIAN RICHMOND L.L.C. By: ---------------------------------------- Title: Manager EXHIBIT A EX-10.33 4 g75096ex10-33.txt FORBEARANCE AGREEMENT EXHIBIT 10.33 [CONFORMED COPY] FORBEARANCE AGREEMENT FORBEARANCE AGREEMENT dated as of October 17, 2001 with respect to the Credit Agreement dated July 23, 1999 (as heretofore amended, the "CREDIT AGREEMENT") among Lodgian Financing Corp. (the "BORROWER"), Lodgian, Inc. (the "PARENT"), Impac Hotel Group LLC, Servico, Inc., the affiliate Guarantors party thereto, the Lenders party thereto (the "LENDERS"), Morgan Stanley Senior Funding, Inc., as Administrative Agent (the "ADMINISTRATIVE AGENT"), Collateral Agent, Co-Lead Arranger, Joint Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent (collectively with the Administrative Agent, the "AGENTS"). W I T N E S S E T H : WHEREAS, the Borrower has advised the Agents that it does not believe it will be in compliance with Sections 5.04(b) and 5.04(c) of the Credit Agreement for the period ended September 30, 2001, thereby resulting in an Event of Default under Section 6.01(c) of the Credit Agreement (the "SPECIFIED DEFAULTS"); and WHEREAS, the Agents and the Lenders have agreed to forbear from exercising certain default-related remedies against the Borrower under the Loan Documents on account of the Specified Defaults for a limited period of time and upon the terms and conditions set forth herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Defined Terms; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement. SECTION 2. Forbearance. (a) The Agents and the Lenders agree that until the expiration of the Forbearance Period, the Agents and the Lenders will temporarily forbear from the exercise of their default-related remedies against the Borrower or any other Loan Party solely to the extent the availability of such remedies arises exclusively from the Specified Defaults; provided that the Borrower shall comply during the Forbearance Period with all provisions, limitations, restrictions or prohibitions that would otherwise be effective or applicable under any of the Loan Documents during the continuance of any Default or Event of Default. "FORBEARANCE PERIOD" means the period beginning on the Effective Date (as defined in Section 10 below) and ending on the earliest to occur of (any such occurrence being a "TERMINATION EVENT"): (i) November 30, 2001, (ii) the occurrence of any Default other than a Specified Default, (iii) the commencement by any holder of Debt of the Borrower or any of its Subsidiaries (or by any indenture trustee or agent therefor), other than (x) Debt outstanding under the Loan Documents and (y) Debt held by no more than two entities in an aggregate principal amount not in excess of $500,000, of the exercise of any remedy or the taking by any such party of any other action in furtherance of collection or enforcement of any claim or Lien against the Borrower, any such Subsidiary or any of their respective assets or (iv) failure by the Borrower to comply with any of its obligations under this Agreement.(b) Upon a Termination Event, the agreement of the Agents and the Lenders hereunder to forbear from exercising their default-related remedies shall immediately terminate without the requirement of any demand, presentment, protest or notice of any kind, all of which the Borrower waives. The Borrower agrees that the Agents and the Lenders may at any time thereafter proceed to exercise any and all of their respective rights and remedies under any or all of the Loan Documents and/or applicable law, including, without limitation, their respective rights and remedies in connection with any or all of the Defaults, including, without limitation, the Specified Defaults. (c) Any agreement to extend the Forbearance Period must be set forth in writing and signed by the Agents and the Required Lenders. (d) THE BORROWER ACKNOWLEDGES AND AGREES THAT THE AGREEMENT OF THE AGENTS AND THE LENDERS HEREUNDER (I) TO FORBEAR FROM EXERCISING THEIR DEFAULT-RELATED REMEDIES WITH RESPECT TO THE SPECIFIED DEFAULTS AND (II) TO PERMIT THE MAKING OF THE PERMITTED BORROWING (AS DEFINED BELOW) AND THE ISSUANCE OF THE PERMITTED LETTERS OF CREDIT (AS DEFINED BELOW), SHALL NOT CONSTITUTE A WAIVER OF SUCH SPECIFIED DEFAULTS AND THAT THE AGENTS AND THE LENDERS EXPRESSLY RESERVE ALL RIGHTS AND REMEDIES THAT THE AGENTS AND THE LENDERS NOW OR MAY IN THE FUTURE HAVE UNDER ANY OR ALL OF THE LOAN DOCUMENTS AND/OR APPLICABLE LAW IN CONNECTION WITH ALL DEFAULTS AND EVENTS OF DEFAULT (INCLUDING WITHOUT LIMITATION THE SPECIFIED DEFAULTS). SECTION 3. Permitted Single Working Capital Borrowing and L/C Rollovers. Notwithstanding the occurrence and continuation of the Specified Defaults, the Borrower shall be permitted, subject to the other terms and conditions of the Credit Agreement and solely upon the effectiveness of this Agreement, (i) to make one Working Capital Borrowing on the Effective Date in an aggregate principal amount not to exceed $2,000,000 (the "PERMITTED 2 BORROWING") and (ii) solely with respect to Letters of Credit that are outstanding on the Effective Date, to renew such Letters of Credit on the same terms (including without limitation amount but excluding expiration date) and to replace any such Letters of Credit that by their current terms expire with new Letters of Credit having the same terms (including without limitation amount but excluding expiration date) and for the same purposes (such new Letters of Credit, together with such renewed Letters of Credit, the "PERMITTED LETTERS OF CREDIT"). Other than the making of the Permitted Borrowing and the issuance of the Permitted Letters of Credit, the Borrower shall not have the right to obtain and no Lender shall have any obligation to make, issue or renew, any Advance or any Letter of Credit or any other extension of credit under the Credit Agreement or any other Loan Document, without the prior written consent of the Required Lenders. SECTION 4. General Release. In consideration of, among other things, the forbearance provided for herein and the receipt of the proceeds of the Permitted Borrowing and the issuance of the Permitted Letters of Credit, the Parent and the Borrower, on behalf of itself and their respective Subsidiaries and its and their successors and assigns (collectively, "RELEASORS"), hereby forever waives, releases and discharges to the fullest extent permitted by law any and all claims (including, without limitation, crossclaims, counterclaims, rights of set-off and recoupment), causes of action, demands, suits, costs, expenses and damages (collectively, the "CLAIMS"), that any Releasor now has or hereafter may have, of whatsoever nature and kind, whether known or unknown, whether now existing or hereafter arising, whether arising at law or in equity, against any or all of the Agents and any Lender and their respective affiliates, shareholders and "controlling persons" (within the meaning of the federal securities laws), and their respective successors and assigns and each and all of the officers, directors, employees, agents, attorneys and other representatives of each of the foregoing (collectively, the "RELEASEES"), based in whole or in part on facts, whether or not now known, existing on or before the execution of this Agreement, except for Claims solely arising out of the gross negligence or wilful misconduct of any Releasees (the "EXCLUDED CLAIMS"). Acceptance by the Borrower of any Working Capital Advances or other financial accommodations made by the Agents or any Lender after the date hereof (including, without limitation, the accommodations contained in this Agreement) shall constitute a ratification, adoption and confirmation by Releasors of the foregoing general release of all Claims other than the Excluded Claims against any Releasee which are based in whole or in part on facts, whether or not now known or unknown, existing on or prior to the date of receipt of any such Working Capital Advances or other financial accommodations. In entering into this Agreement, the Borrower has consulted with and been represented by counsel and expressly disclaims any reliance on any representations, acts or omissions by any of the Releasees and 3 hereby agrees and acknowledges that the validity and effectiveness of the release set forth above do not depend in any way on any such representations, acts and/or omissions or the accuracy, completeness or validity thereof. The provisions of this Section shall survive the termination of the Credit Agreement and the other Loan Documents and payment in full of all amounts owing thereunder. SECTION 5. Representations and Covenants of Borrower. (a) The Borrower represents and warrants that (i) the representations and warranties of the Loan Parties set forth in the Credit Agreement and the other Loan Documents will be true on and as of the Effective Date (assuming for such purposes that this Agreement constitutes a Loan Document) and (ii) no Default or Event of Default will have occurred and be continuing on such date, other than the Specified Defaults. The Borrower confirms that the Credit Agreement and the other Loan Documents are in full force and effect. (b) In addition to the restrictions set forth in the Credit Agreement with respect to Capital Expenditures, the Borrower will not make, and will not permit any of its Subsidiaries to make, any Capital Expenditures other than (i) Capital Expenditures with respect to Hotel Collateral, (ii) Capital Expenditures that have been commenced prior to the Effective Date, (iii) Capital Expenditures that are financed solely with funds that have been segregated in an escrow account for the sole purpose of financing such Capital Expenditures or with cash flow so long as such cash flow will be reimbursed in full with funds on deposit in any such escrow account; provided that no Capital Expenditures shall be permitted in reliance on this clause (iii) to the extent financed with the proceeds of the Permitted Borrowing and (iv) other Capital Expenditures made on an emergency basis in an aggregate amount not in excess of $250,000. Failure to comply with this Section shall constitute an "Event of Default" under the Credit Agreement. (c) In addition to the information required to be furnished under the Loan Documents to the Agent and the Lender Parties (including without limitation pursuant to Section 5.03 of the Credit Agreement), the Parent will furnish to the Agent and the Lender Parties, with respect to each real property of the Parent and its Subsidiaries (whether or not such property is a Hotel Collateral Property), any revisions to the negotiated PIPs effected after the Effective Date. (d) The covenants set forth in subsections (b) and (c) above will terminate on November 30, 2001. Any agreement to waive compliance with such covenants while such covenants are in effect must be set forth in writing and signed by the Agents and the Required Lenders. SECTION 6. Monthly Interest Payments. Notwithstanding anything to the contrary in the Credit Agreement, beginning on November 30, 2001, the Borrower shall pay accrued and unpaid interest on the unpaid principal amount of 4 each Advance owing to any Lender monthly in arrears on the last Business Day of each calendar month, and failure to comply with this Section shall constitute an "Event of Default" under the Credit Agreement. Nothing in this Section 6 shall limit the obligations of the Borrower prior to November 30, 2001 to pay interest when due on Advances outstanding on the Effective Date in accordance with Section 2.07 of the Credit Agreement. SECTION 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 8. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall constitute a Loan Document. SECTION 9. No Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agents and the Lenders and their respective successors and assigns. No Person other than the parties hereto and any other Lender, and, in the case of Section 4 hereof, the Releasees, shall have any rights hereunder or be entitled to rely on this Agreement, and all third-party beneficiary rights (other than the rights of the Releasees under Section 4 hereof and any other Lender) are hereby expressly disclaimed. SECTION 10. Effectiveness. This Agreement shall become effective on the date when the following conditions are met (the "EFFECTIVE DATE"): (a) the Administrative Agent shall have received from each of the Borrower and the Required Lenders a counterpart hereof signed by such party or facsimile or other written confirmation (in form satisfactory to the Agent) that such party has signed a counterpart hereof; (b) the Borrower shall have permanently reduced the Unused Working Capital Commitments pursuant to Section 2.05 of the Credit Agreement and, after giving effect to such reduction (but prior to giving effect to the Permitted Borrowing), the Unused Working Capital Commitments shall not exceed $5,000,000; and (c) (i) the Borrower shall have consummated the sale of the Comfort Inn located in Roseville for gross cash proceeds of at least $4,225,000, substantially on the terms described by the Borrower to the Agents prior to the date hereof and (ii) the Borrower shall have permanently prepaid pursuant to Section 2.06(b) of the Credit Agreement 5 Term Advances in an aggregate principal amount at least equal to $4,000,000. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by its officer thereunder duly authorized, as of the first written above. LODGIAN FINANCING CORP. By: /s/ Karyn Gutierrez ----------------------------------- Title: President LODGIAN, INC. By: /s/ Karyn Gutierrez ----------------------------------- Title: Executive Vice President MORGAN STANLEY SENIORFUNDING, INC., as Administrative Agent By: /s/ Stephen Hannan ----------------------------------- Title: Vice President LEHMAN COMMERCIAL PAPER INC., as Documentation Agent By: /s/ Francis X. Gilhool ----------------------------------- Title: Authorized Signatory AFFILIATE GUARANTORS ANDGRANTORS SERVICO, INC. By: /s/ Karyn Gutierrez ----------------------------------- Title: President IMPAC HOTEL GROUP, LLC By: /s/ Karyn Gutierrez ----------------------------------- Title: President SHEFFIELD MOTEL ENTERPRISES, INC. DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. GADSDEN HOSPITALITY, INC. LODGIAN ANAHEIM INC. LODGIAN ONTARIO INC. SERVICO PENSACOLA, INC. SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO FT. PIERCE, INC. SERVICO WEST PALM BEACH, INC. SERVICO WINTER HAVEN, INC. ALBANY HOTEL, INC. SERVICO NORTHWOODS, INC. BRUNSWICK MOTEL ENTERPRISES, INC. SERVICO CEDAR RAPIDS, INC. SERVICO METAIRIE, INC. SERVICO COLUMBIA, INC. SERVICO COLESVILLE, INC. SERVICO MARYLAND, INC. NH MOTEL ENTERPRISES, INC. MINNEAPOLIS MOTEL ENTERPRISES, INC. SERVICO ROSEVILLE, INC. LODGIAN MOUNT LAUREL, INC. SERVICO JAMESTOWN, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO GRAND ISLAND, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. APICO INNS OF GREEN TREE, INC. APICO HILLS, INC. SERVICO HILTON HEAD, INC. SERVICO AUSTIN, INC. SERVICO MARKET CENTER, INC. SERVICO HOUSTON, INC. By: /s/ Karyn Gutierrez ----------------------------------- Title: President AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., it general partner By: /s/ Karyn Gutierrez ----------------------------------- Title: SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, its general partner By: /s/ Karyn Gutierrez ----------------------------------- Title: LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Lodgian Richmond SPE Inc. By: /s/ Karyn Gutierrez ----------------------------------- Title: ATLANTA HILLSBORO LODGING, LLC LODGIAN RICHMOND L.L.C. By: /s/ Karyn Gutierrez ----------------------------------- Title: Manager LENDERS: MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Stephen Hannan ----------------------------------- Title: Vice President ARCHIMEDES FUNDING II, LTD. By: ING Capital Advisors LLC, as ----------------------------------- Collateral Manager By: ----------------------------------- Title: ARCHIMEDES FUNDING LLC By: ING Capital Advisors LLC, as Collateral Manager By: ----------------------------------- Title: BLACK DIAMOND CLO 1998-1 LTD. By: /s/ Alan Corkish ----------------------------------- Title: Director BLACK DIAMOND CLO 2000-1 LTD. By: /s/ Alan Corkish ----------------------------------- Title: Director BLUE SQUARE FUNDING LIMITED SERIES 3 By: /s/ Jennifer Bohannon ----------------------------------- Title: Associate CHANG HWA COMMERCIAL BANK LTD.,NEW YORK BRANCH By: ----------------------------------- Title: CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ William M. Swenson ----------------------------------- Title: Authorized Signatory ELF FUNDING TRUST I By: Highland Capital Management, L.P. as Collateral Manager By: /s/ Mark K. Okada ----------------------------------- Title: Executive Vice President EMERALD ORCHARD LIMITED By: ----------------------------------- Title: GLENEAGLES TRADING LLC By: /s/ Ann E. Morris ----------------------------------- Title: Asst. Vice President HIGHLAND LEGACY LIMITED By: Highland Capital Management, L.P. as Collateral Manager By: /s/ Mark K. Okada ----------------------------------- Title: Executive Vice President THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. By: ING Capital Advisors LLC, as Investment Advisor By: ----------------------------------- Title: KZH HIGHLAND-2 LLC By: /s/ Susan Lee ----------------------------------- Title: Authorized Agent KZH STERLING LLC By: /s/ Susan Lee ----------------------------------- Title: Authorized Agent LEHMAN BROTHERS By: /s/ Francis X. Gilhool ----------------------------------- Title: Authorized Signatory LONG LANE MASTER TRUST IV By: Fleet National Bank as Trust Administrator By: /s/ Kevin Kerns ----------------------------------- Title: Managing Director ML CBO IV (CAYMAN) LTD. By: Highland Capital Management, L.P. as Collateral Manager By: /s/ Mark K. Okada ----------------------------------- Title: Executive Vice President MERRILL LYNCH MASTER SENIOR FLOATING RATE FUND, INC. By: ----------------------------------- Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: ----------------------------------- Title: NEMEAN CLO, LTD. By: ING Capital Advisors LLC, as Collateral Manager By: ----------------------------------- Title: PILGRIM CLO By: ----------------------------------- Title: PILGRIM PRIME RATE TRUST By: ----------------------------------- Title: PROVIDENT By: ----------------------------------- Title: SEQUILS-ING I (HBDGM), LTD. By: ING Capital Advisors LLC, as Collateral Manager By: ----------------------------------- Title: SRV-HIGHLAND, INC. By: /s/ Ann E. Morris ----------------------------------- Title: Assistant Vice President SUTTER CBO 1998-1 By: ----------------------------------- Title: SUTTER CBO 1999-1 By: ----------------------------------- Title: TRANSAMERICA EQUIPMENT FINANCIAL SERVICES CORPORATION By: /s/ Ron Linn --------------------------------------- Title: Vice President Region Credit Manager WELLS FARGO BANK By: ----------------------------------- Title: CONSENT Dated as of October 17, 2001 Each of the undersigned as a Loan Party under the Credit Agreement referred to in the foregoing Forbearance Agreement, hereby consents to such Forbearance Agreement and hereby confirms and agrees that (a) notwithstanding the effectiveness of such Forbearance Agreement, each Loan Document to which such Loan Party is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, and (b) the Collateral Documents to which such Loan Party is a party and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations (in each case, as defined therein). SERVICO, INC. By: Title: IMPAC HOTEL GROUP, LLC By: Title: SHEFFIELD MOTEL ENTERPRISES, INC. DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. GADSDEN HOSPITALITY, INC. LODGIAN ANAHEIM INC. LODGIAN ONTARIO INC. SERVICO PENSACOLA, INC. SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO FT. PIERCE, INC. SERVICO WEST PALM BEACH, INC. SERVICO WINTER HAVEN, INC. ALBANY HOTEL, INC. SERVICO NORTHWOODS, INC. BRUNSWICK MOTEL ENTERPRISES, INC. SERVICO CEDAR RAPIDS, INC. SERVICO METAIRIE, INC. SERVICO COLUMBIA, INC. SERVICO COLESVILLE, INC. SERVICO MARYLAND, INC. NH MOTEL ENTERPRISES, INC. MINNEAPOLIS MOTEL ENTERPRISES, INC. SERVICO ROSEVILLE, INC. LODGIAN MOUNT LAUREL, INC. SERVICO JAMESTOWN, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO GRAND ISLAND, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. APICO INNS OF GREEN TREE, INC. APICO HILLS, INC. SERVICO HILTON HEAD, INC. SERVICO AUSTIN, INC. SERVICO MARKET CENTER, INC. SERVICO HOUSTON, INC. By: Title: President AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., it general partner By: Title: SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, its general partner By: Title: LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Lodgian Richmond SPE Inc. By: Title: ATLANTA HILLSBORO LODGING, LLC LODGIAN RICHMOND L.L.C. By: Title: Manager EX-10.34 5 g75096ex10-34.txt FORBEARANCE AGREEMENT EXHIBIT 10.34 [CONFORMED COPY] FORBEARANCE AGREEMENT FORBEARANCE AGREEMENT dated as of November 14, 2001 with respect to the Credit Agreement dated July 23, 1999 (as amended, the "CREDIT AGREEMENT") among Lodgian Financing Corp. (the "BORROWER"), Lodgian, Inc. (the "PARENT"), Impac Hotel Group LLC, Servico, Inc., the affiliate Guarantors party thereto, the Lenders party thereto (the "LENDERS"), Morgan Stanley Senior Funding, Inc., as Administrative Agent (the "ADMINISTRATIVE AGENT"), Collateral Agent, Co-Lead Arranger, Joint Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent (collectively with the Administrative Agent, the "AGENTS"). W I T N E S S E T H : WHEREAS, the Borrower has advised the Agents that it does not believe it will be in compliance with Sections 5.04(a) and 5.04(d) of the Credit Agreement at one or more times on or prior to December 31, 2001, thereby resulting in the case of noncompliance with each such Section in an Event of Default under Section 6.01(c) of the Credit Agreement (collectively, the "ANYTIME COVENANT DEFAULTS"); WHEREAS, on October 17, 2001 the Borrower, the Parent, the Lenders and the Agents executed a Forbearance Agreement (the "OCTOBER FORBEARANCE AGREEMENT") pursuant to which, and subject to the conditions set forth therein, the Lenders agreed to temporarily forbear from the exercise of remedies with respect to the Specified Defaults referred to therein (such Specified Defaults, the "QUARTER END COVENANT DEFAULTS" and, together with the Anytime Covenant Defaults, the "DESIGNATED DEFAULTS"); and WHEREAS, the Agents and the Lenders have agreed to (i) extend the forbearance agreement contained in the October Forbearance Agreement with respect to the Quarter End Covenant Defaults and (ii) forbear from exercising certain default-related remedies against the Borrower or any other Loan Party under the Loan Documents on account of the Anytime Covenant Defaults, in each case for a limited period of time and upon the terms and conditions set forth herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Defined Terms; References. Unless otherwise specifically defined herein, all capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Credit Agreement. SECTION 2. Forbearance. (a) The Agents and the Lenders agree that until the expiration of the Forbearance Period, the Agents and the Lenders will temporarily forbear from the exercise of their default-related remedies against the Borrower or any other Loan Party solely to the extent the availability of such remedies arises exclusively from the Designated Defaults; provided that the Borrower shall comply during the Forbearance Period with all provisions, limitations, restrictions or prohibitions that would otherwise be effective or applicable under any of the Loan Documents during the continuance of any Default or Event of Default. "FORBEARANCE PERIOD" means the period beginning on the Effective Date (as defined in Section 10 below) and ending on the earliest to occur of (any such occurrence being a "TERMINATION EVENT"): (i) December 31, 2001, (ii) the occurrence of any Default other than a Designated Default, (iii) the commencement by any holder of Debt of the Borrower or any of its Subsidiaries (or by any indenture trustee or agent therefor), other than (x) Debt outstanding under the Loan Documents and (y) Debt held by no more than two entities in an aggregate principal amount not in excess of $500,000, of the exercise of any remedy or the taking by any such party of any other action in furtherance of collection or enforcement of any claim or Lien against the Borrower, any such Subsidiary or any of their respective assets, or (iv) failure by the Borrower to comply with any of its obligations under this Agreement or the October Forbearance Agreement. Effective on the Effective Date, this Section 2(a) replaces in its entirety Section 2(a) of the October Forbearance Agreement. Except as modified pursuant to this Section 2(a) and Section 6 herein, all the terms of the October Forbearance Agreement (including without limitation the covenants set forth in Section 5 thereof) remain in full force and effect. (b) Upon a Termination Event, the agreement of the Agents and the Lenders hereunder to forbear from exercising their default-related remedies shall immediately terminate without the requirement of any demand, presentment, protest or notice of any kind, all of which the Borrower waives. The Borrower agrees that the Agents and the Lenders may at any time thereafter proceed to exercise any and all of their respective rights and remedies under any or all of the Loan Documents and/or applicable law, including, without limitation, their respective rights and remedies in connection with any or all of the Defaults, including, without limitation, the Designated Defaults. (c) Any agreement to extend the Forbearance Period must be set forth in writing and signed by the Agents and the Required Lenders. 2 (d) THE BORROWER ACKNOWLEDGES AND AGREES THAT THE AGREEMENT OF THE AGENTS AND THE LENDERS HEREUNDER (I) TO FORBEAR FROM EXERCISING THEIR DEFAULT-RELATED REMEDIES WITH RESPECT TO THE DESIGNATED DEFAULTS AND (II) TO PERMIT THE MAKING OF THE PERMITTED BORROWING (AS DEFINED BELOW) AND THE ISSUANCE OF THE PERMITTED LETTERS OF CREDIT (AS DEFINED BELOW), SHALL NOT CONSTITUTE A WAIVER OF SUCH DESIGNATED DEFAULTS AND THAT THE AGENTS AND THE LENDERS EXPRESSLY RESERVE ALL RIGHTS AND REMEDIES THAT THE AGENTS AND THE LENDERS NOW OR MAY IN THE FUTURE HAVE UNDER ANY OR ALL OF THE LOAN DOCUMENTS AND/OR APPLICABLE LAW IN CONNECTION WITH ALL DEFAULTS AND EVENTS OF DEFAULT (INCLUDING WITHOUT LIMITATION THE DESIGNATED DEFAULTS). SECTION 3. Permitted Single Working Capital Borrowing and L/C Rollovers. Notwithstanding the occurrence and continuation of the Designated Defaults, the Borrower shall be permitted, subject to the other terms and conditions of the Credit Agreement and solely upon the effectiveness of this Agreement, (i) to make one Working Capital Borrowing on November 15, 2001 in an aggregate principal amount not to exceed $3,000,000 (the "PERMITTED BORROWING") solely for the purposes of paying interest on outstanding Advances that is due and payable under Section 2.07(a) of the Credit Agreement on November 15, 2001 and (ii) solely with respect to Letters of Credit that are outstanding on the Effective Date, to renew such Letters of Credit on the same terms (including without limitation amount but excluding expiration date) and to replace any such Letters of Credit that by their current terms expire with new Letters of Credit having the same terms (including without limitation amount but excluding expiration date) and for the same purposes (such new Letters of Credit, together with such renewed Letters of Credit, the "PERMITTED LETTERS OF CREDIT"). The Company hereby instructs the Administrative Agent to apply the proceeds of the Permitted Borrowing to the payment of such interest and notwithstanding anything to the contrary in Section 6.01(a) of the Credit Agreement, if such interest is not paid in full on November 15, 2001, such failure shall constitute an immediate "Event of Default" under the Credit Agreement. Other than the making of the Permitted Borrowing and the issuance of the Permitted Letters of Credit, the Borrower shall not have the right to obtain and no Lender shall have any obligation to make, issue or renew, any Advance or any Letter of Credit or any other extension of credit under the Credit Agreement or any other Loan Document, without the prior written consent of the Required Lenders. SECTION 4. General Release. In consideration of, among other things, the forbearance provided for herein and the receipt of the proceeds of the Permitted Borrowing and the issuance of the Permitted Letters of Credit, the Parent and the Borrower, on behalf of itself and their respective Subsidiaries and its and their successors and assigns (collectively, "RELEASORS"), hereby forever 3 waive, release and discharge to the fullest extent permitted by law any and all claims (including, without limitation, crossclaims, counterclaims, rights of set-off and recoupment), causes of action, demands, suits, costs, expenses and damages (collectively, the "CLAIMS"), that any Releasor now has or hereafter may have, of whatsoever nature and kind, whether known or unknown, whether now existing or hereafter arising, whether arising at law or in equity, against any or all of the Agents and any Lender and their respective affiliates, shareholders and "controlling persons" (within the meaning of the federal securities laws), and their respective successors and assigns and each and all of the officers, directors, employees, agents, attorneys and other representatives of each of the foregoing (collectively, the "RELEASEES"), based in whole or in part on facts, whether or not now known, existing on or before the execution of this Agreement. Acceptance by the Borrower of any Working Capital Advances or other financial accommodations made by the Agents or any Lender after the date hereof (including, without limitation, the accommodations contained in this Agreement) shall constitute a ratification, adoption and confirmation by Releasors of the foregoing general release of all Claims against any Releasee which are based in whole or in part on facts, whether or not now known or unknown, existing on or prior to the date of receipt of any such Working Capital Advances or other financial accommodations. In entering into this Agreement, the Borrower has consulted with and been represented by counsel and expressly disclaims any reliance on any representations, acts or omissions by any of the Releasees and hereby agrees and acknowledges that the validity and effectiveness of the release set forth above do not depend in any way on any such representations, acts and/or omissions or the accuracy, completeness or validity thereof. The provisions of this Section shall survive the termination of the Credit Agreement and the other Loan Documents and payment in full of all amounts owing thereunder. SECTION 5. Representations and Covenants of Borrower. (a) The Borrower represents and warrants that (i) the representations and warranties of the Loan Parties set forth in the Credit Agreement and the other Loan Documents will be true on and as of the Effective Date (assuming for such purposes that this Agreement constitutes a Loan Document) and (ii) no Default or Event of Default will have occurred and be continuing on such date, other than the Designated Defaults. The Borrower confirms that the Credit Agreement and the other Loan Documents are in full force and effect. (b) In addition to the information required to be furnished under the Loan Documents and the October Forbearance Agreement to the Agent and the Lender Parties (including without limitation pursuant to Section 5.03 of the Credit Agreement), the Parent will furnish to the Agent and the Lender Parties, within two Business Days after the end of each calendar week, a weekly flash 4 report with respect to such calendar week in the form agreed to between the Parent and the Agents. (c) The covenant set forth in subsection (b) above will terminate on December 31, 2001. Any agreement to waive compliance with such covenant while such covenant is in effect must be set forth in writing and signed by the Agents and the Required Lenders. SECTION 6. Bi-Weekly Interest Payments. Notwithstanding anything to the contrary in the Credit Agreement, the Borrower shall pay accrued and unpaid interest on the unpaid principal amount of each Advance owing to any Lender under the Credit Agreement on November 15, 2001, November 30, 2001 December 14, 2001 and December 31, 2001, and failure to comply with this Section shall constitute an "Event of Default" under the Credit Agreement. SECTION 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 8. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall constitute a Loan Document. SECTION 9. No Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agents and the Lenders and their respective successors and assigns. No Person other than the parties hereto and any other Lender, and, in the case of Section 4 hereof, the Releasees, shall have any rights hereunder or be entitled to rely on this Agreement, and all third-party beneficiary rights (other than the rights of the Releasees under Section 4 hereof and any other Lender) are hereby expressly disclaimed. SECTION 10. Effectiveness. This Agreement shall become effective on the date when the following conditions are met (the "EFFECTIVE DATE"): (a) the Administrative Agent shall have received from each of the Borrower and the Required Lenders a counterpart hereof signed by such party or facsimile or other written confirmation (in form satisfactory to the Agent) that such party has signed a counterpart hereof; and (b) the Borrower shall have paid all costs and expenses of each Agent (including legal fees and expenses of counsel to the Agents) that have been invoiced on or prior to the Effective Date or the Agents shall have received reasonable assurance from the Borrower that such invoiced 5 costs and expenses will be paid within one Business Day of the Effective Date. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by its officer thereunder duly authorized, as of the first written above. LODGIAN FINANCING CORP. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President LODGIAN, INC. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Secretary MORGAN STANLEY SENIORFUNDING, INC., as Administrative Agent By: /s/ Stephen Hannan --------------------------------------------- Title: Vice President LEHMAN COMMERCIAL PAPER INC., as Documentation Agent By: /s/ Francis X. Gilhool --------------------------------------------- Title: Authorized Signatory 6 AFFILIATE GUARANTORS AND GRANTORS SERVICO, INC. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President IMPAC HOTEL GROUP, LLC By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President SHEFFIELD MOTEL ENTERPRISES, INC. DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. GADSDEN HOSPITALITY, INC. LODGIAN ANAHEIM INC. LODGIAN ONTARIO INC. SERVICO PENSACOLA, INC. SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO FT. PIERCE, INC. SERVICO WEST PALM BEACH, INC. SERVICO WINTER HAVEN, INC. ALBANY HOTEL, INC. SERVICO NORTHWOODS, INC. BRUNSWICK MOTEL ENTERPRISES, INC. SERVICO CEDAR RAPIDS, INC. SERVICO METAIRIE, INC. SERVICO COLUMBIA, INC. SERVICO COLESVILLE, INC. SERVICO MARYLAND, INC. NH MOTEL ENTERPRISES, INC. MINNEAPOLIS MOTEL ENTERPRISES, INC. SERVICO ROSEVILLE, INC. LODGIAN MOUNT LAUREL, INC. SERVICO JAMESTOWN, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO GRAND ISLAND, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. APICO INNS OF GREEN TREE, INC. APICO HILLS, INC. SERVICO HILTON HEAD, INC. SERVICO AUSTIN, INC. SERVICO MARKET CENTER, INC. SERVICO HOUSTON, INC. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., it general partner By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, its general partner By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Lodgian Richmond SPE Inc. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President ATLANTA HILLSBORO LODGING, LLC LODGIAN RICHMOND L.L.C. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Manager LENDERS: MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Stephen Hannan --------------------------------------------- Title: Vice President BLACK DIAMOND CLO 1998-1 LTD. By: /s/ Alan Corkish --------------------------------------------- Title: Director BLACK DIAMOND CLO 2000-1 LTD. By: /s/ Alan Corkish --------------------------------------------- Title: Director BLACK DIAMOND INTERNATIONAL FUNDING, LTD. By: /s/ Alan Corkish --------------------------------------------- Title: Director BLUE SQUARE FUNDING LIMITED SERIES 3 By: Bankers Trust Company as Trustee By: /s/ Susan Anderson --------------------------------------------- Title: Assistant Vice President ELF FUNDING TRUST I By: Highland Capital Management, L.P. as Collateral Manager By: /s/ Todd Travers --------------------------------------------- Title: Senior Portfolio Manager EMERALD ORCHARD LIMITED By: /s/ Dana Schwalie --------------------------------------------- Title: Attorney-In-Fact GLENEAGLES TRADING LLC By: /s/ Ann E. Morris --------------------------------------------- Title: Assistant Vice President HIGHLAND LEGACY LIMITED By: Highland Capital Management, L.P. as Collateral Manager By: /s/ Todd Travers --------------------------------------------- Title: Senior Portfolio Manager KZH HIGHLAND-2 LLC By: /s/ Susan Lee --------------------------------------------- Title: Authorized Agent KZH STERLING LLC By: /s/ Susan Lee --------------------------------------------- Title: Authorized Agent LEHMAN BROTHERS By: /s/ Francis X. Gilhool --------------------------------------------- Title: Authorized Signatory LONG LANE MASTER TRUST IV By: Fleet National Bank as Trust Administrator By: /s/ Kevin Kerns --------------------------------------------- Title: Managing Director ML CBO IV (CAYMAN) LTD. By: Highland Capital Management, L.P. as Collateral Manager By: /s/ Todd Travers --------------------------------------------- Title: Senior Portfolio Manager SRV-HIGHLAND, INC. By: /s/ Ann E. Morris --------------------------------------------- Title: Assistant Vice President TRANSAMERICA EQUIPMENT FINANCIAL SERVICES CORPORATION By: /s/ Ron Linn --------------------------------------------- Title: Vice President, Region Credit Manager CONSENT Dated as of November 14, 2001 Each of the undersigned as a Loan Party under the Credit Agreement referred to in the foregoing Forbearance Agreement, hereby consents to such Forbearance Agreement and hereby confirms and agrees that (a) notwithstanding the effectiveness of such Forbearance Agreement, each Loan Document to which such Loan Party is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, and (b) the Collateral Documents to which such Loan Party is a party and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations (in each case, as defined therein). SERVICO, INC. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President IMPAC HOTEL GROUP, LLC By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President SHEFFIELD MOTEL ENTERPRISES, INC. DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. GADSDEN HOSPITALITY, INC. LODGIAN ANAHEIM INC. LODGIAN ONTARIO INC. SERVICO PENSACOLA, INC. SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO FT. PIERCE, INC. SERVICO WEST PALM BEACH, INC. SERVICO WINTER HAVEN, INC. ALBANY HOTEL, INC. SERVICO NORTHWOODS, INC. BRUNSWICK MOTEL ENTERPRISES, INC. SERVICO CEDAR RAPIDS, INC. SERVICO METAIRIE, INC. SERVICO COLUMBIA, INC. SERVICO COLESVILLE, INC. SERVICO MARYLAND, INC. NH MOTEL ENTERPRISES, INC. MINNEAPOLIS MOTEL ENTERPRISES, INC. SERVICO ROSEVILLE, INC. LODGIAN MOUNT LAUREL, INC. SERVICO JAMESTOWN, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO GRAND ISLAND, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. APICO INNS OF GREEN TREE, INC. APICO HILLS, INC. SERVICO HILTON HEAD, INC. SERVICO AUSTIN, INC. SERVICO MARKET CENTER, INC. SERVICO HOUSTON, INC. By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., it general partner By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, its general partner By: /s/ Daniel E. Ellis --------------------------------------------- Title: Vice President LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Lodgian Richmond SPE Inc. By: /s/ Daniel E. Ellis Title: Vice President ATLANTA HILLSBORO LODGING, LLC LODGIAN RICHMOND L.L.C. By: /s/ Daniel E. Ellis Title: Manager EX-10.35 6 g75096ex10-35.txt FORM OF VOLUNTARY PETITION UNDER CHAPTER 11 Exhibit 10.35 (OFFICIAL FORM 1) (9/07) FORM B1 - ------------------------------------------------------------------------------------------------------------------------------------ UNITED STATES BANKRUPTCY COURT VOLUNTARY PETITION SOUTHERN DISTRICT OF NEW YORK - ------------------------------------------------------------------------------------------------------------------------------------ Name of Debtor (if individual, enter Last, First, Middle): Name of Joint Debtor (Spouse) (Last, First, Middle): LODGIAN, INC. - ------------------------------------------------------------------------------------------------------------------------------------ All Other Names used by the Debtor in the last 6 years All Other Names used by the Joint Debtor in the last 6 years (include married, maiden, and trade names): (include married, maiden, and trade names): - ------------------------------------------------------------------------------------------------------------------------------------ Soc. Sec./Tax I.D. No. (if more than one, state all): Soc. Sec./Tax I.D. No.(if more than one, state all): S2-2093696 - ------------------------------------------------------------------------------------------------------------------------------------ Street Address of Debtor (No. & Street, City, State & Zip Code): Street Address of Joint Debtor 3445 Peachtree Road, NE, Suite 700 (No. & Street, City, State & Zip Code): Atlanta, Georgia 30326 - ------------------------------------------------------------------------------------------------------------------------------------ County of Residence or of the County of Residence or of the Principal Place of Business: Principal Place of Business: Fulton, Georgia - ------------------------------------------------------------------------------------------------------------------------------------ Mailing Address of Debtor (if different from street address): Mailing Address Joint Debtor (if different from street address): - ------------------------------------------------------------------------------------------------------------------------------------ Location of Principal Assets of Business Debtor (if different from street address above): - ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION REGARDING THE DEBTOR (CHECK APPLICABLE BOXES) VENUE (Check any applicable box) | | Debtor has been domiciled or has had a residence, principal place of business, or principal assets in this District for 180 days immediately preceding the date of this petition or for a longer part of such 180 days than in any other District. |X| There is a bankruptcy case concerning debtor's affiliate, general partner, or partnership pending in this District. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TYPE OF DEBTOR (Check all boxes that apply) | | Individual(s) | | Railroad |X| Corporation | | Stockbroker | | Partnership | | Commodity Broker | | Other ______________ NATURE OF DEBTS (Check one box) | | Consumer/Non-Business |X| Business CHAPTER 11 SMALL BUSINESS (Check all boxes that apply) - ------------------------------------------------------------ | | Debtor is a small business as defined in 11 U.S.C. Section 101. | | Debtor is and elects to be considered a small business under 11 U.S.C. Section 1121(e) (Optional) CHAPTER OR SECTION OF BANKRUPTCY CODE UNDER WHICH THE PETITION IS FILED (Check one box) ------------------------------------------------------------ | | Chapter 7 |X| Chapter 11 | | Chapter 13 | | Chapter 9 | | Chapter 12 | | Sec. 304 - Case ancillary to foreign proceeding ------------------------------------------------------------ FILING FEE (Check one box) |X| Filing Fee attached | | Filing Fee to be paid in installments (Applicable to individuals only) . Must attach signed application for the court's consideration certifying that the debtor is unable to pay fee except in installments. See Official Form No. 3. - -------------------------------------------------------------------------------- STATISTICAL/ADMINISTRATIVE INFORMATION (Estimates only)(*) |X| Debtor estimates that funds will be available for distribution to unsecured creditors. | | Debtor estimates that, after any exempt property is excluded and administrative expenses paid, there will be no funds available for distribution to unsecured creditors. THIS SPACE FOR COURT USE ONLY
- -------------------------------------------------------------------------------------------------------------------- 1-15 16-49 50-99 100-199 200-999 1000-over Estimated Number of Creditors | | | | | | | | | | |X| - --------------------------------------------------------------------------------------------------------------------
Estimated Assets*
$0 to $50,001 to $100,001 to $500,001 to $1,000,001 to $10,000,001 to $50,000,001 to More than $50,000 $100,000 $500,000 $1 million $10 million $50 million $100 million $100 million | | | | | | | | | | | | | | |X|
- -------------------------------------------------------------------------------------------------------------------- Estimated Debts* $0 to $50,001 to $100,001 to $500,001 to $1,000,001 to $10,000,001 to $50,000,001 to More than $50,000 $100,000 $500,000 $1 million $10 million $50 million $100 million $100 million | | | | | | | | | | | | | | |X| - ---------------------------------------------------------------------------------------------------------------------
*Consolidated with Affiliates. (OFFICIAL FORM 1) (9/07) - ------------------------------------------------------------------------------------------------------------------------------------ VOLUNTARY PETITION Name of Debtor(s): FORM B1, Page 2 (This page must be completed and filed in every case) - ------------------------------------------------------------------------------------------------------------------------------------ PRIOR BANKRUPTCY CASE FILED WITHIN LAST 6 YEARS (If more than one, attach additional sheet) - ------------------------------------------------------------------------------------------------------------------------------------ Location Case Number: Date Filed: Where Filed: - ------------------------------------------------------------------------------------------------------------------------------------ PENDING BANKRUPTCY CASE FILED BY ANY SPOUSE, PARTNER OR AFFILIATE OF THIS DEBTOR (If more than one, attach additional sheet) - ------------------------------------------------------------------------------------------------------------------------------------ Name of Debtor: Case Number: Date See Attached Schedule I - ------------------------------------------------------------------------------------------------------------------------------------ District: Relationship: Judge: - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURES - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE(S) OF DEBTOR(S) (INDIVIDUAL/JOINT) SIGNATURE OF DEBTOR (CORPORATION/PARTNERSHIP) I declare under penalty of perjury that the information I declare under penalty of perjury that the information provided in this petition is true and correct. provided in this petition is true and correct, and that I have been authorized to file this petition on behalf of the [If petitioner is an individual whose debts are primarily debtor. consumer debts and has chosen to file under chapter 7] I am aware that I may proceed under chapter 7, 11, 12 or 13 of The debtor requests relief in accordance with the chapter of title 11, United States Code, understand the relief title 11, United States Code, specified in this petition. available under each such chapter, and choose to proceed under chapter 7. I request relief in accordance with the chapter of title 11, United States Code, specified in this X /s/ David E. Hawthorne petition. ---------------------------------------------------------- Signature of Authorized Individual X -------------------------------------------------------------- David Hawthorne Signature of Debtor ---------------------------------------------------------- Printed Name of Authorized Individual X -------------------------------------------------------------- President & Chief Executive Officer Signature of Joint Debtor ---------------------------------------------------------- Title of Authorized Individual -------------------------------------------------------------- Telephone Number (If not represented by attorney) 12/20/01 ---------------------------------------------------------- -------------------------------------------------------------- Date Date - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE OF ATTORNEY SIGNATURE OF NON-ATTORNEY PETITION PREPARER X /s/ Adam Rogoff I certify that I am a bankruptcy petition preparer as ------------------------------------------------------------- defined in 11 U.S.C. Section 110, that I prepared this Signature of Attorney for Debtor(s) document for compensation, and that I have provided the debtor with a copy of this document. Adam Rogoff AR 0820 -------------------------------------- ------------------- Printed Name of Attorney for Debtor(s) Bar ID Number ---------------------------------------------------------- Printed Name of Bankruptcy Petition Preparer Cadwalader, Wickersham & Taft ------------------------------------------------------------- Firm Name ---------------------------------------------------------- Social Security Number 100 Maiden Lane ------------------------------------------------------------- ---------------------------------------------------------- Address Address New York, New York 10038 ------------------------------------------------------------- ---------------------------------------------------------- (212) 504-6000 Names and Social Security numbers of all other individuals ------------------------------------------------------------- who prepared or assisted in preparing this document: Telephone Number 12/20/01 If more than one person prepared this document, attach ------------------------------------------------------------- additional sheets conforming to the appropriate official Date form for each person. EXHIBIT A X ---------------------------------------------------------- (To be completed if debtor is required to file Signature of Bankruptcy Petition Preparer periodic reports (e.g., forms 10K and 10Q) with the Securities and Exchange Commission pursuant to Section ---------------------------------------------------------- 13 or 15(d) of the Securities Exchange Act of 1934 and Date is requesting relief under chapter 11) A bankruptcy petition preparer's failure to comply with the |X| Exhibit A is attached and made a part of this petition. provisions of title 11 and the Federal Rules of Bankruptcy Procedure may result in fines or imprisonment or both 11 EXHIBIT B U.S.C. Section 110; 18 U.S.C. Section 156. (To be completed if debtor is an individual whose debts are primarily consumer debts) I, the attorney for the petitioner named in the foregoing petition, declare that I have informed the petitioner that [he or she] may proceed under chapter 7, 11, 12, or 13 of title 11, United States Code, and have explained the relief available under each such chapter. X ------------------------------------------------------------- Signature of Attorney for Debtor(s) Date - ------------------------------------------------------------------------------------------------------------------------------------
CADWALADER, WICKERSHAM & TAFT Attorneys for the Debtors and Debtors in Possession 100 Maiden Lane New York, New York 10038 (212) 504-6000 Adam C. Rogoff, Esq. (AR 0820) Gregory M. Petrick, Esq. (GP 2175) UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - ----------------------------------- In re : Case No. : LODGIAN, INC., : 01-_______________( ) : Debtor, : Chapter 11 - ----------------------------------- EXHIBIT "A" TO VOLUNTARY PETITION(1) 1. If any of the debtor's securities are registered under Section 12 of the Securities and Exchange Act of 1934, the SEC file. number is 0-14681. 2. The following consolidated financial data is the latest available information on the debtor's condition as of September 30, 2001.(2) a. Total assets (Book Value) $1,073,232,000.00 ----------------- b. Total debts (including debts listed in 2.c., below) $968,664,000.00 ----------------- c. None of Debtor's debt obligations are held by more than 500 holders.
- ---------- (1) The following financial data shall not constitute an admission of liability by the Debtor. The Debtor reserves all rights to assert that any debt or claim listed herein as liquidated or fixed is in fact a disputed claim or debt. The Debtor also reserves all rights to challenge the priority, nature, amount or status of a claim or debt. (2) Excluding intercompany liabilities for the purposes of consolidated reporting herein. d. As of September 30, 2001 the Debtors have 28,479,837 shares of common stock issued and outstanding. e. The Debtors are one of the largest owners and operators of both full and limited-service hotels in the United States with 106 hotels containing approximately 19,893 rooms located in 32 states and one hotel in Windsor, Canada. 3. The following persons directly or indirectly own, control, or hold, with power to vote, 5% or more of the voting securities of the debtors: LODGIAN 5% COMMON SHAREHOLDERS NUMBER OF SHARES Eagle Asset Management, Inc. 576,424 William J. Yung 3,157,050 Dimensional Fund Advisors 1,502,900
AFFILIATE LIST On December 20, 2001, each of the affiliated entities listed below (including the debtor in this chapter 11 case) filed in this Court a voluntary petition for relief under chapter 11 of title 11, United States Code. Contemporaneously with the filing of these petitions, such entities filed a motion requesting that their chapter 11 cases be consolidated for procedural purposes only and jointly administered. LODGIAN FINANCIAL CORP. 1075 HOSPITALITY, L.P. ALBANY HOTEL, INC. AMI OPERATING PARTNERS, L.P. APICO HILLS, INC. APICO INNS OF GREEN TREE, INC. APICO INNS OF PITTSBURGH, INC. ATLANTA-BOSTON HOLDINGS L.L.C. ATLANTA-BOSTON LODGING L.L.C. ATLANTA-HILLSBORO LODGING, L.L.C. BRECKSVILLE HOSPITALITY, L.P. BRUNSWICK MOTEL ENTERPRISES, INC. COLUMBUS HOSPITALITY ASSOCIATES, L.P. DEDHAM LODGING ASSOCIATES I, L.P. DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. EAST WASHINGTON HOSPITALITY LIMITED PARTNERSHIP FORT WAYNE HOSPITALITY ASSOCIATES II, L.P. GADSDEN HOSPITALITY, INC. HILTON HEAD MOTEL ENTERPRISES, INC. IMPAC HOTEL GROUP, L.L.C. IMPAC HOTEL MANAGEMENT L.L.C. IMPAC HOTELS I, L.L.C. IMPAC HOTELS II, L.L.C. IMPAC HOTELS III, L.L.C. ISLAND MOTEL ENTERPRISES, INC. KINSER MOTEL ENTERPRISES LAWRENCE HOSPITALITY ASSOCIATES, L.P. LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP LODGIAN AMI, INC. LODGIAN ANAHEIM, INC. LODGIAN CAPITAL TRUST I LODGIAN HOTELS, INC. LODGIAN, INC. LODGIAN MOUNT LAUREL, INC. LODGIAN ONTARIO, INC. LODGIAN RICHMOND, LLC. MANHATTAN HOSPITALITY ASSOCIATES, L.P. MCKNIGHT MOTEL, INC. MELBOURNE HOSPITALITY ASSOCIATES, LP MINNEAPOLIS MOTEL ENTERPRISES, INC. MOON AIRPORT MOTEL, INC. NH MOTEL ENTERPRISES,INC. PENMOCO, INC. RALEIGH-DOWNTOWN ENTERPRISES, INC. SAGINAW HOSPITALITY, LP SECOND FAYETTEVILLE MOTEL ENTERPRISES,INC. SERVICO AUSTIN, INC. SERVJCO CEDAR RAPIDS, INC. SERVICO CENTRE ASSOCIATES, LTD. SERVICO COLUMBIA II, INC. SERVICO COLUMBIA, INC. SERVICO COUNCIL BLUFFS, INC. SERVICO FORT WAYNE, INC. SERVICO FRISCO, INC. SERVICO GRAND ISLAND, INC. SERVICO HILTON HEAD, INC. SERVICO HOTELS I, INC. SERVICO HOTELS II, INC. SERVICO HOTELS III, INC. SERVICO HOTELS IV, INC. SERVICO HOUSTON, INC. SERVICO JAMESTOWN, INC. SERVICO LANSING, INC. SERVICO MANAGEMENT CORP. SERVICO MARKET CENTER, INC. SERVICO MARYLAND, INC. SERVICO METAIRIE, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO NORTHWOODS, INC. SERVICO OMAHA CENTRAL, INC. SERVICO OMAHA, INC. SERVICO PENSACOLA 7200,INC. SERVICO PENSACOLA 7330, INC. SERVICO PENSACOLA, INC. SERVICO ROLLING MEADOWS, INC. SERVICO WEST DES MOINES, INC SERVICO WICHITA, INC. SERVICO WINDSOR, INC. SERVICO WINTER HAVEN, INC. SERVICO, INC. SHEFFIELD MOTEL ENTERPRISES, INC. -2- SIOUX CITY HOSPITALITY, LP WASHINGTON MOTEL ENTERPRISES, INC. WORCESTER HOSPITALITY ASSOCIATES, LP -3- EX-10.36 7 g75096ex10-36.txt REVOLVING CREDIT AGREEMENT EXHIBIT 10.36 REVOLVING CREDIT AND GUARANTY AGREEMENT Among LODGIAN, INC., a Debtor and a Debtor-in-Possession under Chapter 11 of the Bankruptcy Code as Borrower and THE SUBSIDIARIES OF THE BORROWER NAMED HEREIN, certain of which are a Debtor and a Debtor-in-Possession under Chapter 11 of the Bankruptcy Code as Guarantors and THE LENDERS PARTY HERETO, and MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent and Collateral Agent Dated as of December 31, 2001. ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms ........................................................2 SECTION 1.02. Terms Generally .....................................................18 ARTICLE 2 AMOUNT AND TERMS OF CREDIT SECTION 2.01. Commitment of the DIP Lenders .......................................18 SECTION 2.02. Availability of Commitment ..........................................18 SECTION 2.03. Letters of Credit ...................................................18 SECTION 2.04. Issuance ............................................................21 SECTION 2.05. Nature of Letter of Credit Obligations Absolute .....................21 SECTION 2.06. Making of Loans .....................................................22 SECTION 2.07. Repayment of Loans; Evidence of Debt ................................23 SECTION 2.08. Interest on Loans ...................................................23 SECTION 2.09. Default Interest ....................................................24 SECTION 2.10. Optional Termination or Reduction of Commitment .....................24 SECTION 2.11. Alternate Rate of Interest ..........................................24 SECTION 2.12. Refinancing of Loans ................................................25 SECTION 2.13. Mandatory Prepayment, Commitment Reduction and Termination; Cash Collateral ..........................................................26 SECTION 2.14. Optional Prepayment of Loans; Reimbursement of DIP Lenders ..........27 SECTION 2.15. Reserve Requirements; Change in Circumstances .......................29 SECTION 2.16. Change in Legality ..................................................30 SECTION 2.17. Pro Rata Treatment, Etc .............................................31 SECTION 2.18. Taxes ...............................................................31 SECTION 2.19. Certain Fees ........................................................34 SECTION 2.20. Commitment Fee ......................................................34 SECTION 2.21. Letter of Credit Fees ...............................................34 SECTION 2.22. Nature of Fees ......................................................35 SECTION 2.23. Priority and Liens ..................................................35 SECTION 2.24. Right of Set-off ....................................................37 SECTION 2.25. Security Interest in Letter of Credit Account .......................37 SECTION 2.26. Payment of Obligations ..............................................37 SECTION 2.27. No Discharge; Survival of Claims ....................................38 SECTION 2.28. Use of Cash Collateral ..............................................38 SECTION 2.29. General Provisions as to Payments ...................................38
v ARTICLE 3 REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization and Authority ...........................................38 SECTION 3.02. Due Execution ........................................................39 SECTION 3.03. Statements Made ......................................................39 SECTION 3.04. Financial Statements .................................................40 SECTION 3.05. Ownership ............................................................40 SECTION 3.06. Liens ................................................................40 SECTION 3.07. Compliance with Law ..................................................41 SECTION 3.08. Insurance ............................................................41 SECTION 3.09. The Orders ...........................................................41 SECTION 3.10. Use of Proceeds ......................................................41 SECTION 3.11. Litigation ...........................................................41 SECTION 3.12. Intellectual Property ................................................42 SECTION 3.13. Letters of Credit ....................................................42 SECTION 3.14. Pre-Petition Indebtedness ............................................42 SECTION 3.15. Properties ...........................................................42 SECTION 3.16. Leases ...............................................................42 SECTION 3.17. Investments ..........................................................43 ARTICLE 4 CONDITIONS OF LENDING SECTION 4.01. Conditions Precedent to Closing and Extension of Initial Loans and Initial Letters of Credit ............................................43 SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit ..........46 ARTICLE 5 AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements, Reports, Etc ...................................48 SECTION 5.02. Corporate Existence ..................................................51 SECTION 5.03. Insurance ............................................................51 SECTION 5.04. Obligations and Taxes ................................................51 SECTION 5.05. Notice of Event of Default, etc ......................................52 SECTION 5.06. Access to Books and Records ..........................................52 SECTION 5.07. Maintenance of Concentration Account .................................53 SECTION 5.08. Budget ...............................................................53 SECTION 5.09. Furnishing of Additional Items .......................................53
vi ARTICLE 6 NEGATIVE COVENANTS SECTION 6.01. Liens .....................................................55 SECTION 6.02. Merger, etc ...............................................55 SECTION 6.03. Indebtedness ..............................................55 SECTION 6.04. Capital Expenditures ......................................55 SECTION 6.05. Financial Covenants .......................................56 SECTION 6.06. Guarantees and Other Liabilities ..........................56 SECTION 6.07. Chapter 11 Claims .........................................57 SECTION 6.08. Dividends; Capital Stock ..................................57 SECTION 6.09. Transactions with Affiliates ..............................57 SECTION 6.10. Investments, Loans and Advances ...........................57 SECTION 6.11. Disposition of Assets .....................................58 SECTION 6.12. Nature of Business ........................................59 SECTION 6.13. Cash Management System ....................................59 ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default .........................................59 ARTICLE 8 THE AGENT SECTION 8.01. Administration by Agent ...................................63 SECTION 8.02. Advances and Payments .....................................63 SECTION 8.03. Sharing of Setoffs ........................................64 SECTION 8.04. Agreement of Required DIP Lenders .........................64 SECTION 8.05. Liability of Agent ........................................64 SECTION 8.06. Reimbursement and Indemnification .........................65 SECTION 8.07. Rights of Agent ...........................................66 SECTION 8.08. Independent DIP Lenders ...................................66 SECTION 8.09. Notice of Transfer ........................................66 SECTION 8.10. Successor Agent ...........................................66 ARTICLE 9 GUARANTY SECTION 9.01. Guaranty ..................................................67 SECTION 9.02. No Impairment of Guaranty .................................68 SECTION 9.03. Subrogation ...............................................68 SECTION 9.04. Release of Guaranty .......................................68
vii ARTICLE 10 MISCELLANEOUS SECTION 10.01. Notices ..........................................................69 SECTION 10.02. Survival of Agreement, Representations and Warranties, etc .......69 SECTION 10.03. Successors and Assigns ...........................................69 SECTION 10.04. Confidentiality ..................................................72 SECTION 10.05. Expenses .........................................................73 SECTION 10.06. Indemnity ........................................................73 SECTION 10.07. CHOICE OF LAW ....................................................74 SECTION 10.08. No Waiver ........................................................74 SECTION 10.09. Extension of Maturity ............................................74 SECTION 10.10. Amendments, etc ..................................................74 SECTION 10.11. Severability .....................................................75 SECTION 10.12. Headings .........................................................76 SECTION 10.13. Execution in Counterparts ........................................76 SECTION 10.14. Prior Agreements .................................................76 SECTION 10.15. Further Assurances ...............................................76 SECTION 10.16. WAIVER OF JURY TRIAL .............................................76
ANNEX A -- Commitment Amounts EXHIBIT A -- Form of Assignment and Acceptance EXHIBIT B -- Form of Note EXHIBIT C -- Form of Interim Order EXHIBIT D -- Form of Security and Pledge Agreement EXHIBIT E -- Form of Counsel Opinion SCHEDULE 1.01(a) -- Existing Joint Ventures SCHEDULE 3.05 -- Subsidiaries SCHEDULE 3.06 -- Liens SCHEDULE 3.11 -- Litigation SCHEDULE 3.12 -- Intellectual Property SCHEDULE 3.14 -- Pre-Petition Indebtedness SCHEDULE 3.15 -- Hotel Properties SCHEDULE 3.16 -- Leases SCHEDULE 3.17 -- Existing Investments.
viii REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of December 31, 2001, among LODGIAN, INC., a Delaware corporation (the "BORROWER"), a debtor and debtor-in-possession in a case pending under chapter 11 of the Bankruptcy Code, and each of the direct or indirect subsidiaries of the Borrower signatory hereto (each, a "GUARANTOR" and collectively, the "GUARANTORS"), certain of which Guarantors is a debtor and debtor-in-possession in a case pending under chapter 11 of the Bankruptcy Code (the cases of the Borrower and certain of the Guarantors, each a "CASe" and collectively, the "CASEs"), MORGAN STANLEY SENIOR FUNDING, INC., ("MSSF"), LEHMAN BROTHERS, INC., ("LEHMAN" and together with MSSF, the "CO-ARRANGERs") and each of the other financial institutions from time to time party hereto (together with MSSF and Lehman, the "DIP LENDERS"), MSSF, as administrative agent and collateral agent (in such capacity, the "AGENT") for the DIP Lenders. INTRODUCTORY STATEMENT On December 20, 2001 (the "PETITION DATE"), the Borrower and certain of the Guarantors filed voluntary petitions with the Bankruptcy Court initiating the Cases and have continued in the possession of their assets and in the management of their businesses pursuant to Sections 1107 and 1108 of the Bankruptcy Code. The Borrower has applied to the DIP Lenders for a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $25,000,000, all of the Borrower's obligations under which are to be guaranteed by the Guarantors. The proceeds of the Loans will be used only to finance capital expenditures on Primed Hotel Properties, as defined below, and to finance operations of the Borrower and certain of the Guarantors (including interest payable to Pre-Petition Lenders and the DIP Lenders), all in accordance with a budget approved by the Agent as hereinafter provided. To provide guarantees and security for the repayment of the Loans, the reimbursement of any draft drawn under a Letter of Credit and the payment of the other obligations of the Borrower and the Guarantors hereunder and under the other Loan Documents (including, without limitation, the Obligations of the Borrower under Section 6.03(a)(iv)), the Borrower and the Guarantors will provide to the Agent and the DIP Lenders the following (each as more fully described herein and as to the Guarantors only as applicable thereto): (a) a guaranty from each of the Guarantors of the due and punctual payment and performance of the obligations of the Borrower hereunder; (b) an allowed administrative expense claim in each of the Cases pursuant to Section 364(c)(1) of the Bankruptcy Code having priority over all administrative expenses of the kind specified in, or arising under, any Sections of the Bankruptcy Code (including, without limitation, Sections 105, 326, 328, 330, 331, 503(b), 507(a), 507(b), 546(c) or 726 thereof) pursuant to Section 364(c)(i) of the Code, whether or not such claims or expenses may become secured by a judgment lien or other non-consensual lien, levy or attachment; (c) a perfected Lien, pursuant to Section 364(c)(2) of the Bankruptcy Code, on all unencumbered property of the Borrower and the Guarantors (subject, in the case of leaseholds, to any notices required under applicable law) and on all cash and cash equivalents in the Letter of Credit Account, provided that amounts in the Letter of Credit Account shall not be subject to the Carve-Out hereinafter referred to; (d) a perfected Lien, pursuant to Section 364(c)(3) of the Bankruptcy Code, upon all property of the Borrower and the Guarantors (other than the Primed Assets and certain other exceptions), junior to existing valid and perfected Liens on such property, junior to Liens on such property granted as adequate protection to Pre-Petition Lenders and junior to Liens securing certain intercompany advances, as provided in the Orders; and (e) perfected first priority priming Liens, pursuant to Section 364(d)(1) of the Bankruptcy Code, on all Primed Assets; Provided, however, that all of the claims and the Liens granted hereunder in the Cases to the Agent and the DIP Lenders shall be subject to the Carve-Out to the extent provided in Section 2.23. Accordingly, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans. "ABR LOAN" shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Section 2. "ADDITIONAL CREDIT" shall have the meaning given such term in Section 4.02(d). 2 "ADJUSTED EBITDA" shall mean, for any period, all as determined without duplication, the aggregate net income (or net loss) of the Low Leverage Guarantors for such period, plus (a) the sum of (i) depreciation expense, (ii) amortization expense, (iii) other non-cash expenses and charges, (iv) net total Federal, state and local income tax expense, (v) gross interest expense for such period less gross interest income for such period, (vi) extraordinary losses and losses arising from sales of assets outside the ordinary course of business, (vii) any non-recurring charge or restructuring charge, (viii) the cumulative net effect (whether positive or negative) of any change in accounting principles, (ix) "chapter 11 expenses" (or "administrative costs reflecting chapter 11 expenses") and (x) allocated overhead and restructuring expense less (b) extraordinary gains and gains arising from sales of assets outside the ordinary course of business, in each case to the extent deducted in determining the aggregate net income (or net loss) of the Low Leverage Guarantors for such period provided that "Adjusted EBITDA" shall only include the net income for such period of any Person that is not a Subsidiary of the Borrower to the extent of dividends or distributions or other payments paid in cash to the Borrower or any of the Low Leverage Guarantors. "ADJUSTED LIBOR RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest Period divided by (b) a percentage (expressed as a decimal) equal to 100% minus Statutory Reserves. For purposes hereof, the term "LIBOR RATe" shall mean the rate (rounded upwards, if necessary, to the next 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period (provided that, if for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Interest Period such Eurodollar Borrowing, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "AFFILIATE" shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person (a "CONTROLLED PERSON") shall be deemed to be "controlled by" another Person (a "CONTROLLING PERSON") if the Controlling Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of the Controlled Person whether by contract or otherwise. "AGENT" shall have the meaning set forth in the Introduction. 3 "AGREEMENT" shall mean this Revolving Credit and Guaranty Agreement, as the same may from time to time be further amended, modified or supplemented. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2of 1%. For purposes hereof, "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by Citibank, N.A. as its base commercial lending rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving the rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "ASSET SALE AGREEMENT" shall mean any agreement with respect to the sale, lease or other disposition of any asset of the Borrower or the Guarantors that is (a) approved by the Required DIP Lenders and (b) to the extent required by the Bankruptcy Code, approved by the Bankruptcy Court. "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a DIP Lender and an Eligible Assignee, and accepted by the Agent and each Fronting Bank, substantially in the form of Exhibit A. "ATTRIBUTED DIP AMOUNT" shall mean, with respect to each Low Leverage Hotel Property, the amount set forth opposite such Low Leverage Hotel Property in Schedule 3.15 under the heading "Attributed DIP Amount", which amount equals the initial aggregate amount of the Commitments multiplied by the Attributed DIP Percentage for such Low Leverage Hotel Property. "ATTRIBUTED DIP PERCENTAGE" shall mean, with respect to each Low Leverage Hotel Property, the percentage set forth opposite such property in Schedule 3.15 under the heading "Proportional EBITDA". 4 "AVAILABLE COMMITMENT" shall mean (i) until the date of the Final Order, $10,000,000 and (ii) from and after the date of the Final Order (x) the Total Commitment less (y) the sum of (i) Attributed DIP Amount of each Low Leverage Hotel Property that is not a Primed Hotel Property plus (ii) the aggregate amount of loans and advances made to High Leverage Guarantors in reliance on Section 6.10(vi) that are outstanding on any date that is after the date of the Final Order and do not have Section 506(c) Status. "BANKRUPTCY CODE" shall mean The Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C.ss.101, et seq. "BANKRUPTCY COURT" shall mean the United States Bankruptcy Court for the Southern District of New York or any other court having jurisdiction over the Cases from time to time. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States. "BORROWER" shall have the meaning set forth on the first page of this Agreement. "BORROWING" shall mean the incurrence of Loans of a single Type made by the DIP Lenders on a single date and having, in the case of Eurodollar Loans, a single Interest Period (with any ABR Loan made pursuant to Section 2.16 being considered a part of the related Borrowing of Eurodollar Loans). "BUDGET" shall have the meaning set forth in Section 4.01(i). "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which banks in the State of New York are required or permitted to close (and, for a Letter of Credit, other than a day on which the Fronting Bank issuing such Letter of Credit is closed); provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits on the London interbank market. "CAPITAL EXPENDITURES" shall mean, for any period, the aggregate of all expenditures paid in cash by the Borrower and the Guarantors during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, equipment or intangibles or similar fixed asset accounts reflected in the consolidated balance sheet of the Borrower and the Guarantors (including equipment purchased simultaneously with the trade-in of existing equipment owned by the Borrower or any of the Guarantors to the extent of the gross amount of such purchase price less the book value of the equipment being traded in at such time). 5 "CAPITALIZED LEASE" shall mean, as applied to any Person, any lease of property by such Person as lessee that would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "CAPITAL STOCK" shall mean, any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "CARVE-OUT" shall have the meaning set forth in Section 2.23. "CASES" shall mean the Cases under chapter 11 of the Bankruptcy Code of the Borrower and certain of the Guarantors pending in the Bankruptcy Court. "CHANGE OF CONTROL" shall mean and be deemed to have occurred upon the occurrence of any of the following events: (i) any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, and regulations promulgated thereunder) shall have acquired beneficial ownership of more than 35% of the outstanding shares of Voting Stock of the Borrower and (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors of the Borrower. "VOTING STOCK" shall mean shares of Capital Stock entitled to vote generally in the election of directors, and "CONTINUING DIRECTORS" shall mean the directors of the Borrower on the Closing Date and each other director, if, in each case, such other director's election or nomination for election to the board of directors of the Borrower is recommended by at least a majority of the then Continuing Directors. "CLOSING DATE" shall mean the date on which this Agreement has been executed and the conditions precedent set forth in Section 4.01 have been satisfied or waived, which date shall occur promptly upon entry of the Interim Order, but not later than 15 days following the Petition Date. The Agent's execution and delivery of this Agreement shall constitute notice to the Borrowers of the satisfaction of the conditions precedent set forth in Section 4.01 and the occurrence of the Closing Date. "CO-ARRANGERS" shall have the meaning set forth on the first page of this Agreement. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. "COLLATERAL" shall mean the Collateral as defined in the Security and Pledge Agreement and all other collateral given, pursuant to orders of the Bankruptcy Court or otherwise, as security for or in connection with the Obligations. 6 "COMMITMENT" shall mean, with respect to each DIP Lender, the commitment of each DIP Lender hereunder in the amount set forth opposite its name on Annex A hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to this Agreement. "COMMITMENT FEE" shall have the meaning set forth in Section 2.20. "COMMITMENT PERCENTAGE" shall mean at any time, with respect to each DIP Lender, the percentage obtained by dividing its Commitment at such time by the Total Commitment at such time. "CONCENTRATION ACCOUNT" shall have the meaning set forth in Section 5.07. "CONSUMMATION DATE" shall mean the date (or if there is more than one of such dates, the first such date) of the substantial consummation (as defined in Section 1101(2) of the Bankruptcy Code and which, for purposes of this Agreement, shall be no later than the effective date) of a Reorganization Plan of the Borrower or any of the Guarantors that is confirmed pursuant to an order of the Bankruptcy Court in the Cases. "DIP LENDER AFFILIATE" means, (a) with respect to any DIP Lender, (i) an Affiliate of such DIP Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a DIP Lender or an Affiliate of such DIP Lender and (b) with respect to any DIP Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such DIP Lender or by an Affiliate of such investment advisor. "DIP LENDERS" shall have the meaning set forth on the first page of this Agreement. "DOLLARS" and "$" shall mean lawful money of the United States of America. "ELIGIBLE ASSIGNEE" shall mean (i) a commercial bank having total assets in excess of $1,000,000,000; (ii) a finance company, insurance company or other financial institution or fund, in each case acceptable to the Agent, which in the ordinary course of business extends credit of the type contemplated herein and has total assets in excess of $200,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA; (iii) a DIP Lender Affiliate; and (iv) any other financial institution satisfactory to the Borrower and the Agent. 7 "ENVIRONMENTAL LIEN" shall mean a Lien in favor of any Governmental Authority for (i) any liability under federal or state environmental laws or regulations or (ii) damages arising from or costs incurred by such Governmental Authority in response to a release or threatened release of a hazardous or toxic waste, substance or constituent, or other substance into the environment. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated) that is a member of a group of which the Borrower is a member and that is under common control within the meaning of Section 414(b) or (c) of the Code and the regulations promulgated and rulings issued thereunder. "EUROCURRENCY LIABILITIES" shall have the meaning assigned thereto in Regulation D issued by the Board, as in effect from time to time. "EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar Loans. "EURODOLLAR LOAN" shall mean any Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Section 2. "EVENT OF DEFAULT" shall have the meaning set forth in Section 7.01. "EXISTING JOINT VENTURE" shall mean each joint venture listed on Schedule 1.01(a) hereto. "FEES" shall collectively mean the Commitment Fees, Letter of Credit Fees and other fees referred to in Sections 2.19, 2.20 and 2.21. "FINAL ORDER" shall have the meaning given such term in Section 4.02(d). "FINANCIAL OFFICER" shall mean the chief financial officer of the Borrower. "FRONTING BANK" shall mean MSSF or such other DIP Lender (which other DIP Lender shall be reasonably satisfactory to the Borrower), in their capacities as the issuer(s) of Letters of Credit hereunder, and their respective successors in such capacity as provided for herein. A Fronting Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by an Affiliate of such Fronting Bank, in which case the term "Fronting Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate as may agree with MSSF to act in such capacity. 8 "GAAP" shall mean generally accepted accounting principles applied in accordance with Section 1.02. "GOVERNMENTAL AUTHORITY" shall mean any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case whether of the United States or foreign. "GUARANTOR" shall have the meaning set forth on the first page of this Agreement. "HIGH LEVERAGE GUARANTOR" shall mean any Guarantor that is not a Low Leverage Guarantor. "INDEBTEDNESS" shall mean, at any time and with respect to any Person, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including inventory, and services purchased, and expense accruals and deferred compensation items, arising in the ordinary course of business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person under Capitalized Leases, to the extent required to be so recorded, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities and all obligations of such Person in respect of (x) currency swap agreements, currency future or option contracts and other similar agreements designed to hedge against fluctuations in foreign interest rates and (y) interest rate swap, cap or collar agreements and interest rate future or option contracts; (vii) all Indebtedness referred to in clauses (i) through (vi) above guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss in respect of such Indebtedness, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such Indebtedness, and (viii) all Indebtedness referred to in clauses (i) through (vii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. 9 "INSUFFICIENCY" shall mean, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of ERISA. "INTERIM ORDER" shall have the meaning given such term in Section 4.01(b). "INTEREST PAYMENT DATE" shall mean (i) as to any Eurodollar Loan, the last day of each consecutive 30 day period running from the commencement of the applicable Interest Period, and (ii) as to all ABR Loans, the last calendar day of each month. "INTEREST PERIOD" shall mean, as to any Borrowing of Eurodollar Loans, the period commencing on the date of such Borrowing (including as a result of a refinancing of ABR Loans) or on the last day of the preceding Interest Period applicable to such Borrowing and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is one or three months thereafter, as the Borrower may elect in the related notice delivered pursuant to Sections 2.06(b) or 2.12; provided, however, that (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day, and (ii) no Interest Period shall end later than the Termination Date. "INVESTMENTS" shall have the meaning given such term in Section 6.10. "LETTER OF CREDIT" shall mean any irrevocable letter of credit issued pursuant to Section 2.03, which letter of credit shall, subject to Section 3.13, be (i) a standby or import documentary letter of credit, (ii) issued for purposes that are consistent with the ordinary course of business of the Borrower or any Subsidiary, or for such other purposes as are reasonably acceptable to the Agent, (iii) denominated in Dollars and (iv) otherwise in such form as may be reasonably approved from time to time by the Agent and the applicable Fronting Bank. "LETTER OF CREDIT ACCOUNT" shall mean the account established by the Borrower under the sole and exclusive control of the Agent designated as the "Lodgian, Inc." and used solely for the purposes set forth in Sections 2.03(b) and 2.13. "LETTER OF CREDIT FEES" shall mean the fees payable in respect of Letters of Credit pursuant to Section 2.21. "LETTER OF CREDIT OUTSTANDINGS" shall mean, at any time, the sum of (i) the aggregate undrawn stated amount of all Letters of Credit then outstanding plus (ii) all amounts theretofore drawn under Letters of Credit and not then reimbursed. 10 "LIEN" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement or any lease in the nature thereof). "LOAN" shall have the meaning given such term in Section 2.01. "LOAN DOCUMENTS" shall mean this Agreement, the Letters of Credit, the Security and Pledge Agreement and any other instrument or agreement executed and delivered in connection herewith. "LOW LEVERAGE GUARANTOR" shall mean each Guarantor that owns a Low Leverage Hotel Property or that is a holding company (i.e., does not own any hotel property directly but only investments in subsidiaries) that owns capital stock or Indebtedness of any such Guarantor that is a Low Leverage Guarantor. "LOW LEVERAGE HOTEL PROPERTY" shall mean each hotel property identified as a "Low Leverage Hotel Property" on Schedule 3.15. "MATURITY DATE" shall mean the first anniversary of the Petition Date. "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "MULTIPLE EMPLOYER PLAN" shall mean a Single Employer Plan, that (i) is maintained for employees of the Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such Plan has been or were to be terminated. "NET PROCEEDS" shall mean, in respect of any sale or other disposition of assets, the proceeds of such sale or disposition after the payment of or reservation for (a) expenses that are directly related to (or the need for which arises as a result of) the transaction of such sale or disposition, including, but not limited to, related severance costs, taxes payable, brokerage commissions, professional expenses, other similar costs that are directly related to the sale or disposition, (b) escrow and indemnification amounts required under the terms of such sale or other disposition and (c) the amount secured by valid and perfected Liens, if any, that are senior to the Liens on such assets held by the Agent on behalf of the DIP Lenders. "OBLIGATIONS" shall mean all obligations, now or hereafter existing, under this Agreement and the other Loan Documents, including, but not limited to, (a) the due and 11 punctual payment of all principal of and interest on the Loans and the reimbursement of all amounts drawn under Letters of Credit, (b) the due and punctual payment of the Fees and all other present and future, fixed or contingent, obligations of the Borrower and the Guarantors to the DIP Lenders and the Agent under the Loan Documents (including in connection with Indebtedness permitted under Section 6.03(a)(iv) hereof and arising subsequent to the Petition Date) and (c) any amendments, restatements, renewals, extensions or modifications of any of the foregoing. "ORDERS" shall mean (i) the Interim Order and the Final Order of the Bankruptcy Court referred to in Sections 4.01(b) and 4.02(d) and (ii) any cash management orders or cash collateral orders entered in the Cases with the approval of the Co-Arrangers. "OTHER TAXES" shall have the meaning given such term in Section 2.18. "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor agency or entity performing substantially the same functions. "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within twelve months from the date of acquisition thereof; (b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within six months from the date of acquisition thereof and having, at such date of acquisition, a rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (c) investments in certificates of deposit, banker's acceptances and time deposits (including Eurodollar time deposits) maturing within six months from the date of acquisition thereof issued or guaranteed by or placed with (i) any domestic office of the Agent or the bank with whom the Borrower and the Guarantors maintain their cash management system, provided, that if such bank is not a DIP Lender hereunder, such bank shall have entered into an agreement with the Agent pursuant to which such bank shall have waived all rights of setoff and confirmed that such bank does not have, nor shall it claim, a security interest therein or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal banking subsidiary of a bank holding company having a long-term unsecured debt rating of at least "A-2" or the. 12 equivalent thereof from Standard & Poor's Corporation or at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (d) investments in commercial paper maturing within six months from the date of acquisition thereof and issued by (i) the holding company of the Agent or (ii) the holding company of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has (A) a combined capital and surplus in excess of $250,000,000 and (B) commercial paper rated at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (e) investments in repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above; (f) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above; and (g) to the extent owned on the Petition Date, investments in the capital stock of any direct or indirect Subsidiary of the Borrower. "PERMITTED LIENS" shall mean (i) Liens imposed by law (other than Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due or that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens (other than Environmental Liens and any Lien imposed under ERISA) in existence on the Petition Date or thereafter imposed by law and created in the ordinary course of business; (iii) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations incurred in the ordinary course of business or arising as a result of progress payments under government contracts; (iv) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded) and interest of ground lessors, that do not interfere in any material respect with the ordinary conduct of the business of the Borrower or any Guarantor, as the case may be, and that do not detract in any material respect from the value of the property to which they attach or materially impair the use thereof to the Borrower or any Guarantor, as the 13 case may be and (v) extensions, renewals or replacements of any Lien referred to in paragraphs (i) through (iv) above, provided that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby; and provided further that the term "PERMITTED LIENS", when used with respect to any Collateral subject to a mortgage, shall mean the "Permitted Liens" or "Permitted Encumbrances" as defined in such mortgage only. "PERSON" shall mean any natural person, corporation, division of a corporation, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof. "PETITION DATE" shall have the meaning given such term in the Introductory Statement on the first page of this Agreement. "PLAN" shall mean a single Employer Plan or a Multiemployer Plan. "PREPAYMENT DATE" shall mean thirty (30) days after the entry of the Interim Order by the Bankruptcy Court if the Final Order has not been entered by the Bankruptcy Court prior to the expiration of such thirty (30) day period. "PRE-PETITION AGENT" shall mean MSSF as agent for the Pre-Petition Lenders. "PRE-PETITION CREDIT AGREEMENT" shall mean the Credit Agreement dated as of July 23, 1999, among Lodgian Financing Corp., the Borrower, Impac Hotel Group, LLC, Servico Inc., the Affiliate Guarantors party thereto, MSSF, as Administrative Agent, Collateral Agent, Co-Lead Arranger, Joint-Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint Book Manager and Lehman Commercial Paper Inc., as Documentation Agent and the several lenders from time to time party thereto and shall include all of the agreements granting security interests and Liens in property and assets of the Borrower and the Guarantors to the Pre-Petition Lenders, including without limitation, security agreements, mortgages and leasehold mortgages, each of which documents was executed and delivered (to the extent party thereto) by the Borrower and the Guarantors prior to the Petition Date, as each may have been amended or modified from time to time. "PRE-PETITION INDEBTEDNESS" shall mean all Indebtedness of the Borrower and its Subsidiaries outstanding on the Petition Date. "PRE-PETITION LENDERS" shall mean, collectively, those certain lenders to the Borrower and the Guarantors (to the extent party thereto) under the Pre-Petition Credit Agreement, together with any successors or assigns thereof. 14 "PRE-PETITION PAYMENT" shall mean a payment (by way of adequate protection or otherwise) of principal or interest or otherwise on account of any pre-petition Indebtedness of, or trade payables of, or other pre-petition claims against, the Borrower or any Guarantor that is the subject of a Case. "PRIMED ASSET" shall mean any Specified Asset; provided that the Bankruptcy Court has authorized pursuant to Section 364(d)(i) of the Bankruptcy Code that the Obligations under the Loan Documents be secured by a perfected first priority senior priming Lien on such Specified Asset. "PRIMED HOTEL PROPERTY" shall mean, at any time, any Low Leverage Hotel Property that is a Primed Asset. "PRIMED LENDER" shall mean the Pre-Petition Lenders and each other creditor that is owed Pre-Petition Indebtedness by a Low Leverage Guarantor that is secured by a valid Lien that existed prior to the Petition Date on a Primed Hotel Property. "REDUCTION PERCENTAGE" shall mean (i) with respect to any hotel property other than a Primed Hotel Property, 100% and (ii) with respect to any Primed Hotel Property, the fraction (expressed as a percentage, but not more than 100%) the numerator of which is the Attributed DIP Amount of such Primed Hotel Property and the denominator of which is the Net Cash Proceeds of such Primed Hotel Property. "REGISTER" shall have the meaning set forth in section 10.03(d). "REORGANIZATION PLAN" shall mean a plan of reorganization in any of the Cases. "REQUIRED DIP LENDERS" shall mean, at any time, DIP Lenders holding Loans representing in excess of 50% of the aggregate principal amount of such Loans outstanding or, if no such Loans are outstanding, DIP Lenders having Commitments representing in excess of 50% of the Total Commitment. "SCHEDULED PERCENTAGE" shall mean, with respect to any Primed Lender (or any DIP Lender that acquired a Commitment, directly or indirectly, from a Primed Lender), the aggregate of the Attributable DIP Percentages of all Primed Hotel Properties securing such Primed Lender's Pre-Petition Indebtedness. "SECURITY AND PLEDGE AGREEMENT" shall have the meaning set forth in Section 4.01(c). "SECTION 506(C) STATUS" shall have the meaning specified in Section 6.10(vi). 15 "SINGLE EMPLOYER PLAN" shall mean a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate or (ii) was so maintained and in respect of which the Borrower could have liability under Section 4069 of ERISA in the event such Plan has been or were to be terminated. "SPECIFIED ASSETS" shall mean all property of the Borrower and each Low Leverage Guarantor, including without limitation all real property, accounts receivable, rents, contracts, documents, inventory, equipment, general intangibles, instruments, interests in leaseholds, intellectual property, rights under license agreements and the Capital Stock of all Subsidiaries of the Borrower that are Low Leverage Guarantors. "STATUTORY RESERVES" shall mean on any date the percentage (expressed as a decimal) established by the Board and any other banking authority that is the then stated maximum rate for all reserves (including but not limited to any emergency, supplemental or other marginal reserve requirements) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency Liabilities (or any successor category of liabilities under Regulation D issued by the Board, as in effect from time to time). Such reserve percentages shall include, without limitation, those imposed pursuant to said Regulation. The Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in such percentage. "SUBSIDIARY" means, with respect to any Person (herein referred to as the "PARENT"), a corporation, partnership, limited liability company or other entity (whether now existing or hereafter organized) of which shares of stock or other ownership interest having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership, limited liability company or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by the parent, provided, however, that for all purposes of the Loan Documents, an Existing Joint Venture shall be deemed to be a Subsidiary. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "SUPER-MAJORITY DIP LENDERS" shall have the meaning given such term in Section 10.10(b). "SUPERPRIORITY CLAIM" shall mean a claim against the Borrower or any Guarantor in any of the Cases that is a superpriority administrative expense claim having priority over any or all administrative expenses and other claims of the kind specified in, or otherwise arising or ordered under, any Sections of the Bankruptcy Code (including, without limitation, Sections 105, 326, 328, 330, 331, 503(b), 507(a), 507(b), 546(c) 16 and/or 726 thereof), whether or not such claim or expenses may become secured by a judgment lien or other non-consensual lien, levy or attachment. "TAXES" shall have the meaning given such term in section 2.18. "TERMINATION DATE" shall mean the earliest to occur of (i) the Prepayment Date, (ii) the Maturity Date, (iii) the Consummation Date and (iv) the acceleration of the Loans and the termination of the Total Commitment in accordance with the terms hereof. "TERMINATION EVENT" shall mean (i) a "reportable event", as such term is described in Section 4043 of ERISA and the regulations issued thereunder (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC under Section 4043 of ERISA or such regulations) or an event described in Section 4068 of ERISA excluding events described in Section 4043(c)(9) of ERISA or 29 CFRss.ss.2615.21 or 2615.23, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(c) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) providing notice of intent to terminate a Plan pursuant to Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA or (v) any other event or condition (other than the commencement of the Cases and the failure to have made any contribution accrued as of the Petition Date but not paid) that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the imposition of any liability under Title IV of ERISA (other than for the payment of premiums to the PBGC). "TOTAL COMMITMENT" shall mean, at any time, the sum of the Commitments at such time. "TRANSFEREE" shall have the meaning given such term in Section 2.18. "TYPE" when used in respect of any Loan or Borrowing shall refer to the Rate of interest by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "RATE" shall mean the Adjusted LIBOR Rate and the Alternate Base Rate. "UNUSED TOTAL COMMITMENT" shall mean, at any time, (i) the Total Commitment less (ii) the sum of (x) the aggregate outstanding principal amount of all Loans and (y) the aggregate Letter of Credit Outstandings. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. 17 SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with any covenant set forth in Section 6, such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement applied on a basis consistent with the application used in the Borrower's audited financial statements referred to in Section 3.04. ARTICLE 2 AMOUNT AND TERMS OF CREDIT SECTION 2.01. Commitment of the DIP Lenders. (a) Each DIP Lender severally and not jointly with the other DIP Lenders agrees, upon the terms and subject to the conditions herein set forth (including, without limitation, the provisions of Section 2.02 and Section 2.28), to make revolving credit loans (each a "LOAN" and collectively, the "LOANS") to the Borrower at any time and from time to time during the period commencing on the date hereof and ending on the Termination Date in an aggregate principal amount not to exceed, when added to such DIP Lender's Commitment Percentage of the then aggregate Letter of Credit Outstandings (in excess of the amount of cash then held in the Letter of Credit Account pursuant to Section 2.03(b)), the Commitment of such DIP Lender, which Loans may be repaid and reborrowed in accordance with the provisions of this Agreement. (b) Each Borrowing shall be funded by the DIP Lenders pro rata in accordance with their respective Commitments; provided, however, that the failure of any DIP Lender to make any Loan shall not in itself relieve the other DIP Lenders of their obligations to lend. SECTION 2.02. Availability of Commitment. At no time shall the sum of the then outstanding aggregate principal amount of the Loans plus the then aggregate Letter of Credit Outstandings (in excess of the amount of cash then held in the Letter of Credit Account pursuant to Section 2.03(b)) exceed the lesser of (i) the Available Commitment and (ii) the Total Commitment, and no Loan shall be made or Letter of Credit issued in violation of the foregoing. SECTION 2.03. Letters of Credit. 18 (a) Upon the terms and subject to the conditions herein set forth, the Borrower may request a Fronting Bank, at any time and from time to time after the date hereof and prior to the Termination Date, to issue, and subject to the terms and conditions contained herein, such Fronting Bank shall issue, for the account of the Borrower or a Guarantor one or more Letters of Credit in support of obligations of the Borrower or such Guarantor that are acceptable to the Agent in its sole discretion; provided that no Letter of Credit shall be issued if after giving effect to such issuance (i) the aggregate Letter of Credit Outstandings shall exceed $5,000,000 or (ii) the aggregate Letter of Credit Outstandings, when added to the aggregate outstanding principal amount of the Loans, would exceed the lesser of (x) the Total Commitment and (y) the Available Commitment; and provided further that no Letter of Credit shall be issued if the Fronting Bank shall have received notice from the Agent or the Required DIP Lenders that the conditions to such issuance have not been met. (b) No Letter of Credit shall expire later than the Maturity Date, provided that if any Letter of Credit shall be outstanding on the Termination Date, the Borrower shall, at or prior to the Termination Date, except as the Agent may otherwise agree in writing, (i) cause all Letters of Credit that expire after the Termination Date to be returned to the Fronting Bank undrawn and marked "cancelled" or (ii) if the Borrower is unable to do so in whole or in part, either (x) provide a "back-to-back" letter of credit to one or more Fronting Banks in a form satisfactory to such Fronting Bank and the Agent (in their sole discretion), issued by a bank satisfactory to such Fronting Bank and the Agent (in their sole discretion), in an amount equal to the greater of (I) an amount, as determined by the Fronting Bank and the Agent, equal to the face amount of all outstanding Letters of Credit plus the sum of all projected contractual obligations to the Agent, the Fronting Bank and the DIP Lenders of the Borrower or Guarantor thereunder through the expiration date(s) of such Letters of Credit, and (II) 105% of the then undrawn stated amount of all outstanding Letters of Credit issued by such Fronting Banks and/or (y) deposit cash in the Letter of Credit Account in an amount equal to the greater of (I) an amount, as determined by the Fronting Bank and the Agent, equal to the face amount of all outstanding Letters of Credit plus the sum of all projected contractual obligations to the Agent, the Fronting Bank and the DIP Lenders of the Borrower or Guarantor thereunder and (II) 105% of the then undrawn stated amount of all outstanding Letters of Credit as collateral security for the Borrower's reimbursement obligations in connection therewith, such cash to be remitted to the Borrower upon the expiration, cancellation or other termination or satisfaction of such reimbursement obligations. (c) The Borrower shall pay to each Fronting Bank, in addition to such other fees and charges as are specifically provided for in Section 2.21 hereof, such fees and charges in connection with the issuance and processing of the Letter of Credit issued by such Fronting Bank as are customarily imposed by such Fronting Bank from time to time in connection with letter of credit transactions. 19 (d) Drafts drawn under each Letter of Credit shall be reimbursed by the Borrower in Dollars not later than the first Business Day following the date of draw and shall bear interest from the date of draw until the first Business Day following the date of draw at a rate per annum equal to the Alternate Base Rate plus 2.50% and thereafter until reimbursed in full at a rate per annum equal to the Alternate Base Rate plus 4.50% (computed on the basis of the actual number of days elapsed over a year of 360 days). The Borrower shall effect such reimbursement (x) if such draw occurs prior to the Termination Date (or the earlier date of termination of the Total Commitment), in cash or through a Borrowing without the satisfaction of the conditions precedent set forth in Section 4.02 or (y) if such draw occurs on or after the Termination Date (or the earlier date of termination of the Total Commitment), in cash. Each DIP Lender agrees to make the Loans described in clause (x) of the preceding sentence notwithstanding a failure to satisfy the applicable lending conditions thereto or the provisions of Sections 2.02 or 2.28. (e) Immediately upon the issuance of any Letter of Credit by any Fronting Bank, such Fronting Bank shall be deemed to have sold to each DIP Lender other than such Fronting Bank and each such other DIP Lender shall be deemed unconditionally and irrevocably to have purchased from such Fronting Bank, without recourse or warranty, an undivided interest and participation, to the extent of such DIP Lender's Commitment Percentage, in such Letter of Credit, each drawing thereunder and the obligations of the Borrower and the Guarantors under this Agreement with respect thereto. Upon any change in the Commitments pursuant to Section 10.03, it is hereby agreed that with respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the participations hereby created to reflect the new Commitment Percentages of the assigning and assignee DIP Lenders. Any action taken or omitted by a Fronting Bank under or in connection with a Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Fronting Bank any resulting liability to any other DIP Lender. (f) In the event that a Fronting Bank makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Fronting Bank pursuant to this Section, the Fronting Bank shall promptly notify the Agent, which shall promptly notify each DIP Lender of such failure, and each DIP Lender shall promptly and unconditionally pay to the Agent for the account of the Fronting Bank the amount of such DIP Lender's Commitment Percentage of such unreimbursed payment in Dollars and in same day funds. If the Fronting Bank so notifies the Agent, and the Agent so notifies the DIP Lenders prior to 11:00 a.m. (New York City time) on any Business Day, each of such DIP Lenders shall make available to the Fronting Bank such DIP Lender's Commitment Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such DIP Lender shall not have so made its Commitment Percentage of the amount of such payment available to the Fronting Bank, such DIP Lender agrees to pay to such Fronting Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is 20 paid to the Agent for the account of such Fronting Bank at the Federal Funds Effective Rate. The failure of any DIP Lender to make available to the Fronting Bank its Commitment Percentage of any payment under any Letter of Credit shall not relieve any other DIP Lender of its obligation hereunder to make available to the Fronting Bank its Commitment Percentage of any payment under any Letter of Credit on the date required, as specified above, but no DIP Lender shall be responsible for the failure of any other DIP Lender to make available to such Fronting Bank such other DIP Lender's Commitment Percentage of any such payment. Whenever a Fronting Bank receives a payment of a reimbursement obligation as to which it has received any payments from the DIP Lenders pursuant to this paragraph, such Fronting Bank shall pay to each DIP Lender which has paid its Commitment Percentage thereof, in Dollars and in same day funds, an amount equal to such DIP Lender's Commitment Percentage thereof. SECTION 2.04. Issuance. Whenever the Borrower desires a Fronting Bank to issue a Letter of Credit, it shall give to such Fronting Bank and the Agent at least two Business Days' prior written (including telegraphic, telex, facsimile or cable communication) notice (or such shorter period as may be agreed upon by the Agent, the Borrower and the Fronting Bank) specifying the date on which the proposed Letter of Credit is to be issued (which shall be a Business Day), the stated amount of the Letter of Credit so requested, the conditions for the drawing thereof, the expiration date of such Letter of Credit and the name and address of the beneficiary thereof. SECTION 2.05. Nature of Letter of Credit Obligations Absolute. The obligations of the Borrower to reimburse the DIP Lenders for drawings made under any Letter of Credit shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other right that the Borrower or any Guarantor may have at any time against a beneficiary of any Letter of Credit or against any of the DIP Lenders, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by a Fronting Bank of any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (v) any other circumstance or happening whatsoever, that is similar to any of the foregoing; or (vi) the fact that any Event of Default shall have occurred and be continuing. None of the Agent, the DIP Lenders, the Fronting Bank and their respective affiliates shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in 21 interpretation of technical terms or any consequence arising from causes beyond the control of the Fronting Bank; provided that the foregoing shall not excuse the Fronting Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Fronting Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. Without limiting the generality of the foregoing, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Fronting Bank may, in its sole discretion, either (A) accept and make payment upon such documents without responsibility for further investigation, regardless of any notice of information to the contrary, or (B) refuse to accept and make payment upon such documents if such documents do not strictly comply with the terms of such Letter of Credit. SECTION 2.06. Making of Loans. (a) Except as contemplated by Section 2.11, Loans shall be either ABR Loans or Eurodollar Loans as the Borrower may request subject to and in accordance with this Section, provided that all Loans made pursuant to the same Borrowing shall, unless otherwise specifically provided herein, be Loans of the same Type. Subject to Section 2.18, DIP Lender may fulfill its Commitment with respect to any Eurodollar Loan or ABR Loan by causing any lending office of such DIP Lender to make such Loan; provided that any such use of a lending office shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Subject to the other provisions of this Section and the provisions of Section 2.12, Borrowings of Loans of more than one Type may be incurred at the same time, provided that no more than five (5) Borrowings of Eurodollar Loans may be outstanding at any time. (b) The Borrower shall give the Agent prior notice of each Borrowing hereunder of at least three (3) Business Days for Eurodollar Loans and one (1) Business Day for ABR Loans; such notice shall be irrevocable and shall specify the amount of the proposed Borrowing (which shall not be less than $1,000,000 or an integral multiple of $500,000 in excess thereof in the case of Eurodollar Loans and not less than $500,000 or an integral multiple of $100,000 in excess thereof in the case of ABR Loans) and the date thereof (which shall be a Business Day) and shall contain disbursement instructions. Such notice, to be effective, must be received by the Agent not later than 12:00 noon, New York City time, on the third Business Day in the case of Eurodollar Loans and the first Business Day in the case of ABR Loans, preceding the date on which such Borrowing is to be made except as provided in the last sentence of this Section 2.06(b). Such notice shall specify whether the Borrowing then being requested is to be a Borrowing of ABR Loans or Eurodollar Loans. If no election is made as to the Type of Loan, such notice shall be deemed a request for Borrowing of ABR Loans. The Agent shall promptly notify each DIP Lender of its proportionate share of such Borrowing, the date of such 22 Borrowing, the Type of Borrowing or Loans being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the borrowing date specified in such notice, each DIP Lender shall make its share of the Borrowing available at the office of the Agent, no later than 12:00 noon, New York City time, in immediately available funds. Upon receipt of the funds made available by the DIP Lenders to fund any borrowing hereunder, the Agent shall disburse such funds in the manner specified in the notice of borrowing delivered by the Borrower. SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Agent for the account of each DIP Lender the then unpaid principal amount of each Loan on the Termination Date. (b) Each DIP Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such DIP Lender resulting from each Loan made by such DIP Lender, including the amounts of principal and interest payable and paid to such DIP Lender from time to time hereunder. (c) The Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each DIP Lender hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of the DIP Lenders and each DIP Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any DIP Lender or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any DIP Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such DIP Lender a promissory note payable to the order of such DIP Lender (or, if requested by such DIP Lender, to such DIP Lender and its registered assigns) in the form attached hereto as Exhibit B. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.03) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.08. Interest on Loans. 23 (a) Subject to the provisions of Section 2.09, each ABR Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Alternate Base Rate plus 2.50%. (b) Subject to the provisions of Section 2.09, each Eurodollar Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal, during each Interest Period applicable thereto, to the Adjusted LIBOR Rate for such Interest Period in effect for such Borrowing plus 3.50%. (c) Accrued interest on all Loans shall be payable in arrears on each Interest Payment Date applicable thereto, at maturity (whether by acceleration or otherwise), after such maturity on demand and (with respect to Eurodollar Loans) upon any repayment or prepayment thereof (on the amount prepaid). SECTION 2.09. Default Interest. If the Borrower or any Guarantor, as the case may be, shall default in the payment of the principal of or interest on any Loan or in the payment of any other amount becoming due hereunder (including, without limitation, the reimbursement pursuant to Section 2.03(d) of any draft drawn under a Letter of Credit), whether at stated maturity, by acceleration or otherwise, the Borrower or such Guarantor, as the case may be, shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to (x) in the case of Borrowings consisting of Eurodollar Loans, the Adjusted LIBOR Rate in effect for such Borrowing plus 5.50% and (y) in the case of all other amounts, the Alternate Base Rate plus 4.50%. SECTION 2.10. Optional Termination or Reduction of Commitment. Upon at least one Business Days' prior written notice to the Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Unused Total Commitment. Each such reduction of the Commitments shall be in the principal amount of $1,000,000 or any integral multiple of $500,000 in excess thereof. Simultaneously with each reduction or termination of the Unused Total Commitment, the Borrower shall pay to the Agent for the account of each DIP Lender the Commitment Fee accrued on the amount of the Commitment of such DIP Lender so terminated or reduced through the date thereof. Any reduction or termination, as applicable, of the Unused Total Commitment pursuant to this Section shall be deemed to be a reduction or termination of the Total Commitment and shall be applied pro rata to reduce the Commitment of each DIP Lender. SECTION 2.11. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Loan, the Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that reasonable means 24 do not exist for ascertaining the applicable Adjusted LIBOR Rate, the Agent shall, as soon as practicable thereafter, give written or telegraphic notice of such determination to the Borrower and the DIP Lenders, and any request by the Borrower for a Borrowing of Eurodollar Loans (including pursuant to a refinancing with Eurodollar Loans) pursuant to Section 2.06 or 2.12 shall be deemed a request for a Borrowing of ABR Loans. After such notice shall have been given and until the circumstances giving rise to such notice no longer exist, each request for a Borrowing of Eurodollar Loans shall be deemed to be a request for a Borrowing of ABR Loans. SECTION 2.12. Refinancing of Loans. The Borrower shall have the right, at any time, on three Business Days' prior irrevocable notice to the Agent (which notice, to be effective, must be received by the Agent not later than 1:00 p.m., New York City time, on the third Business Day preceding the date of any refinancing), (x) to refinance (without the satisfaction of the conditions set forth in Section 4 as a condition to such refinancing) any outstanding Borrowing or Borrowings of Loans of one Type (or a portion thereof) with a Borrowing of Loans of the other Type or (y) to continue an outstanding Borrowing of Eurodollar Loans for an additional Interest Period, subject to the following: (a) as a condition to the refinancing of ABR Loans with Eurodollar Loans and to the continuation of Eurodollar Loans for an additional Interest Period, no Event of Default shall have occurred and be continuing at the time of such refinancing; (b) if less than a full Borrowing of Loans shall be refinanced, such refinancing shall be made pro rata among the DIP Lenders in accordance with the respective principal amounts of the Loans comprising such Borrowing held by the DIP Lenders immediately prior to such refinancing; (c) the aggregate principal amount of Loans being refinanced shall be at least $1,000,000, provided that no partial refinancing of a Borrowing of Eurodollar Loans shall result in the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $1,000,000 in aggregate principal amount; (d) each DIP Lender shall effect each refinancing by applying the proceeds of its new Eurodollar Loan or ABR Loan, as the case may be, to its Loan being refinanced; (e) the Interest Period with respect to a Borrowing of Eurodollar Loans effected by a refinancing or in respect to the Borrowing of Eurodollar Loans being continued as Eurodollar Loans shall commence on the date of refinancing or the expiration of the current Interest Period applicable to such continuing Borrowing, as the case may be; 25 (f) a Borrowing of Eurodollar Loans may be refinanced only on the last day of an Interest Period applicable thereto; and (g) each request for a refinancing with a Borrowing of Eurodollar Loans that fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period of one month. In the event that the Borrower shall not give notice to refinance any Borrowing of Eurodollar Loans, or to continue such Borrowing as Eurodollar Loans, or shall not be entitled to refinance or continue such Borrowing as Eurodollar Loans, in each case as provided above, such Borrowing shall automatically be refinanced with a Borrowing of ABR Loans at the expiration of the then-current Interest Period. The Agent shall, after it receives notice from the Borrower, promptly give each DIP Lender notice of any refinancing, in whole or part, of any Loan made by such DIP Lender. SECTION 2.13. Mandatory Prepayment, Commitment Reduction and Termination; Cash Collateral. (a) On the date on which the Borrower or any of the Guarantors receives any Net Proceeds of a sale, lease, transfer or other disposition of assets of the Borrower, a Guarantor or any other Affiliate of the Borrower that are subject to Liens in favor of the Agent, the Total Commitment shall be reduced by an amount equal to the Reduction Percentage of the amount of such Net Proceeds; provided that if the Reduction Percentage of the Net Proceeds are less than $1,000,000 such reduction shall be made upon receipt of Net Proceeds such that, together with all other such amounts not previously applied, aggregate Net Proceeds required to be applied and not so applied are equal to at least $1,000,000. (b) If at any time the aggregate principal amount of the outstanding Loans plus the aggregate Letter of Credit Outstandings exceeds the lesser of (x) the Total Commitment and (y) the Available Commitment (after giving effect to any reduction to the Total Commitment pursuant to paragraph (a) of this Section), the Borrower will, within one Business Day, (i) prepay the Loans in an amount necessary to cause the aggregate principal amount of the outstanding Loans plus the aggregate Letter of Credit Outstandings to be equal to or less than the lesser of (x) the Total Commitment and (y) the Available Commitment, and (ii) if, after giving effect to the prepayment in full of the Loans, the aggregate Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account exceeds the lesser of (x) the Total Commitment and (y) the Available Commitment, deposit into the Letter of Credit Account an amount equal to 105% of the amount by which the 26 aggregate Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account so exceeds the lesser of (x) the Total Commitment or (y) the Available Commitment. (c) Upon the Termination Date, the Total Commitment shall be terminated in full and the Borrower shall pay the Loans in full and, except as the Agent may otherwise agree in writing, if any Letter of Credit remains outstanding, comply with Section 2.03(b). (d) The Borrower shall notify the Agent by telephone (confirmed by telecopy) of any prepayment or reduction under this Section not later than 12:30 p.m., New York City time, three Business Days (or as soon as practicable if it is not practicable to provide three Business Days notice) before the date of prepayment or reduction, as the case may be (or, solely if such prepayment will be a prepayment of ABR Loans only, no later than 12:30 p.m., New York City time, on the date of such prepayment). Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid (which may be the Borrower's then best estimate thereof if due to the nature of the transaction giving rise to such prepayment or reduction, the amount or date thereof cannot be determined with certainty). Promptly following receipt of any such notice, the Agent shall advise the affected DIP Lenders of the contents thereof. SECTION 2.14. Optional Prepayment of Loans; Reimbursement of DIP Lenders. (a) The Borrower shall have the right at any time and from time to time to prepay any Loans, in whole or in part, (x) with respect to Eurodollar Loans, upon at least three Business Days' prior written, telex or facsimile notice to the Agent and (y) with respect to ABR Loans on the same Business Day if written, telex or facsimile notice is received by the Agent prior to 1:00 p.m., New York City time, and thereafter upon at least one Business Day's prior written, telex or facsimile notice to the Agent; provided, however, that (i) each such partial prepayment shall be in integral multiples of $100,000 and, in any event not less than $500,000 and (ii) no prepayment of Eurodollar Loans shall be permitted pursuant to this Section 2.14(a) other than on the last day of an Interest Period applicable thereto unless such prepayment is accompanied by the payment of the amounts described in clause (i) of the first sentence of Section 2.14(b), and (iii) no partial prepayment of a Borrowing of Eurodollar Loans shall result in the aggregate principal amount of the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $1,000,000. Each notice of prepayment shall specify the prepayment date, the principal amount of the Loans to be prepaid and in the case of Eurodollar Loans, the Borrowing or Borrowings pursuant to which made, shall be irrevocable and shall commit the Borrower to prepay such Loan by the amount and on the date stated therein. The Agent shall, promptly after receiving notice from the Borrower hereunder, notify each DIP Lender of the principal amount of the Loans held by such DIP Lender that are to be prepaid, the prepayment date and the manner of application of the prepayment. 27 (b) The Borrower shall reimburse each DIP Lender on demand for any loss incurred or to be incurred by it in the reemployment of the funds released (i) resulting from any prepayment (for any reason whatsoever, including, without limitation, refinancing with ABR Loans) of any Eurodollar Loan required or permitted under this Agreement, if such Loan is prepaid other than on the last day of the Interest Period for such Loan (including, without limitation, any such prepayment in connection with the syndication of the credit facility evidenced by this Agreement) or (ii) in the event that after the Borrower delivers a notice of borrowing under Section 2.06 in respect of Eurodollar Loans, such Loans are not made on the first day of the Interest Period specified in such notice of borrowing for any reason other than a breach by such DIP Lender of its obligations hereunder. Such loss shall be the amount as reasonably determined by such DIP Lender as the excess, if any, of (A) the amount of interest which would have accrued to such DIP Lender on the amount so paid or not borrowed at a rate of interest equal to the Adjusted LIBOR Rate for such Loan (excluding loss of anticipated profits or margin), for the period from the date of such payment or failure to borrow to the last day (x) in the case of a payment or refinancing with ABR Loans other than on the last day of the Interest Period for such Loan, of the then current Interest Period for such Loan, or (y) in the case of such failure to borrow, of the Interest Period for such Loan which would have commenced on the date of such failure to borrow, over (B) the amount of interest which would have accrued to such DIP Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the London interbank market. Each DIP Lender shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such DIP Lender. (c) In the event the Borrower fails to prepay any Loan on the date specified in any prepayment notice delivered pursuant to Section 2.14(a), the Borrower on demand by any DIP Lender shall pay to the Agent for the account of such DIP Lender any amounts required to compensate such DIP Lender for any loss incurred by such DIP Lender as a result of such failure to prepay, including, without limitation, any loss, cost or expenses incurred by reason of the acquisition of deposits or other funds by such DIP Lender to fulfill deposit obligations incurred in anticipation of such prepayment, but without duplication of any amounts paid under Section 2.14(b). Each DIP Lender shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such DIP Lender. (d) Any partial prepayment of the Loans by the Borrower pursuant to Sections 2.13 or 2.14 shall be applied as specified by the Borrower or, in the absence of such specification, as determined by the Agent, and shall be applied to repay ratably the Loan of the several DIP Lenders included within such Borrowing or Borrowings, provided that, in the event such a partial prepayment is applied as determined by the Agent (in the absence of a specification by the Borrower), no Eurodollar Loans shall be prepaid pursuant to Section 2.13 to the extent that such Loan has an Interest Period ending after the required date of prepayment unless and until all outstanding ABR Loans and Eurodollar Loans with Interest Periods ending on such date have been repaid in full. 28 SECTION 2.15. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any DIP Lender of the principal of or interest on any Eurodollar Loan made by such DIP Lender or any fees or other amounts payable hereunder (other than changes in respect of Taxes, Other Taxes and taxes imposed on, or measured by, the net income or overall gross receipts or franchise taxes of such DIP Lender by the jurisdiction in which such DIP Lender has its principal office or in which the applicable lending office for such Eurodollar Loan is located or by any political subdivision or taxing authority therein, or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which such DIP Lender would not be subject to tax but for the execution and performance of this Agreement), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by such DIP Lender (except any such reserve requirement that is reflected in the Adjusted LIBOR Rate) or shall impose on such DIP Lender or the London interbank market any other condition affecting this Agreement or the Eurodollar Loans made by such DIP Lender, and the result of any of the foregoing shall be to increase the cost to such DIP Lender of making or maintaining any Eurodollar Loan or to reduce the amount of any sum received or receivable by such DIP Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such DIP Lender to be material, then the Borrower will pay to such DIP Lender in accordance with paragraph (c) below such additional amount or amounts as will compensate such DIP Lender for such additional costs incurred or reduction suffered. (b) If any DIP Lender shall have determined that the adoption or effectiveness after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any governmental authority, central bank or comparable agency charged with the interpretation of administration thereof, or compliance by any DIP Lender (or any lending office of such DIP Lender) or any DIP Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such DIP Lender's capital or on the capital of such DIP Lender's holding company, if any, as a consequence of this Agreement, the Loans made by such DIP Lender pursuant hereto, such DIP Lender's Commitment hereunder or the issuance of, or participation in, any Letter of Credit by such DIP Lender to a level below that which such DIP Lender or such DIP Lender's holding company could have achieved but for such adoption, change or compliance (taking into account DIP Lender's policies and the policies of such DIP Lender's holding company with respect to capital adequacy) 29 by an amount deemed by such DIP Lender to be material, then from time to time the Borrower shall pay to such DIP Lender such additional amount or amounts as will compensate such DIP Lender or such DIP Lender's holding company for any such reduction suffered. (c) A certificate of each DIP Lender setting forth such amount or amounts as shall be necessary to compensate such DIP Lender or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay each DIP Lender the amount shown as due on any such certificate delivered to it within 10 days after its receipt of the same. Any DIP Lender receiving any such payment shall promptly make a refund thereof to the Borrower if the law, regulation, guideline or change in circumstances giving rise to such payment is subsequently deemed or held to be invalid or inapplicable. (d) Failure on the part of any DIP Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such DIP Lender's right to demand compensation with respect to such period or any other period. The protection of this Section shall be available to each DIP Lender regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. SECTION 2.16. Change in Legality. (a) Notwithstanding anything to the contrary contained elsewhere in this Agreement, if (x) any change after the date of this Agreement in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration thereof shall make it unlawful for a DIP Lender to make or maintain a Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to a Eurodollar Loan or (y) at any time any DIP Lender determines that the making or continuance of any of its Eurodollar Loans has become impracticable as a result of a contingency occurring after the date hereof that adversely affect the London interbank market or the position of such DIP Lender in such market, then, by written notice to the Borrower, such DIP Lender may (i) declare that Eurodollar Loans will not thereafter be made by such DIP Lender hereunder, whereupon any request by the Borrower for a Eurodollar Borrowing shall, as to such DIP Lender only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any DIP Lender shall exercise its rights under clause (i) or (ii) of this paragraph (a), all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such DIP Lender or the converted Eurodollar Loans of such DIP Lender shall instead be applied to repay the ABR Loans 30 made by such DIP Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.16, a notice to the Borrower by any DIP Lender pursuant to paragraph (a) above shall be effective, if lawful, and if any Eurodollar Loans shall then be outstanding, on the last day of the then-current Interest Period; otherwise, such notice shall be effective on the date of receipt by the Borrower. SECTION 2.17. Pro Rata Treatment, Etc. All payments and repayments of principal and interest in respect of the Loans (except as provided in Sections 2.15 and 2.16) shall be made pro rata among the DIP Lenders in accordance with the then outstanding principal amount of the Loans and/or participations in Letter of Credit Outstandings and all outstanding undrawn Letters of Credit (and the unreimbursed amount of drawn Letters of Credit) hereunder and all payments of Commitment Fees and Letter of Credit Fees (other than those payable to a Fronting Bank) shall be made pro rata among the DIP Lenders in accordance with their Commitments. Interest in respect of any Loan hereunder shall accrue from and including the date of such Loan to but excluding the date on which such Loan is paid in full or converted to a Loan of a different Type. SECTION 2.18. Taxes. (a) Any and all payments by the Borrower or any Guarantor hereunder shall be made free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) taxes imposed on or measured by the net income or overall gross receipts of the Agent or any DIP Lender (or, as contemplated by Section 10.03 hereof, any transferee or assignee thereof, including a participation holder (any such entity being called a "TRANSFEREE")) and franchise taxes imposed on the Agent or any DIP Lender (or Transferee) by the United States or any jurisdiction under the laws of which the Agent or any DIP Lender (or Transferee) is organized or in which the applicable lending office of any such DIP Lender (or Transferee) or applicable office of the Agent is located or any political subdivision thereof or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which the Agent or such DIP Lender would not be subject to tax but for the execution and performance of this Agreement and (ii) taxes, levies, imposts, deductions, charges or withholdings ("AMOUNTS") with respect to payments hereunder to a DIP Lender (or Transferee) or the Agent in accordance with laws in effect on the later of the date of this Agreement and the date such DIP Lender (or Transferee) or the Agent becomes a DIP Lender (or Transferee or Agent, as the case may be), but not excluding, with respect to such DIP Lender (or Transferee) or the Agent, any increase in such Amounts solely as a result of any change in such laws occurring after such later date or any Amounts that would not have been imposed but for actions (other than actions contemplated by this Agreement) taken by the Borrower after such later date (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). If the Borrower or any Guarantor 31 shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the DIP Lenders (or any Transferee) or the Agent, (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) such DIP Lender (or Transferee) or the Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any current or future stamp or documentary taxes or any other excise or property taxes, charges, assessments or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "OTHER TAXES"). (c) The Borrower will indemnify each DIP Lender (or Transferee) and the Agent for the full amount of Taxes and Other Taxes paid by such DIP Lender (or Transferee) or the Agent, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other Governmental Authority. Such indemnification shall be made within 30 days after the date any DIP Lender (or Transferee) or the Agent, as the case may be, makes written demand therefor. If a DIP Lender (or Transferee) or the Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes as to which it has been indemnified by the Borrower pursuant to this Section, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after receipt of a request by the Borrower, apply for such refund at the Borrower's expense. If any DIP Lender (or Transferee) or the Agent receives a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrower pursuant to this Section, it shall promptly notify the Borrower of such refund and shall, within 30 days after receipt of a request by the Borrower (or promptly upon receipt, if the Borrower has requested application for such refund pursuant hereto), repay such refund to the Borrower (to the extent of amounts that have been paid by the Borrower under this Section with respect to such refund plus interest that is received by the DIP Lender (or Transferee) or the Agent as part of the refund), net of all out-of-pocket expenses of such DIP Lender (or Transferee) or the Agent and without additional interest thereon; provided that the Borrower, upon the request of such DIP Lender (or Transferee) or the Agent, agrees to return such refund (plus penalties, interest or other charges) to such DIP Lender (or Transferee) or the Agent in the event such DIP Lender (or Transferee) or the Agent is required to repay such refund. Nothing contained in this subsection (c) shall require any DIP Lender (or Transferee) or the Agent to make available any of its tax returns (or any other information relating to its taxes that it deems to be confidential). 32 (d) Within 30 days after the date of any payment of Taxes or Other Taxes withheld by the Borrower in respect of any payment to any DIP Lender (or Transferee) or the Agent, the Borrower will furnish to the Agent, at its address referred to on the signature pages hereof, the original or a certified copy of a receipt evidencing payment thereof (or, if such a receipt is not available, other written documentation reasonably satisfactory to the Agent). (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section shall survive the payment in full of the principal of and interest on all Loans made hereunder. (f) Each DIP Lender (or Transferee) that is organized under the laws of a jurisdiction outside the United States shall, if legally able to do so, prior to the immediately following due date of any payment by the Borrower hereunder, deliver to the Borrower such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including Internal Revenue Service Form W-8INY, Form W-8ECI or Form W-8BEN or any subsequent version thereof or successors thereto, properly completed and duly executed by such DIP Lender (or Transferee) establishing that such payment is (i) not subject to United States Federal withholding tax under the Code because such payment is effectively connected with the conduct by such DIP Lender (or Transferee) of a trade or business in the United States or (ii) totally exempt from United States Federal withholding tax or subject to a reduced rate of such tax under a provision of an applicable tax treaty. Unless the Borrower and the Agent have received forms or other documents satisfactory to them indicating that such payments hereunder or are not subject to United States Federal withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Agent shall withhold taxes from such payments at the applicable statutory rate. (g) The Borrower shall not be required to pay any additional amounts to any DIP Lender (or Transferee) in respect of United States Federal withholding tax pursuant to subsection (a) above if the obligation to pay such additional amounts would not have arisen but for a failure by such DIP Lender (or Transferee) to comply with the provisions of subsection (f) above. (h) Any DIP Lender (or Transferee) claiming any additional amounts payable pursuant to Section 2.15 or this Section 2.18 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrower or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole determination of such DIP Lender, be otherwise materially disadvantageous to such DIP Lender (or Transferee) or the Agent. 33 SECTION 2.19. Certain Fees. (a) Upfront Fee. The Borrower agrees to pay to the Agent for the ratable benefit of the DIP Lenders an upfront fee (the "UPFRONT FEE") equal to 2% of the Available Commitment payable in installments as follows: (i) on the Closing Date, the Borrower shall pay 2% of the amount of the Available Commitment on the Closing Date (that is, $200,000 or 2% of $10,000,000); (ii) on the date of the Final Order, the Borrower shall pay 2% of the amount of the Available Commitment (determined without giving effect to any reduction in the Available Commitment as a consequence of clause (y)(ii) of the definition of Available Commitment) in excess of $10,000,000; and (iii) on each date after the date of the Final Order on which the Available Commitment increases, the Borrower shall pay 2% of the amount of such increase. (b) Agent's Fee. The Borrower acknowledges its agreement to pay to the Agent, for the Agent's own account, an administrative agency fee at the times and in the amounts heretofore agreed between the Borrower and the Agent. SECTION 2.20. Commitment Fee. The Borrower shall pay to the DIP Lenders a commitment fee (the "COMMITMENT FEE") for the period commencing on the date hereof to the Termination Date or the earlier date of termination of the Commitment, computed (on the basis of the actual number of days elapsed over a year of 360 days) at the rate of 0.75% per annum on the average daily Unused Total Commitment. Such Commitment Fee, to the extent then accrued, shall be payable (x) monthly, in arrears, on the last calendar day of each month, (y) on the Termination Date and (z) as provided in Section 2.10 hereof, upon any reduction or termination in whole or in part of the Total Commitment. SECTION 2.21. Letter of Credit Fees. The Borrower shall pay with respect to each Letter of Credit (i) to the Agent on behalf of the DIP Lenders a fee calculated (on the basis of the actual number of days elapsed over a year of 360 days) at the rate of (x) 2.50% per annum on the undrawn stated amount thereof and (ii) to the Fronting Bank such Fronting Bank's customary fees for issuance, amendments and processing referred to in Section 2.03. In addition, the Borrower agrees to pay each Fronting Bank for its account a fronting fee in respect of each Letter of Credit issued by such Fronting Bank, for the period from and including the date of issuance of such Letter of Credit to and including the date of termination of such Letter of Credit, computed at a rate, and payable at times, to be determined by such Fronting Bank, the Borrower and the Agent. Accrued fees described in clause (i) of the first sentence of this paragraph in respect of each Letter of Credit shall be due and payable monthly in arrears on the last calendar day of each month and on the Termination Date, or such earlier date as the Total Commitment is 34 terminated. Accrued fees described in clause (ii) of the first sentence of this paragraph in respect of each Letter of Credit shall be payable at times to be determined by the Fronting Bank, the Borrower and the Agent. SECTION 2.22. Nature of Fees. All Fees shall be paid on the dates due, in immediately available funds, to the Agent for the respective accounts of the Agent, the Fronting Bank and the DIP Lenders, as provided herein and in the letter described in Section 2.19. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.23. Priority and Liens. (a) The Borrower and each of the Guarantors hereby covenants, represents and warrants that, upon entry of the Interim Order, the Obligations of the Borrower and each of the Guarantors that is the subject of a Case hereunder and under the Loan Documents and in respect of Indebtedness permitted by Section 6.03(a)(iv): (i) pursuant to Section 364(c)(1) of the Bankruptcy Code, shall at all times constitute an allowed Superpriority Claim; (ii) pursuant to Section 364(c)(2) of the Bankruptcy Code, shall at all times be secured by a perfected first priority Lien on all cash maintained in the Letter of Credit Account and any investments of the funds contained therein; (iii) pursuant to Section 364(c)(3) of the Bankruptcy Code, shall be secured by a perfected Lien upon all property of the Borrower and the Guarantors that are subject to the Cases (other than Primed Assets, as to which the Lien in favor of the Agent and the DIP Lenders will be as described in clause (iv) of this sentence) that is subject to valid and perfected liens in existence on the Petition Date or in existence on the Petition Date that are perfected subsequent to the Petition Date as permitted by Section 546(b) of the Bankruptcy Code Liens or granted after the Petition Date to provide adequate protection or that are Permitted Liens, which perfected Lien shall be junior to such valid and perfected Liens and junior to Liens securing certain intercompany advances as provided in the Orders; provided that such Lien need not apply to the property of Impac Hotels II, L.L.C. or Impac Hotels III, L.L.C. prior to the Final Order being entered; and (iv) pursuant to Section 364(d)(1) of the Bankruptcy Code, shall be secured by a perfected first priority, senior priming Lien on all Primed Assets, subject only to (x) in the event of the occurrence and during the continuance of an Event of Default or an event that would constitute an Event of Default with the giving of notice or lapse of time or both, the payment of allowed and unpaid professional fees and disbursements incurred by the Borrower, the Guarantors and any statutory committees appointed in the Cases in an aggregate amount not in excess of $1.5 million and (y) the payment of unpaid fees pursuant to 28 U.S.C.ss. 35 1930 and to the Clerk of the Bankruptcy Court (collectively, the "CARVE-OUT"), provided that amounts in the Letter of Credit Account and any investment of the funds contained therein shall not be subject to the Carve-Out, and provided further, that, except as otherwise provided in the Orders, no portion of the Carve-Out shall be utilized for the payment of professional fees and disbursements incurred in connection with any investigation of or challenge to the amount, extent, priority, validity, perfection or enforcement of the indebtedness of the Borrower and the Guarantors owing to the Pre-Petition Lenders or to the collateral securing such indebtedness, and provided further that, except as otherwise provided in Orders, as to proceeds of causes of action to recover preferences, fraudulent transfers or other avoidance claims under chapter 5 of the Bankruptcy Code, the Agent and the DIP Lenders shall have been granted an administrative claim pursuant to Section 503(b) of the Bankruptcy Code. The Superpriority Claims shall at all times be senior to the rights of the Borrower, the Guarantors, any chapter 11 trustee and, subject to section 726 of the Bankruptcy Code, any chapter 7 trustee, or any other creditor (including, without limitation, post-petition vendors and other post-petition creditors) in the Cases or any subsequent proceedings under the Bankruptcy Code, including, without limitation, any chapter 7 cases if any of the Borrower's or the Guarantors' Cases are converted to cases under chapter 7 of the Bankruptcy Code, subject only to the Carve-Out. The DIP Lenders agree that so long as no Event of Default or event which with the giving of notice or lapse of time or both would constitute an Event of Default shall have occurred, the Borrower and the Guarantors shall be permitted to pay compensation and reimbursement of expenses incurred in the ordinary course of business, or professional fees allowed and payable under 11 U.S.C.ss.330 and 11 U.S.C.ss.331 or otherwise permitted to be paid by Court order, as the same may be due and payable, and any compensation and expenses previously paid, or accrued but unpaid, prior to the occurrence of such Event of Default shall not reduce the Carve-Out. (b) As to all real property the title to which is held by the Borrower or any of the Guarantors, or the possession of which is held by the Borrower or any of the Guarantors pursuant to leasehold interest, the Borrower and each such Guarantor hereby assigns and conveys as security, grants a security interest in, hypothecates, mortgages, pledges and sets over unto the Agent on behalf of the DIP Lenders all of the right, title and interest of the Borrower and such Guarantor in all of such owned real property and in all such leasehold interests, together in each case with all of the right, title and interest of the Borrower and such Guarantor in and to all buildings, improvements, and fixtures related thereto, any lease or sublease thereof, all general intangibles relating thereto and all proceeds thereof. The Borrower and each Guarantor that is a subject of a Case acknowledges that, pursuant to the Orders, the Liens in favor of the Agent on behalf of the DIP Lenders in all of such real property and leasehold instruments shall be perfected without the recordation of any instruments of mortgage or assignment. The Borrower and each Guarantor further agree that, promptly upon the request of the Agent, the Borrower 36 and such Guarantor shall enter into separate fee and leasehold mortgages in recordable form with respect to such properties on terms satisfactory to the Agent and take all steps necessary to record and perfect such mortgages and real property liens under applicable non-bankruptcy law. The provisions of this Section shall not become effective with respect to Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. (and their respective assets) until the date of the Final Order. SECTION 2.24. Right of Set-off. Subject to the provisions of Section 7.01, upon the occurrence and during the continuance of any Event of Default, the Agent and each DIP Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law and without further order of or application to the Bankruptcy Court, but without prejudice to valid and pre-existing Liens and claims of other creditors, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent and each such DIP Lender to or for the credit or the account of the Borrower or any Guarantor against any and all of the obligations of such Borrower or Guarantor then due and owing under the Loan Documents, irrespective of whether or not such DIP Lender shall have made any demand under any Loan Document. Each DIP Lender and the Agent agrees promptly to notify the Borrower and the Guarantors after any such set-off and application made by such DIP Lender or by the Agent, as the case may be, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each DIP Lender and the Agent under this Section are in addition to other rights and remedies that such DIP Lender and the Agent may have upon the occurrence and during the continuance of any Event of Default. SECTION 2.25. Security Interest in Letter of Credit Account. The Borrower and the Guarantors hereby assign and pledge to the Agent, for its benefit and for the ratable benefit of the DIP Lenders, and hereby grant to the Agent, for its benefit and for the ratable benefit of the DIP Lenders, a first priority security interest, senior to all other Liens, if any, in all of the Borrower's and the Guarantors' right, title and interest in and to the Letter of Credit Account and direct investment of the funds contained therein. Cash held in the Letter of Credit Account shall not be available for use by the Borrower, whether pursuant to Section 363 of the Bankruptcy Code or otherwise. The provisions of this Section shall not become effective with respect to Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. (and their respective assets) until the date of the Final Order. SECTION 2.26. Payment of Obligations. Subject to the provisions of Section 7.01, upon the maturity (whether by acceleration or otherwise) of any of the Obligations under this Agreement or any of the other Loan Documents of the Borrower and the Guarantors, the DIP Lenders shall be entitled to immediate payment of such Obligations, and to exercise foreclosure and other remedies under the Loan Documents, without further application to or order of the Bankruptcy Court. 37 SECTION 2.27. No Discharge; Survival of Claims. Each of the Borrower and the Guarantors agrees that (i) its obligations hereunder shall not be discharged by the entry of an order confirming any Plan of Reorganization (and each of the Borrower and the Guarantors, pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and (ii) the Superpriority Claim granted to the Agent and the DIP Lenders pursuant to the Order and described in Section 2.23 and the Liens granted to the Agent pursuant to the Order and described in Sections 2.23 and 2.25 shall not be affected in any manner by the entry of an order confirming any Plan of Reorganization. SECTION 2.28. Use of Cash Collateral. Notwithstanding anything to the contrary contained herein, the Borrower shall not be permitted (i) to request a Borrowing under Section 2.06 or request the issuance of a Letter of Credit under Section 2.04 unless the Bankruptcy Court shall have entered the Interim Order or (ii) to request a Borrowing under Section 2.06 unless the Borrower and the Guarantors shall at that time have the use of all cash collateral subject to the Orders for the purposes described in Section 3.10. SECTION 2.29. General Provisions as to Payments. The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 noon (New York City time) on the date when due in Federal or other funds immediately available in New York City, without set-off or counterclaim, to the DIP Lenders at their addresses referred to in Section 10.01. Whenever any payment of principal of, or interest on, the Loans or of fees shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. ARTICLE 3 REPRESENTATIONS AND WARRANTIES In order to induce the DIP Lenders to make Loans and issue and/or participate in Letters of Credit hereunder, the Borrower and each of the Guarantors jointly and severally represent and warrant as follows: SECTION 3.01. Organization and Authority. Each of the Borrower and the Guarantors (i) is duly organized and validly existing under the laws of the State of its incorporation or formation, (ii) is duly qualified as a foreign corporation (or other entity) and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the financial condition, operations, business, properties or assets of the Borrower and the Guarantors, taken as a whole, (iii) subject to the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable) has the requisite corporate power and authority to effect the transactions contemplated hereby, and by the other Loan Documents to which it is a party and (iv) subject to the entry by the 38 Bankruptcy Court of the Interim Order (or the Final Order, when applicable) has all requisite corporate power and authority and the legal right to own, pledge, mortgage, lease and operate its properties, and to conduct its business as now or currently proposed to be conducted. SECTION 3.02. Due Execution. Upon the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable), the execution, delivery and performance by each of the Borrower and the Guarantors of each of the Loan Documents to which it is a party (including, without limitation, the grant and pledge by the Borrower and the Guarantors party thereto of the security interests granted pursuant to the Security and Pledge Agreement), (i) are within the respective corporate powers of each of the Borrower and the Guarantors, have been duly authorized by all necessary corporate action, including the consent of shareholders, partners or members where required, and do not (A) contravene the charter, by-laws or other organizational documents of any of the Borrower or the Guarantors, (B) violate any law (including, without limitation, the Securities Exchange Act of 1934) or regulation (including, without limitation, Regulations T, U or X of the Board of Governors of the Federal Reserve System), or any order or decree of any court or Governmental Authority, (C) conflict with or result in a breach of, or constitute a default under, any material indenture, mortgage or deed of trust entered into after the Petition Date or any material lease, agreement or other instrument entered into after the Petition Date binding on the Borrower or the Guarantors or any of their properties, or (D) result in or require the creation or imposition of any Lien upon any of the property of any of the Borrower or the Guarantors other than the Liens granted pursuant to this Agreement, the other Loan Documents or the Orders; and (ii) do not require the consent, authorization by or approval of or notice to or filing or registration with any Governmental Authority other than the entry of the Orders. Except for the entry of the Orders (and in the case of Guarantors that are not subject to the Cases, the filing of appropriate UCC financing statements), no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the perfection of the security interests granted pursuant to the Loan Documents or, subject to Section 7.01 hereof, the exercise by the Agent or the DIP Lenders of their respective rights and remedies under the Loan Documents. Upon the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable), this Agreement shall have been duly executed and delivered by each of the Borrower and the Guarantors. Upon the entry by the Bankruptcy Court of the Interim Order (or the Final Order, when applicable), this Agreement, and each of the other Loan Documents to which the Borrower or any of the Guarantors is or will be a party, when delivered hereunder or thereunder, will be, a legal, valid and binding obligation of the Borrower or such Guarantor, as the case may be, enforceable against the Borrower or such Guarantor, as the case may be, in accordance with its terms and the Orders. SECTION 3.03. Statements Made. The information that has been delivered in writing by the Borrower or any of the Guarantors to the Agent or to the Bankruptcy Court in connection with any Loan Document, and any financial statement delivered pursuant 39 hereto or thereto (other than to the extent that any such statements constitute projections), taken as a whole and in light of the circumstances in which made, contains no untrue statement of a material fact and does not omit to state a material fact necessary to make such statements not misleading; and, to the extent that any such information constitutes projections, such projections were prepared in good faith on the basis of assumptions, methods, data, tests and information believed by the Borrower or such Guarantor to be reasonable at the time such projections were furnished. SECTION 3.04. Financial Statements. The Borrower has furnished the DIP Lenders with copies of (i) the audited consolidated financial statement and schedules of the Borrower for the fiscal year ended December 31, 2000 and (ii) the unaudited consolidated financial statement and schedules of the Borrower for the fiscal quarter ended September 30, 2001. Such financial statements present fairly in all material respects (and subject in the case of clause (ii), to the absence of footnotes and to normal year-end adjustments) the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis as of such dates and for such periods; such balance sheets and the notes thereto disclose all liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the dates thereof required to be disclosed by GAAP and such financial statements were prepared in a manner consistent with GAAP, subject (in the case of such fiscal quarter statement) to normal year end adjustments. No material adverse change in the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, has occurred since September 30, 2001 other than those which customarily occur as a result of events leading up to and following the commencement of a proceeding under chapter 11 of the Bankruptcy Code and the commencement of the Cases (including, without limitation, those reflected in the financial projections heretofore made available to the Agent). SECTION 3.05. Ownership. Each of the Persons listed on Schedule 3.05 is a direct or indirect Subsidiary of the Borrower, and, except as indicated on Schedule 3.05, each such Person is a wholly-owned Subsidiary of the Borrower. The Borrower owns no other Subsidiaries, whether directly or indirectly, other than as set forth on Schedule 3.05. SECTION 3.06. Liens. There are no Liens of any nature whatsoever on any assets of the Borrower or any of the Guarantors other than: (i) Liens granted pursuant to the Pre-Petition Credit Agreement; (ii) Permitted Liens; (iii) Liens permitted pursuant to section 6.01; (iv) Liens in favor of the Agent and the DIP Lenders and (v) Liens existing on the Petition Date and permitted to exist pursuant to the Pre-Petition Credit Agreement (which Liens shall be identified on Schedule 3.06 hereto). Neither the Borrower nor any of the Guarantors is a party to any contract, agreement, lease or instrument the performance of which, either unconditionally or upon the happening of an event, will result in or require the creation of a Lien on any assets of the Borrower or any Guarantor or otherwise result in a violation of this Agreement other than the Liens granted to the Agent and the DIP Lenders as provided for in this Agreement. 40 SECTION 3.07. Compliance with Law. (a) (i) The operations of the Borrower and the Guarantors comply in all material respects with all applicable environmental, health and safety statutes and regulations, including, without limitation, regulations promulgated under the Resource Conservation and Recovery Act (42 U.S.C.ss.ss.6901 et seq.); (ii) none of the operations of the Borrower or the Guarantors is the subject of any Federal or state investigation evaluating whether any remedial action involving a material expenditure by the Borrower or any Guarantor is needed to respond to a release of any Hazardous Waste or Hazardous Substance (as such terms are defined in any applicable state or Federal environmental law or regulations) into the environment; and (iii) neither the Borrower nor any Guarantor has any material contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. (b) Neither the Borrower nor any Guarantor is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority the violation of which, or a default with respect to which, would have a material adverse effect on the financial condition, operations, business, properties or assets of the Borrower and the Guarantors, taken as a whole. SECTION 3.08. Insurance. All policies of insurance of any kind or nature owned by or issued to the Borrower and the Guarantors, including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation, employee health and welfare, title, property and liability insurance, are in full force and effect and are of a nature and provide such coverage as is customarily carried by companies of the size and character of the Borrower and the Guarantors. SECTION 3.09. The Orders. On the date of the making of the initial Loans or the issuance of the initial Letters of Credit hereunder, whichever first occurs, the Interim Order will have been entered and will not have been stayed, amended, vacated, reversed or rescinded. On the date of the making of any Loan or issuance of any Letter of Credit, the Interim Order or the Final Order, as the case may be, will have been entered and will not have been amended, stayed, vacated or rescinded. Upon the maturity (whether by the acceleration or otherwise) of any of the obligations of the Borrower and the Guarantors hereunder and under the other Loan Documents, the DIP Lenders shall, subject to the provisions of Section 7.01, be entitled to immediate payment of such obligations, and to enforce the remedies provided for hereunder, without further application to or order by the Bankruptcy Court. SECTION 3.10. Use of Proceeds. Subject to compliance with the Orders and the other provisions of this Agreement, the proceeds of the Loans shall be used for working capital and for other general corporate purposes of the Borrower and the Guarantors. SECTION 3.11. Litigation. Other than as set forth on Schedule 3.11, there are no unstayed actions, suits or proceedings pending or, to the best knowledge of the Borrower 41 or the Guarantors, threatened against or affecting the Borrower or the Guarantors or any of their respective properties, before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that are reasonably likely to be determined adversely to the Borrower or the Guarantors and, if so adversely determined, would have a material adverse effect on the financial condition, business, properties, prospects, operations or assets of the Borrower and the Guarantors, taken as a whole. SECTION 3.12. Intellectual Property. Set forth on Schedule 3.12 hereto is a complete and accurate list of all patents, patent applications, trademarks, trademark applications, trade names, service marks and copyrights, and all applications therefor and licenses thereof, of the Borrower and each Guarantor (the "INTELLECTUAL PROPERTY"), showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date. Except as described on Schedule 3.12, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower or any Guarantor know of any such claim, and, to the knowledge of the Borrower and each Guarantor, the use of such Intellectual Property by the Borrower and the Guarantors does not infringe on the rights of any Person, except for such claims and infringement that, in the aggregate, would not be reasonably expected to have a material adverse effect on the financial condition, business, properties, prospects, operations or assets of the Borrower and the Guarantors, taken as a whole. SECTION 3.13. Letters of Credit. Letters of Credit issued hereunder will be used only for the purposes permitted hereby and by the Orders. SECTION 3.14. Pre-Petition Indebtedness. Set forth on Schedule 3.14 hereto is a complete and accurate list of all Pre-Petition Indebtedness of the Borrower and each Guarantor (in each case identified as a Low Leverage or High Leverage Guarantor), showing as of the date hereof the obligor or obligors and the principal amount outstanding thereunder. SECTION 3.15. Properties. Set forth on Schedule 3.15 hereto is a complete and accurate list of all real property owned by the Borrower or each Guarantor (in each case identified as a Low Leverage or High Leverage Guarantor) as of the date hereof, showing the street address, county or other relevant jurisdiction, state and record owner thereof and clearly identifying each property that is a "Low Leverage Hotel Property" and the Attributed DIP Percentage and Attributed DIP Amount for such Low Leverage Hotel Property. Except as set forth on Schedule 3.15, each Borrower or such Guarantor has good, marketable and insurable fee simple title to such real property, free and clear of all Liens, other than Liens created or permitted hereby. SECTION 3.16. Leases. Set forth on Schedule 3.16 hereto is a complete and accurate list of all leases of real property under which the Borrower or each Guarantor (in 42 each case identified as a Low Leverage or High Leverage Guarantor) is the lessee, as of the date hereof, showing the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof. Except as set forth on Schedule 3.16 hereto, each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. SECTION 3.17. Investments. Set forth on Schedule 3.17 hereto is a complete and accurate list of all deposit accounts or securities accounts maintained by the Borrower and each Guarantor (identified in each case as a Low Leverage or High Leverage Guarantor) and of all Investments in excess of $1,000,000 held by the Borrower or such Guarantors on the date hereof, showing the amount, obligor or issuer and maturity, if any, thereof. ARTICLE 4 CONDITIONS OF LENDING SECTION 4.01. Conditions Precedent to Closing and Extension of Initial Loans and Initial Letters of Credit. The occurrence of the Closing Date and obligation of the DIP Lenders to make the initial Loans or the Fronting Banks to issue the initial Letters of Credit, whichever may occur first, is subject to the following conditions precedent: (a) Supporting Documents. The Agent shall have received: (i) a copy of the Borrower's certificate of incorporation, as amended up to and including the Closing Date, certified as of a recent date by the Secretary of State (or other applicable Governmental Authority) of the jurisdiction of the Borrower's incorporation; provided that the Agent may, in its discretion, accept such certificate of incorporation of the Borrower certified by a Secretary or Assistant Secretary of the Borrower in lieu of certification by the Secretary of State (or other applicable Governmental Authority), subject to receipt of an undertaking from the Borrower to effect delivery of such documents certified by the Secretary of State (or other applicable Governmental Authority) promptly after the Closing Date; (ii) a certificate of the Secretary of State (or other applicable Governmental Authority) of the Borrower's jurisdiction of incorporation, dated as of a recent date, as to the good standing of the Borrower and as to the charter documents on file in the office of such Secretary of State (or other applicable Governmental Authority); (iii) a certificate of the Secretary or an Assistant Secretary of the Borrower dated as of the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of the Borrower as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of the Borrower authorizing the 43 Borrowings and Letter of Credit extensions hereunder, the execution, delivery and performance in accordance with their respective terms of this Agreement, the Loan Documents and any other documents required or contemplated hereunder or thereunder and the granting of the security interest in the Letter of Credit Account and other Liens contemplated hereby, and that such resolutions are in full force and effect without modification or amendment, (C) that the certificate of incorporation of the Borrower has not been amended since the date of the last amendment thereto indicated on the certificate furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer of the Borrower executing this Agreement or any other Loan Documents or any other document delivered by it in connection herewith or therewith (such certificate to contain a certification by another officer of such entity as to the incumbency and signature of the officer signing the certificate referred to in this clause (iii)); and (iv) such other documents as the Agent may reasonably request. (b) Interim Order. At the time of the making of the initial Loans or at the time of the issuance of the initial Letters of Credit, whichever first occurs, the Agent and the DIP Lenders shall have received a certified copy of an order of the Bankruptcy Court in substantially the form of Exhibit C (the "INTERIM ORDEr") approving the Loan Documents and granting the Superpriority Claim status and senior priming and other Liens described in Section 2.23 which Interim Order (i) shall have been entered, upon an application or motion of the Borrower reasonably satisfactory in form and substance to the Agent, on such prior notice to such parties (including the Pre-Petition Lenders) as may in each case be reasonably satisfactory to the Agent, (ii) shall authorize extensions of credit in amounts satisfactory to the Agent, (iii) shall approve the payment by the Borrower of all of the Fees referred to in Section 2.19, 2.20 and 2.21, (iv) shall be in full force and effect, (v) shall have authorized the use by the Borrower and the Guarantors of any cash collateral which constitutes a Primed Asset and shall have provided, as adequate protection for the use of such cash collateral and the priming contemplated hereby, for (A) a Superpriority Claim as contemplated by Section 507(b) of the Bankruptcy Code immediately junior to the claims under Section 364(c)(1) of the Bankruptcy Code held by the Agent and the DIP Lenders, (B) a Lien on substantially all of the assets of the Borrower and the Guarantors that are subject to the Cases (other than Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.) having a priority junior to the priming Liens granted in favor of the Agent and the DIP Lenders hereunder and under the other Loan Documents with respect to the Primed Assets and immediately junior to pre-existing Liens (if any), (C) the payment on a current basis of the reasonable fees and disbursements of respective professionals (including, but not limited to, the reasonable fees and disbursements of counsel and internal and third-party consultants, including financial consultants, real estate appraisers, and auditors) for the Pre-Petition Agent (including the payment on the Closing Date or as soon thereafter as is practicable of any unpaid pre-petition fees and expenses) and the continuation of the payment to the Pre-Petition Agent on a current basis of the administration fees that are provided for under the 44 Pre-Petition Credit Agreement and (E) the payment to the Pre-Petition Lenders (to be applied as provided for in the Pre-Petition Credit Agreement) and the other Primed Lenders of the Net Proceeds of the sale of assets on which they have Liens to the extent such Net Proceeds are not required to be paid to the Agent and the DIP Lenders hereunder (such payments to the Pre-Petition Lenders to be made each time that cumulative Net Proceeds that are so payable, but have not yet been paid, reach $100,000) and (vi) shall not have been stayed, reversed, modified or amended in any respect; and, if the Interim Order is the subject of a pending appeal in any respect, neither the making of such Loans nor the issuance of such Letter of Credit nor the performance by the Borrower or any of the Guarantors of any of their respective obligations hereunder or under the Loan Documents or under any other instrument or agreement referred to herein shall be the subject of a presently effective stay pending appeal. (c) Security and Pledge Agreement. The Borrower and each of the Guarantors (other than Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.) shall have duly executed and delivered to the Agent a Security and Pledge Agreement in substantially the form of Exhibit D (the "SECURITY AND PLEDGE AGREEMENT") and each of the documents contemplated thereunder that is to be delivered prior to the extension of the initial Loans or issuance of the initial Letters of Credit hereunder (including, without limitation, all such patent, trademark and copyright security agreements or other filings as requested by the Agent in order to perfect the Agent's security interest in intellectual property of the Borrower and the Guarantors). (d) First Day Orders. All of the "first day orders" entered by the Bankruptcy Court at the time of the commencement of the Cases shall be satisfactory in form and substance to the Agent. (e) Opinion of Counsel. Unless the Agent shall have agreed that the condition set forth in this Section 4.01(e) may be satisfied at the time of the entry of the Final Order, the Agent and the DIP Lenders shall have received the favorable written opinion of counsel to the Borrower and the Guarantors, dated the Closing Date substantially in the form of Exhibit E and reasonably acceptable to the Agent. (f) Payment of Fees. The Borrower shall have paid to the Agent the then unpaid balance of all accrued and unpaid Fees due under and pursuant to this Agreement and the letter referred to in Section 2.19. (g) Corporate and Judicial Proceedings. All corporate, judicial and other proceedings and all instruments and agreements in connection with the transactions among the Borrower, the Guarantors, the Agent and the DIP Lenders contemplated by this Agreement shall be satisfactory in form and substance to the Agent, and the Agent shall have received all information and copies of all documents and papers, including records of corporate, judicial and other proceedings, which the Agent may have requested 45 in connection therewith, such documents and papers where appropriate to be certified by proper corporate, governmental or judicial or other authorities. (h) Information. The Agent shall have received such information (financial or otherwise) as may be reasonably requested by the Agent and shall have discussed such information (as well as the Borrower's business plan and Budget delivered to the Agent prior to the Closing Date) with the Borrower's management and shall be satisfied with the nature and substance of such discussions. (i) Budget. The Agent and the DIP Lenders shall have received from the Borrower a forecast detailing the anticipated cash receipts and disbursements of the Borrower and the Low Leverage Guarantors, as a group, and the High Leverage Guarantors, as a group, in each case for the period commencing on or prior to the Petition Date and ending on or after the Maturity Date and setting forth the anticipated uses of the Total Commitment (as amended from time to time with the consent of the Co-Arrangers, the "BUDGET"), all on a monthly basis, satisfactory in form and substance to the Co-Arrangers. (j) Compliance with Laws. The Borrower and the Guarantors shall have granted the Agent access to and the right to inspect all reports, audits and other internal information of the Borrower and the Guarantors relating to environmental matters, and any third party verification of certain matters relating to compliance with environmental laws and regulations requested by the Agent, and the Agent shall be reasonably satisfied that the Borrower and the Guarantors are in compliance in all material respects with all applicable environmental laws and regulations and be satisfied with the costs of maintaining such compliance. (k) Management Agreements. The Agent shall be satisfied that the Borrower has entered into arrangements that are reflected in the Orders with each Guarantor that owns a hotel property, unless the assets of such Guarantor are Primed Assets, providing appropriate payments to the Borrower for services rendered to, and expenses paid on behalf of, such Guarantor (including payment of allocated overhead and restructuring expenses and reasonable provision for capital expenditures) and such management arrangements that are reflected in the Orders shall be in form and substance satisfactory to the Agent. SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit. The obligation of the DIP Lenders to make each Loan and of the Fronting Bank to issue each Letter of Credit, including the initial Loan and the initial Letter of Credit, is subject to the following conditions precedent: (a) Notice. The Agent shall have received a notice with respect to such borrowing or issuance, as the case may be, as required by Section 2. 46 (b) Representations and Warranties. All representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if made on and as of such date except to the extent such representations and warranties expressly relate to an earlier date. (c) No Default. On the date of each Borrowing hereunder or the issuance of each Letter of Credit, no Event of Default or event which upon notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing. (d) Orders. The Interim Order shall be in full force and effect and shall not have been stayed, reversed, modified or amended in any respect without the prior written consent of the Agent and the Required DIP Lenders, provided, that at the time of the making of any Loan or the issuance of any Letter of Credit the aggregate amount of either or which, when added to the sum of the principal amount of all Loans then outstanding and the Letter of Credit Outstandings, would exceed the amount authorized by the Interim Order (collectively, the "ADDITIONAL CREDIT"), the Agent and each of the DIP Lenders shall have received a certified copy of an order of the Bankruptcy Court in form and substance satisfactory to the Co-Arrangers in their sole discretion (the "FINAL ORDER"), which, in any event, shall have been entered by the Bankruptcy Court no later than 30 days after the entry of the Interim Order, and at the time of the extension of any Additional Credit the Final Order shall be in full force and effect, and shall not have been stayed, reversed, modified or amended in any respect without the prior written consent of the Agent and the Required DIP Lenders; and if either the Interim Order or the Final Order is the subject of a pending appeal in any respect, neither the making of the Loans nor the issuance of any Letter of Credit nor the performance by the Borrower or any Guarantor of any of their respective obligations under any of the Loan Documents shall be the subject of a presently effective stay pending appeal. (e) Payment of Fees. The Borrower shall have paid to the Agent the then unpaid balance of all accrued and unpaid Fees then payable under and pursuant to this Agreement and the letter referred to in Section 2.19. (f) UCC Searches; Opinions of Counsel; Repayment of Certain Advances. At the time of the making of the first Loan or the issuance of the first Letter of Credit following the entry of the Final Order, the Agent shall have received (i) UCC searches conducted in the jurisdictions in which the Borrower and the Guarantors conduct business (dated as of a date reasonably satisfactory to the Agent), reflecting the absence of Liens and encumbrances on the assets of the Borrower and the Guarantors other than such Liens permitted by Section 6.01, (ii) to the extent requested at least 10 days in advance by the Agent, opinions of local counsel covering matters not covered in the opinion of counsel delivered pursuant to Section 4.01(e) in form and substance reasonably satisfactory to the Agent and (iii) evidence satisfactory to the Agent that all outstanding advances made on or after the Closing Date by the Borrower or any Low Leverage Guarantor to any High 47 Leverage Guarantor have been held or stipulated to be costs or expenses recoverable by such High Leverage Guarantor under Section 506(c) of the Bankruptcy Code. (g) Usage. The uses of such Borrowing or such Letter of Credit shall be consistent with the Budget and Section 3.10 of this Agreement. The request by the Borrower for, and the acceptance by the Borrower of, each extension of credit hereunder shall be deemed to be a representation and warranty by the Borrower that the conditions specified in this Section have been satisfied or waived at that time. ARTICLE 5 AFFIRMATIVE COVENANTS From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account, or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.03(b)), or any amount shall remain outstanding or unpaid under this Agreement, the Borrower and each of the Guarantors agree that, unless the Required DIP Lenders shall otherwise consent in writing, the Borrower and each of the Guarantors will: SECTION 5.01. Financial Statements, Reports, Etc. In the case of the Borrower and the Guarantors, deliver to the Agent and each of the DIP Lenders: (a) within 90 days after the end of each fiscal year, the Borrower's consolidated balance sheet and related statement of income and cash flows, showing the financial condition of the Borrower and its Subsidiaries on a consolidated basis, as of the close of such fiscal year and the results of their respective operations during such year, the consolidated statement of the Borrower to be audited for the Borrower and its Subsidiaries by Arthur Andersen or other independent public accountants or recognized national standing acceptable to the Required DIP Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect other than with respect to the Cases) and to be certified by a Financial Officer of the Borrower to the effect that such consolidated financial statements fairly present in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters, the Borrower's consolidated balance sheets and related statements of income and cash flows, showing the financial condition of the Borrower and its Subsidiaries on a consolidated basis as of the close of such fiscal quarter and the results of their operations during such fiscal quarter and the then elapsed portion of the fiscal year, each certified by a Financial 48 Officer of the Borrower as fairly presenting in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to the absence of footnotes and normal year-end audit adjustments; (c) concurrently with any delivery of financial statements under (a) or (b) above as applicable, (i) a certificate of a Financial Officer (A) certifying that no Event of Default or event that upon notice or lapse of time or both would constitute an Event of Default has occurred, or, if such an Event of Default or event has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (B) setting forth computations in reasonable detail satisfactory to the Agent demonstrating compliance with the provisions of Sections 6.04, 6.05 and 6.10 and (ii) a certificate (which certificate may be limited to accounting matters and disclaim responsibility for legal interpretations) of such accountants accompanying the audited consolidated financial statements delivered under (a) above certifying that, in the course of the regular audit of the business of the Borrower and its Subsidiaries, such accountants have obtained no knowledge that an Event of Default has occurred and its continuing, or if, in the opinion of such accountants, an Event of Default has occurred and is continuing, specifying the nature thereof and all relevant facts with respect thereto; (d) as soon as available, but no more than 45 days after the end of each month, the unaudited monthly cash flow reports of the Borrower and its Subsidiaries on a consolidated basis as of the close of such fiscal month and the results of their operations during such fiscal period and the then elapsed portion of the fiscal year, all certified by a Financial Officer as fairly presenting in all material respects the results of operations of the Borrower and the Guarantors on a consolidated basis, subject to the absence of footnotes and normal year-end audit adjustments; (e) within five Business Days of the first of each month, a statement of projected cash receipts and cash disbursements for each of the Borrower and the Low Leverage Guarantors, as a group and High Leverage Guarantors as a group, respectively, for each month in the period of six continuous months commencing with that month in a form reasonably satisfactory to the Agent; (f) weekly "cash flow" reports in a form reasonably satisfactory to the Agent (which shall include a summary of all outstanding loans or advances made in reliance on Section 6.10(vi)); (g) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by it with the Securities and Exchange Commission, or any governmental authority succeeding to any of or all of the functions of said commission, or with any national securities exchange, as the case may be; 49 (h) as soon as available and in any event (A) within 30 days after the Borrower or any of its ERISA Affiliates knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Single Employer Plan of the Borrower or such ERISA Affiliate has occurred and (B) within 10 days after the Borrower or any of its ERISA Affiliates knows or has reason to know that any other Termination Event with respect to any such Plan has occurred, a statement of a Financial Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within 10 days after receipt thereof by the Borrower or any of its ERISA Affiliates from the PBGC copies of each notice received by the Borrower or any such ERISA Affiliate of the PBGC's intention to terminate any Single Employer Plan of the Borrower or such ERISA Affiliate or to have a trustee appointed to administer any such Plan; (j) if requested by the Agent, promptly, and in any event within 30 days after the filing thereof, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan of the borrower or any of its ERISA Affiliates; (k) within 10 days after notice is given or required to be given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure of the Borrower or any of its ERISA Affiliates to make timely payments to a Plan, a copy of any such notice filed and a statement of a Financial Officer of the Borrower setting forth (A) sufficient information necessary to determine the amount of the lien under Section 302(f)(3), (B) the reason for the failure to make the required payments and (C) the action, if any, which the Borrower or any of its ERISA Affiliates proposed to take with respect thereto; (l) promptly and in any event within 10 days after receipt thereof by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or which may be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (A), (B) or (C) above; (m) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Guarantor, or compliance with the terms of any material loan or financing agreements as the Agent, at the request of any DIP Lender, may reasonably request; 50 (n) promptly after the same is available, copies of all pleadings, motions, applications, judicial information, financial information and other documents filed by or on behalf of the Borrower or any of the Guarantors with the Bankruptcy Court in the Cases, or distributed by or on behalf of the Borrower or any of the Guarantors to any official committee appointed in the Cases, providing copies of same to counsel for the Agent, except if such distribution would destroy attorney-client privilege; and (o) no later than the 35 th day after the end of each fiscal calender month of the Borrower, a reconciliation of the results of the business operations of the Borrower and the Low Leverage Guarantors (as a group) and the High Leverage Guarantors (as a group) for such fiscal calender month as compared to the corresponding period in the Budget (clearly distinguishing between Low Leverage, as a group and High Leverage Guarantors, as a group). SECTION 5.02. Corporate Existence. Preserve and maintain in full force and effect all governmental rights, privileges, qualification, permits, licenses and franchises necessary or desirable in the normal conduct of its business except (i) (A) if in the reasonable business judgment of the Borrower or such Guarantor, as the case may be, it is in its best interest not to preserve and maintain such rights, privileges, qualifications, permits, licenses and franchises, and (B) such failure to preserve the same could not, in the aggregate, reasonably be expected to have a material adverse effect on the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrower and the Guarantors, taken as a whole, and (ii) as otherwise permitted in connection with sales of assets permitted by Section 6.11. SECTION 5.03. Insurance. (a) Keep its insurable properties insured at all times, against such risks, including fire and other risks insured against by extended coverage, as is customary with companies of the same or similar size in the same or similar businesses; and maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by the Borrower or any Guarantor, as the case may be, in such amounts and with such deductibles as are customary with companies of the same or similar size in the same or similar businesses, in the same geographic area and similarly situated; and (b) maintain such other insurance or self insurance as may be required by law. SECTION 5.04. Obligations and Taxes. With respect to the Borrower and each Guarantor, pay all its material obligations arising after the Petition Date promptly and in accordance with their terms and pay and discharge promptly all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property arising after the Petition Date, before the same shall become in default, as well as all material lawful claims for labor, materials and supplies or otherwise, arising after the Petition Date which, if unpaid, would become a Lien or 51 charge (except that advances and loans made to High Leverage Guarantors by the Borrower or Low Leverage Guarantors may have the benefit of a Lien or charge pursuant to Section 506(c) of the Bankruptcy Code) upon such properties or any part thereof; provided, however, that the Borrower and each Guarantor shall not be required to pay and discharge or to cause to be paid and discharged any such obligation, tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings (if the Borrower and the Guarantors shall have set aside on their books adequate reserves therefor in conformity with GAAP). SECTION 5.05. Notice of Event of Default, etc. Within three Business Days thereof, give to the Agent notice in writing of (a) any Event of Default or the occurrence of any event or circumstance that with the passage of time or giving of notice or both would constitute an Event of Default and (b) any litigation, investigations or proceedings which may exist at any time between the Borrower or any Guarantor and any Governmental Authority. SECTION 5.06. Access to Books and Records. (a) Maintain or cause to be maintained at all times true and complete books and records in accordance with GAAP of the financial operations of the Borrower and its Subsidiaries on a consolidated basis, and the operating results on a Guarantor by Guarantor basis; and upon reasonable notice provide the Agent and its representatives access to all such books and records during regular business hours, in order that the Agent may examine and make abstracts from such books, accounts, records and other papers for the purpose of verifying the accuracy of the various reports delivered by the Borrower or the Guarantors to the Agent or the DIP Lenders pursuant to this Agreement or for otherwise ascertaining compliance with this Agreement. The Borrower and each Guarantor will, at any reasonable time and from time to time during regular business hours, upon reasonable notice, permit the Agent and any agents or representatives (including, without limitation, appraisers) designated by the Agent to visit the properties of the Borrower and the Guarantors and to conduct examinations of and to monitor the Collateral held by the Agent and to discuss the affairs, finances and condition of the Borrower and the Guarantors with the officers and independent accountants of the Borrower. (b) The Borrower and the Guarantors will permit any representatives designated by the Agent (including any consultants, accountants, lawyers and appraisers retained by the Agent) to conduct evaluations and appraisals of the Borrower's computation of the Primed Assets, all at such reasonable times and as often as reasonably requested. The Borrower shall pay the reasonable fees (including reasonable and customary internally allocated fees of employees of the Agent as to which invoices have been furnished) and expenses of any such representatives retained by the Agent as to which invoices have been furnished to conduct any such evaluation or appraisal, including the reasonable fees and expenses associated with collateral monitoring services performed by the Agent. 52 (c) The Borrower and the Guarantors will grant the Agent access to and the right to inspect all reports, audits and other internal information of the Borrower and the Guarantors relating to environmental matters upon reasonable notice, and obtain any third party verification of matters relating to compliance with environmental laws and regulations requested by the Agent at any time and from time to time. SECTION 5.07. Maintenance of Concentration Account. The Borrower and the Guarantors shall, within 30 days after the Closing Date, and at all times thereafter, maintain with the Agent (or another depository bank or financial institution satisfactory to the Agent) an account or accounts (the "CONCENTRATION ACCOUNT") (a) to be used by the Borrower and the Guarantors as their principal concentration accounts and (b) except as otherwise provided in an Order, into which shall be swept or deposited, at the end of each Business Day, all cash of the Borrower and the Guarantors and the full available balances in excess of an aggregate of $250,000 in all of the operating and other bank accounts of the Borrower and the Guarantors maintained at any institution other than in the Concentration Account. SECTION 5.08. Budget. The Borrower shall, and shall cause each of the Guarantors to, comply with the Orders and the Budget and shall not permit any of the Guarantors to, make any Pre-Petition Payment, except as permitted by the Orders and except as authorized by the Bankruptcy Court (i) in "first day orders" approved by the Agent (including to pay pre-petition trust fund taxes reflected in the Budget) and (ii) to pay lease payments reflected in the Budget in respect of Capital Leases constituting Pre-Petition Indebtedness. SECTION 5.09. Furnishing of Additional Items. In the case of the Borrower and the Guarantors, deliver to the Agent: (a) within 20 days after the date hereof, (i) a copy of each such entity's certificate of incorporation, as amended up to and including the Closing Date, certified as of a recent date by the Secretary of State (or other applicable Governmental Authority) of the jurisdiction of such entity's incorporation, (ii) a certificate of such Secretary of State (or other applicable Governmental Authority) of each such entity's jurisdiction of incorporation, dated as of a recent date, as to the good standing of such entity and as to the charter documents on file in the office of such Secretary of State (or other applicable Governmental Authority), and (iii) a certificate of the Secretary or an Assistant Secretary of each such entity dated as of a recent date and certifying (A) that attached thereto is a true and complete copy of the by-laws of such entity as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of such entity authorizing the Borrowings and Letter of Credit extensions hereunder, the execution, delivery and performance in accordance with their respective terms of this Agreement, the Loan Documents and any other documents required or contemplated hereunder or thereunder and the granting of the security interest 53 in the Letter of Credit Account and other Liens contemplated hereby, and that such resolutions are in full force and effect without modification or amendment, (C) that the certificate of incorporation of such entity has not been amended since the date of the last amendment thereto indicated on the certificate of the Secretary of State furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer of such entity executing this Agreement or any other Loan Documents or any other document delivered by it in connection herewith or therewith (such certificate to contain a certification by another officer of such entity as to the incumbency and signature of the officer signing the certificate referred to in this clause (iii)); (b) within 20 days after the date hereof, (i) a certificate of the Secretary of State (or other applicable Governmental Authority) of each such entity's jurisdiction of incorporation, each dated as of a recent date, as to the payment of taxes by such entity and (ii) a certificate of the Secretary of State (or other applicable Governmental Authority) of each other jurisdiction in which such entity is qualified to do business as a foreign corporation, each dated as of a recent date, as to the good standing of and payment of taxes by such entity; provided that, in the case of jurisdictions in which any of the Borrower or the Guarantors is qualified to do business as a foreign corporation, the Agent may, in its discretion, accept a certificate of a Secretary or Assistant Secretary of the Borrower as to the good standing and payment of taxes by such entity, in lieu of certification by the Secretary of State (or other applicable Governmental Authority); (c) within 20 days after the date hereof (or in the case of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C., no later than the day of the Final Order), (i) executed UCC financing statements naming each of the Borrower and the Guarantors as debtor in substantially the form of Schedule D-6 to Exhibit D to the Security and Pledge Agreement, in each case in appropriate form for filing in the UCC filing offices set forth in paragraph 2 of the Perfection Certificate with respect to each of the Borrower and the Guarantors, (ii) such other financing statements, security agreements or documents as the Agent may reasonably request, in order to perfect any security interest granted or purported to be granted under the Loan Documents to the extent such security interest may be perfected by filing under the UCC and (iii) an updated Perfection Certificate, substantially in the form of Exhibit D to the Security and Pledge Agreement (and including the information contemplated by paragraphs 3, 4, 5 and 6 thereof), in each case in form and substance satisfactory to the Agent. As used in this subsection (c), the term "UCC" has the meaning set forth in the Security and Pledge Agreement; and (d) within 20 days after requested by the Agent fee and leasehold mortgages in recordable form on terms satisfactory to the Agent with respect to the real property upon which the DIP Lenders have been granted a Lien pursuant to the Orders and the Loan Documents. 54 ARTICLE 6 NEGATIVE COVENANTS From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.03(b)) or any amount shall remain outstanding or unpaid under this Agreement, unless the Required DIP Lenders shall otherwise consent in writing, the Borrower and each of the Guarantors will not (and will not apply to the Bankruptcy Court for authority to): SECTION 6.01. Liens. Incur, create, assume or suffer to exist any Lien on any asset of the Borrower or the Guarantors now owned or hereafter acquired by the Borrower or any of such Guarantors, other than: (i) Liens existing on the Petition Date as reflected on Schedule 3.06 hereto and Liens granted pursuant to the Pre-Petition Credit Agreement; (ii) Liens constituting adequate protection granted pursuant to the Orders, which Liens are junior to the Liens contemplated hereby on Primed Assets in favor of the Agent and the DIP Lenders, provided that the Interim Order and the Final Order shall provide that the holders of such junior Liens on Primed Assets shall not be permitted to take any action to foreclose with respect to such junior Liens so long as any amounts (including, without limitation, any Loans or Letters of Credit) shall remain outstanding hereunder or any Commitment shall be in effect; (iii) Permitted Liens and (iv) Liens in favor of the Agent and the DIP Lenders. SECTION 6.02. Merger, etc. Consolidate or merge with or into another Person. SECTION 6.03. Indebtedness. Contract, create, incur, assume or suffer to exist any Indebtedness, except for (i) indebtedness under this Agreement; (ii) Indebtedness incurred prior to the Petition Date; (iii) Indebtedness arising from Investments among the Borrower and the Guarantors that are permitted hereunder; (iv) Indebtedness owed to MSSF or any banking Affiliates in respect of any overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house transfers of funds; and (v) Indebtedness consisting of guaranties permitted by Section 6.06. SECTION 6.04. Capital Expenditures. Make Capital Expenditures, other than expenses incurred in connection with normal replacement and maintenance programs properly charged to current operations to the extent that such expenses are included in the Budget. 55 SECTION 6.05. Financial Covenants. (a) Minimum Adjusted EBITDA. Permit cumulative Adjusted EBITDA for any period beginning on January 1, 2002 and ending on a date listed below to be less than the amount specified opposite such date:
Date EBITDA ---- ------ March 31, 2002 $ 12,900,000 April 30, 2002 $ 19,300,000 May 31, 2002 $ 26,700,000 June 30, 2002 $ 34,400,000 July 31, 2002 $ 41,700,000 August 31, 2002 $ 51,500,000 September 30, 2002 $ 57,600,000 October 31, 2002 $ 66,300,000 November 30, 2002 $ 70,800,000
(b) Minimum Revenue. Permit the aggregate revenue of the Low Leverage Guarantors to be less than (i) $19,000,000 for the month of January 2002 or (ii) $20,800,000 for the month of February 2002. (c) Maximum Corporate Overhead. Permit corporate overhead expense (exclusive of unusual items such as Chapter 11 costs, severance expense, office relocation expense and other items reasonably acceptable to the Co-Arrangers) for any month to be more than the amount specified opposite such month:
Period Ending Amount ------------- ------ January 2002 $ 2,300,000 February 2002 $ 2,300,000 March 2002 $ 2,070,000 April 2002 $ 1,955,000 May 2002 $ 1,840,000 June 2002 $ 1,840,000 July 2002 $ 1,495,000 August 2002 $ 1,495,000 September 2002 $ 1,495,000 October 2002 $ 1,495,000 November 2002 $ 1,495,000 December 2002 $ 1,495,000
SECTION 6.06. Guarantees and Other Liabilities. Purchase or repurchase (or agree, contingently or otherwise, so to do) the Indebtedness of, or assume, guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance of any obligation or capability of so doing, or otherwise), endorse or 56 otherwise become liable, directly or indirectly, in connection with the obligations, stock or dividends of any Person, except (i) for any guaranty of Indebtedness or other obligations of the Borrower or any Guarantor if the Borrower or such Guarantor could have incurred such Indebtedness or obligations under this Agreement and (ii) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business. SECTION 6.07. Chapter 11 Claims. Incur, create, assume, suffer to exist or permit any other Superpriority Claim that is pari passu with or senior to the claims of the Agent and the DIP Lenders against the Borrower and the Guarantors that are subject to the Cases, except for the Carve-Out. SECTION 6.08. Dividends; Capital Stock. Declare or pay, directly or indirectly, any dividends or make any other distribution, or payment, whether in cash, property, securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of capital stock (or any options, warrants, rights or other equity securities or agreements relating to any capital stock), or set apart any sum for the aforesaid purposes; provided that any Guarantor may pay dividends to the Borrower or a Low Leverage Guarantor. SECTION 6.09. Transactions with Affiliates. Sell or transfer any property to, or otherwise engage in any other material transactions with, any of its Affiliates, other than (a) in the ordinary course of business in good faith and at prices and on terms and conditions not less favorable to the Borrower or such Guarantor than could be obtained on an arms'-length basis from unrelated third parties and (b) Investments in the Borrower or any Guarantor by the Borrower or any other Guarantor consistent with the terms of the Loan Documents and the Orders. SECTION 6.10. Investments, Loans and Advances. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to (including payment of overhead or restructuring charges allocable to any Subsidiary of the Borrower), or make or permit to exist any investment in, any other Person (all of the foregoing, "INVESTMENTS"), except for (i) ownership by the Borrower or the Guarantors of the capital stock of each of the Subsidiaries listed on Schedule 3.05, (ii) Permitted Investments, (iii) advances and loans existing on the Petition Date and set forth on Schedule 3.17 among the Borrower and the Subsidiaries (but not any refinancings or extensions thereof or further advances of any kind in connection therewith; provided that the maturity of loans owing from a Low Leverage Guarantor the assets of which constitute Primed Assets to the Borrower may be extended (in the same amount and subject to the same terms as the existing loan) if repayment of such loan on the original maturity date would render such Subsidiary obligor insolvent), which have been entered into in the ordinary course of business, (iv) Investments in the Existing Joint Ventures as they exist on the Petition Date as described in Schedule 1.01(a); (v) advances and loans 57 permitted by the Orders made by the Borrower or any Guarantor to the Borrower or any Low Leverage Guarantor or by any High Leverage Guarantor to another High Leverage Guarantor and (vi) advances and loans made on or after the Closing Date to High Leverage Guarantors (other than Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.) by the Borrower or Low Leverage Guarantors to cover allocated overhead or restructuring charges and operating expenses (excluding capital expenditures or payments of interest), but only to the extent they are held or stipulated to be recoverable costs or expenses of such High Leverage Guarantor under Section 506(c) of the Bankruptcy Code ("SECTION 506(C) STATUS"); provided the aggregate amount of such advances and loans may not exceed $1,700,000 at any time outstanding; and provided further that the Borrower and Low Leverage Guarantors may make such advances and loans to High Leverage Guarantors prior to the date of the Final Order that do not have Section 506(c) Status only if the Co-Arrangers approve such loans or advances in advance and only so long as such advances or loans are repaid in full by no later than the date that is three months after the Final Order (unless they are given Section 506(c) Status prior to such time). Neither the Borrower not any Guarantor shall (i) make any advances to an Affiliate of the Borrower that is not organized under the laws of the United States or any State thereof or the District of Columbia or (ii) except as expressly permitted pursuant to clause (iii), (v) or (vi) of the foregoing sentence, make any advances to or Investments in, or pay any amounts on behalf of, any other Affiliate of the Borrower. SECTION 6.11. Disposition of Assets. Sell or lease (as lessor) any assets (including, without limitation, the capital stock of any Subsidiary) except for (i) sales of surplus equipment no longer used in the businesses of the Borrower or the Guarantors and (ii) sales of assets pursuant to an Asset Sales Agreement and (iii) sales of assets of (or the capital stock of) any High Leverage Guarantor, but only if all loans and advances made to such High Leverage Guarantor by the Borrower or by Low Leverage Guarantor are repaid in full prior to, or with the proceeds of, such sale; provided that (w) Primed Hotel Properties may not be sold or disposed of without the consent of each lender secured thereby unless the Net Proceeds will be sufficient (after any prepayment of the Loans and/or cash collateralization of Letter of Credit Outstandings required as a result of any reduction of the Total Commitment in accordance with Section 2.13(a)) to repay the obligations to such lender secured by such Primed Hotel Property, (x) the consideration received by the Borrower or the relevant Guarantor shall not be less than the fair market value of the assets sold or disposed of, (y) where required by law, the sale or disposition shall have received the approval of the Bankruptcy Court and (z) upon receipt by the Borrower or any Guarantor of any Net Proceeds of any sale or disposition described in clause (ii) or (iii) hereof, the Total Commitment shall be permanently reduced in accordance with Section 2.13(a), and the Borrower shall prepay Loans and/or cash collateral Letters of Credit as required pursuant to, and in the amount and order of priority set forth in, Section 2.13(b); provided that the provisions of this Section 6.11 shall not apply to any sale or disposition of any asset made as a result of foreclosure or other exercise of remedies by the DIP Lenders under the Loan Documents. Nothing in this 58 Section 6.11 shall limit the transfer or disposition to the Borrower or a Low Leverage Guarantor of assets which constitute Primed Assets. SECTION 6.12. Nature of Business. Modify or alter in any material manner the nature and type of its business as conducted at or prior to the Petition Date (except as required by the Bankruptcy Code), it being understood that sales permitted by Section 6.11 shall not constitute such a material modification or alteration. SECTION 6.13. Cash Management System. Except as provided in, or as required to comply with, an Order, modify or alter in any material manner its intercompany cash management system as existing at or prior to the Petition Date. ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default. In the case of the happening of any of the following events and the continuance thereof beyond the applicable period of grace if any (each, an "EVENT OF DEFAULT"): (a) any material representation or warranty made by the Borrower or any Guarantor in this Agreement or in any Loan Document or in connection with this Agreement or the credit extensions hereunder or any material statement or representation made in any report, financial statement, certificate or other document furnished by the Borrower or any Guarantors to the DIP Lenders under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made or delivered; or (b) default shall be made in the payment of any (i) Fees or interest on the Loans or reimbursement of expenses or other amounts under any Loan Documents when due, and such default shall continue unremedied for more than three Business Days or (ii) principal of the Loans or reimbursement obligations or cash collateralization in respect of Letters of Credit, when and as the same shall become due and payable, whether at the due date thereof (including the Prepayment Date) or at a due fixed for prepayment thereof or by acceleration thereof or otherwise; or (c) default shall be made by the Borrower or any Guarantor in the due observance or performance of any covenant, condition or agreement contained in Section 6 hereof; or (d) default shall be made by the Borrower or any Guarantor in the due observance or performance of any other covenant, condition or agreement to be observed 59 or performed pursuant to the terms of this Agreement or any of the other Loan Documents and such default shall continue unremedied for more than 30 days after knowledge of a responsible officer of the Borrower or notice from the Agent or a DIP Lender; or (e) any of the Cases shall be dismissed or converted to a case under chapter 7 of the Bankruptcy Code or the Borrower shall file a motion or other pleading seeking the dismissal of any of the Cases under Section 1112 of the Bankruptcy Code or otherwise; a trustee under chapter 7 or chapter 11 of the Bankruptcy Code, a responsible officer or an examiner with enlarged powers relating to the operation of the business (powers beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code shall be appointed in any of the Cases and the order appointing such trustee, responsible officer or examiner shall not be reversed or vacated within 30 days after the entry thereof; or an application shall be filed by the Borrower or any Guarantor for the approval of any other Superpriority Claim (other than the Carve-Out) in any of the Cases which is pari passu with or senior to the claims of the Agent and the DIP Lenders against the Borrower or any Guarantor hereunder, or there shall arise or be granted any such pari passu or senior Superpriority Claim; or (f) the Bankruptcy Court shall enter an order or orders granting relief from the automatic stay applicable under Section 362 of the Bankruptcy Code to the holder or holders of any security interest to permit foreclosure (or the granting of a deed in lieu of foreclosure or the like) on any assets (other than assets of, or capital stock of, a High Leverage Guarantor if all loans and advances made to such High Leverage Guarantor by the Borrower or any Low Leverage Guarantor have been repaid in full) of the Borrower or any of the Guarantors that have a value in excess of $500,000 in the aggregate; or (g) a Change of Control shall occur; or (h) default shall be made by the Borrower or any Guarantor in the due observance or performance of any term or condition contained in any Order applicable to it; (i) any provision of any Loan Document shall for any reason cease to be valid and binding or the Borrower or any of the Guarantors, or the Borrower or any of the Guarantors shall so assert in any pleading filed in any court; or (j) an order of the Bankruptcy Court shall be entered reversing, amending, supplementing, staying for a period in excess of 10 days, vacating or otherwise modifying either of the Orders or terminating the use of cash collateral by the Borrower or the Guarantors pursuant to the Orders; or 60 (k) any unsatisfied judgment or order as to a post-petition liability or debt for the payment of money in excess of $500,000 (to the extent not paid or covered by a reputable insurance company which has not disputed liability in writing) shall be rendered against the Borrower or any of the Guarantors and the enforcement thereof shall not have been stayed; or (l) any non-monetary judgment or order with respect to a post-petition event shall be rendered against the Borrower or any of the Guarantors which does or would reasonably be expected to (i) cause a material adverse change in the financial condition, business, prospects, operations or assets of the Borrower and the Guarantors taken as a whole on a consolidated basis, (ii) have a material adverse effect on the ability of the Borrower or any of the Guarantors to perform their respective obligations under any Loan Document, or (iii) have a material adverse effect on the rights and remedies of the Agent or any DIP Lender under any Loan Document, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (m) except as permitted by the Orders, the Borrower or the Guarantors shall make any Pre-Petition Payment other than Pre-Petition Payments authorized by the Bankruptcy Court (i) in "first day orders" approved by the Agent (including to pay pre-petition trust fund taxes) or (ii) to pay lease payments reflected in the Budget in respect of Capital Leases constituting Pre-Petition Indebtedness; or (n) any Termination Event described in clauses (iii) or (iv) of the definition of such term shall have occurred and shall continue unremedied for more than 10 days and the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of the Plan in respect of which such Termination Event shall have occurred and be continuing and the Insufficiency of any and all other Plans with respect to which such a Termination Event (described in such clauses (iii) or (iv)) shall have occurred and then exist is equal to or greater than $100,000; or (o) (i) the Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA Affiliate does not have reasonable grounds to contest such Withdrawal Liability and is not in fact contesting such Withdrawal Liability in a timely and appropriate manner and (iii) the amount of such Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower or such ERISA Affiliate in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $50,000 allocable to post-petition obligations or requires payments exceeding $100,000 per annum in excess of the annual payments made with respect to such Multiemployer Plans by the Borrower or such ERISA Affiliate for the plan year immediately preceding the plan year in which such notification is received; or 61 (p) the Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years that include the date hereof by an amount exceeding $100,000; or (q) the Borrower or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA (other than the failure to make any contribution accrued and unpaid as of the Petition Date) and the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $100,000; or (r) it shall be determined (whether by the Bankruptcy Court or by any other judicial or administrative forum) that the Borrower or any Guarantor is liable for the payment of claims arising out of any failure to comply (or to have complied) with applicable environmental laws or regulations the payment of which will have a material adverse effect on the financial condition, business, properties, operations or assets of the Borrower and the Guarantors, taken as a whole, and the enforcement thereof shall not have been stayed; then, and in every such event and at any time thereafter during the continuance of such event, and without further order of or application to the Bankruptcy Court, the Agent may, and at the request of the Required DIP Lenders shall take one or more of the following actions, at the same or different times (provided, that with respect to clause (iv) below and the enforcement of Liens or other remedies with respect to the Collateral referred to in clause (v) below, the Agent shall provide the Borrower and its counsel (with a copy to counsel for any Official Creditors' Committee in the Cases, to counsel for the Pre-Petition Agent and to the United States Trustee for the Southern District of New York) with five (5) Business Days' written notice prior to taking the action contemplated thereby, and provided, further, that upon receipt of notice referred to in the immediately preceding clause with respect to the accounts referred to in clause (iv) below, the Borrower may continue to make ordinary course disbursements from such accounts (other than the Letter of Credit Account) but may not withdraw or disburse any other amounts from such accounts): (i) terminate forthwith the Total Commitment; (ii) declare the Loans then outstanding to be forthwith due and payable, whereupon the principal of the Loans together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower and the Guarantors, anything contained herein or in any other Loan Document to the contrary 62 notwithstanding; (iii) require the Borrower and the Guarantors upon demand to forthwith deposit in the Letter of Credit Account cash in an amount that, together with any amounts then held in the Letter of Credit Account, is equal to the sum of 105% of the then outstanding Letters of Credit (and to the extent the Borrower and the Guarantors shall fail to furnish such funds as demanded by the Agent, the Agent shall be authorized to debit the accounts of the Borrower and the Guarantors maintained with the Agent in such amount five (5) Business Days after the giving of the notice referred to above); (iv) set-off amounts in the Letter of Credit Account or any other accounts maintained with the Agent and apply such amounts to the obligations of the Borrower and the Guarantors hereunder and in the other Loan Documents; and (v) exercise any and all remedies under the Loan Documents and under applicable law available to the Agent and the DIP Lenders. ARTICLE 8 THE AGENT SECTION 8.01. Administration by Agent. The general administration of the Loan Documents shall be performed by the Agent. Each DIP Lender hereby irrevocably authorizes the Agent, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto (including the release of Collateral in connection with any transaction that is expressly permitted by the Loan Documents). The Agent shall have no duties or responsibilities except as set forth in this Agreement and the remaining Loan Documents. SECTION 8.02. Advances and Payments. (a) On the date of each Loan, the Agent shall be authorized (but not obligated) to advance, for the account of each of the DIP Lenders, the amount of the Loan to be made by it in accordance with its Commitment hereunder. Should the Agent do so, each of the DIP Lenders agrees forthwith to reimburse the Agent in immediately available funds for the amount so advanced on its behalf by the Agent, together with interest at the Federal Funds Effective Rate if not so reimbursed on the date due from and including such date but not including the date of reimbursement. (b) Any amounts received by the Agent in connection with this Agreement (other than amounts to which the Agent is entitled pursuant to Sections 2.19, 8.06, 10.05 and 10.06), the application of which is not otherwise provided for in this Agreement shall be applied, first, in accordance with each DIP Lender's Commitment Percentage to pay accrued but unpaid Commitment Fees or Letter of Credit Fees, and second, in accordance 63 with each DIP Lender's Commitment Percentage to pay accrued but unpaid interest and the principal balance outstanding and all reimbursed Letter of Credit drawings. All amounts to be paid to a DIP Lender by the Agent shall be credited to that DIP Lender, after collection by the Agent, in immediately available funds either by wire transfer or deposit in that DIP Lender's correspondent account with the Agent, as such DIP Lender and the Agent shall from time to time agree. SECTION 8.03. Sharing of Setoffs. Each DIP Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower, including, but not limited to, a secured claim under Section 506 of the Bankruptcy Code or other security interest arising from, or in lieu of, such secured claim and received by such DIP Lender under any applicable bankruptcy, insolvency or other similar law, or otherwise, obtain payment in respect of its Loans as a result of which the unpaid portion of its Loans is proportionately less than the unpaid portion of the Loans of any other DIP Lender (a) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other DIP Lender a participation in the Loans of such other DIP Lender, so that the aggregate unpaid principal amount of each DIP Lender's Loans and its participation in Loans of the other DIP Lenders shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to the obtaining of such payment was to the principal amount of all Loans outstanding prior to the obtaining of such payment and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that the DIP Lenders share such payment pro-rata, provided that if any such non-pro-rata payment is thereafter recovered or otherwise set aside, such purchase of participation shall be rescinded (without interest). The Borrower expressly consents to the foregoing arrangements and agrees that any DIP Lender holding (or deemed to be holding) a participation in a Loan may exercise any and all rights of banker's lien, setoff (in each case, subject to the same notice requirements as pertain to clause (iv) of the remedial provisions of Section 7.01) or counterclaim with respect to any and all moneys owing by the Borrower to such DIP Lender as fully as if such DIP Lender held a Note and was the original obligee thereon, in the amount of such participation. SECTION 8.04. Agreement of Required DIP Lenders. Upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Required DIP Lenders, action shall be taken by the Agent for and on behalf or of the benefit of all DIP Lenders upon the direction of the Required DIP Lenders, and any such action shall be binding on all DIP Lenders. No amendment, modification, consent, or waiver shall be effective except in accordance with the provisions of Section 10.10. SECTION 8.05. Liability of Agent. (a) The Agent when acting on behalf of the DIP Lenders, may execute any of its respective duties under this Agreement by or through any of its respective officers, 64 agents, and employees, and neither the Agent, either Co-Arranger nor their respective directors, officers, agents, employees or Affiliates shall be liable to the DIP Lenders or any of them for any action taken or omitted to be taken in good faith, or be responsible to the DIP Lenders or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct. The Agent, each Co-Arranger and their respective directors, officers, agents, employees and Affiliates shall in no event be liable to the DIP Lenders or to any of them for any action taken or omitted to be taken by them pursuant to instructions received by them from the Required DIP Lenders or in reliance upon the advice of counsel selected by it. Without limiting the foregoing, neither the Agent, the Co-Arrangers nor any of their respective directors, officers, employees, agents or Affiliates shall be responsible to any DIP Lender for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty or representation in, this Agreement, any Loan Document or any related agreement, document or order, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents. (b) Neither the Agent, the Co-Arrangers nor any of their respective directors, officers, employees, agents or affiliates shall have any responsibility to the Borrower or the Guarantors on account of the failure or delay in performance or breach by any DIP Lender or by the Borrower or the Guarantors of any of their respective obligations under this Agreement or any of the Loan Documents or in connection herewith or therewith. (c) The Agent, in its capacity as Agent hereunder, shall be entitled to rely on any communication, instrument, or document reasonably believed by such person to be genuine or correct and to have been signed or sent by a person or persons believed by such person to be the proper person or persons, and such person shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by such person. SECTION 8.06. Reimbursement and Indemnification. Each DIP Lender agrees (i) to reimburse (x) the Agent for such DIP Lender's Commitment Percentage of any expenses and fees incurred for the benefit of the DIP Lenders under this Agreement and any of the Loan Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the DIP Lenders, and any other expense incurred in connection with the operations or enforcement thereof not reimbursed by the Borrower or the Guarantors and (y) the Agent for such DIP Lender's Commitment Percentage of any expenses of the Agent incurred for the benefit of the DIP Lenders that the Borrower has agreed to reimburse pursuant to Section 10.05 and has failed to so reimburse and (ii) to indemnify and hold harmless the Agent and any of its directors, officers, employees, agents or Affiliates, on demand, in the amount of its proportionate share, from and against any and all liabilities, obligations, losses, damages, 65 penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against it or any of them in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by it or any of them under this Agreement or any of the Loan Documents to the extent not reimbursed by the Borrower or the Guarantors (except such as shall result from their respective gross negligence or willful misconduct). SECTION 8.07. Rights of Agent. It is understood and agreed that MSSF and Lehman (and their respective affiliates) shall have the same rights and powers hereunder (including the right to give such instructions) as the other DIP Lenders and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with the Borrower or any Guarantor, as though they were not the Agent of the DIP Lenders and/or Co-Arranger under this Agreement. SECTION 8.08. Independent DIP Lenders. Each DIP Lender acknowledges that it has decided to enter into this Agreement and to make the Loans hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Borrower and the Guarantors and agrees that the Agent shall bear no responsibility therefor. SECTION 8.09. Notice of Transfer. The Agent may deem and treat a DIP Lender party to this Agreement as the owner of such DIP Lender's portion of the Loans for all purposes, unless and until a written notice of the assignment or transfer thereof executed by such DIP Lender shall have been received by the Agent. SECTION 8.10. Successor Agent. The Agent may resign at any time by giving written notice thereof to the DIP Lenders and the Borrower. Upon any such resignation, the Required DIP Lenders shall have the right to appoint a successor Agent, which shall be reasonably satisfactory to the Borrower. If no successor Agent shall have been so appointed by the Required DIP Lenders and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, the retiring Agent may, on behalf of the DIP Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $100,000,000, which shall be reasonably satisfactory to the Borrower. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 66 ARTICLE 9 GUARANTY SECTION 9.01. Guaranty. (a) Each of the Guarantors unconditionally and irrevocably guarantees the due and punctual payment and performance by the Borrower of the Obligations. Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and it will remain bound upon this guaranty notwithstanding any extension or renewal of any of the Obligations. The Obligations of the Guarantors shall be joint and several. (b) Each of the Guarantors waives presentation to, demand for payment from and protest to the Borrower or any other Guarantor, and also waives notice of protest for nonpayment. The Obligations of the Guarantors hereunder shall not be affected by (i) the failure of the Agent or a DIP Lender to assert any claim or demand or to enforce any right or remedy against the borrower or any other Guarantor under the provisions of this Agreement or any other Loan Document or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of any of the Loan Documents; (iv) the release, exchange, waiver or foreclosure of any security held by the Agent for the Obligations or any of them; (v) the failure of the Agent or a DIP Lender to exercise any right or remedy against any other Guarantor; or (vi) the release or substitution of the Borrower or any other Guarantor. (c) Each of the Guarantors further agrees that this guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and waives any right to require that any resort be had by the Agent or a DIP Lender to any security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of the Agent or a DIP Lender in favor of the Borrower or any other Guarantor, or to any other Person. (d) Each of the Guarantors hereby waives any defense that it might have based on a failure to remain informed of the financial condition of the Borrower and of any other Guarantor and any circumstances affecting the ability of the Borrower to perform under this Agreement. (e) Each Guarantor's guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any other instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations that might otherwise constitute a defense to this Guaranty. 67 (f) Subject to the provisions of Section 7.01, upon the Obligations becoming due and payable (by acceleration or otherwise), the DIP Lenders shall be entitled to immediate payment of such Obligations by the Guarantors upon written demand by the Agent, without further application to or order of the Bankruptcy Court. SECTION 9.02. No Impairment of Guaranty. The obligations of the Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations. Without limiting the generality of the foregoing, the obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or a DIP Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing that may or might in any manner or to any extent vary the risk of the Guarantors or would otherwise operate as a discharge of the Guarantors as a matter of law, unless and until the Obligations are paid in full. SECTION 9.03. Subrogation. Upon payment by any Guarantor of any sums to the Agent or a DIP Lender hereunder, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinate and junior in right of payment to the prior final payment in full of all the Obligations. If any amount shall be paid to such Guarantor for the account of the Borrower, such amount shall be held in trust for the benefit of the Agent and the DIP Lenders and shall forthwith be paid to the Agent and the DIP Lenders to be credited and applied to the Obligations, whether matured or unmatured. SECTION 9.04. Release of Guaranty. The obligations of a Guarantor under this Article 9 will terminate upon a sale or other disposition of such Guarantor or the sale or disposition of all or substantially all the assets of such Guarantor (in each case other than to the Borrower or a Subsidiary of the Borrower) that is permitted by Section 6.11 of this Agreement so long as the Net Cash Proceeds of such sale or disposition are applied as required by Section 2.13 of this Agreement. 68 ARTICLE 10 MISCELLANEOUS SECTION 10.01. Notices. Notices and other communications provided for herein shall be in writing (including telegraphic, telex, facsimile or cable communication) and shall be mailed, telegraphed, telexed, transmitted, cabled or delivered to the Borrower or any Guarantor at 3445 Peachtree Road, Suite 700, Atlanta, GA 30326, Attention: Chief Financial Officer, if to a DIP Lender, to it as set forth on Annex A and if to the Agent, at its address at 1285 Broadway, 10 th Floor, New York, NY 10036, Attention: James Morgan, with a copy to it at 1221 Avenue of the Americas, 35 th Floor, New York, NY 10020, Attention: Morgan Edwards, or such other address as such party may from time to time designate by giving written notice to the other parties hereunder. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the fifth Business Day after the date when sent by registered or certified mail, postage prepaid, return receipt requested, if by mail; or when delivered to the telegraph company, charges prepaid, if by telegram; or when receipt is acknowledged, if by any telegraphic communications or facsimile equipment of the sender, in each case addressed to such party as provided in this Section 10.01 or in accordance with the latest unrevoked written direction from such party; provided, however, that in the case of notices to the Agent notices pursuant to the preceding sentence with respect to change of address and pursuant to Section 2 shall be effective only when received by the Agent. SECTION 10.02. Survival of Agreement, Representations and Warranties, etc. All warranties, representations and covenants made by the Borrower or any Guarantor herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the DIP Lenders and shall survive the making of the Loans herein contemplated regardless of any investigation made by any DIP Lender or on its behalf and shall continue in full force and effect so long as any amount due or to become due hereunder is outstanding and unpaid and so long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute representations and warranties by the Borrower and the Guarantors hereunder with respect to the Borrower and the Guarantors. SECTION 10.03. Successors and Assigns. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent and the DIP Lenders and their respective successors and assigns. Neither the Borrower nor any of the Guarantors may assign or transfer any of their rights or obligations hereunder without the prior written consent of all of the DIP Lenders. Each DIP Lender may sell participations to any Person in all or part of any Loan, or all or part of its Commitment, in which event, without limiting the foregoing, the provisions of Section 2.15 shall inure to the benefit of each purchaser of a participation (provided that 69 such participant shall look solely to the seller of such participation for such benefits and the Borrower's and the Guarantors' liability, if any, under Sections 2.15 and 2.18 shall not be increased as a result of the sale of any such participation) and the pro rata treatment of payments, as described in Section 2.17, shall be determined as if such DIP Lender had not sold such participation. In the event any DIP Lender shall sell any participation, such DIP Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower and each of the Guarantors relating to the Loans, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement (provided that such DIP Lender may grant its participant the right to consent to such DIP Lender's execution of amendments, modifications or waivers that (i) reduce any Fees payable hereunder to the DIP Lenders, (ii) reduce the amount of any scheduled principal payment on any Loan or reduce the principal amount of any Loan or the stated rate of interest payable hereunder or (iii) extend the maturity of the Borrower's obligations hereunder). The sale of any such participation shall not alter the rights and obligations of the DIP Lender selling such participation hereunder with respect to the Borrower or the Guarantors. (b) Each DIP Lender may assign to one or more DIP Lenders or Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the same portion of the related Loans at the time owing to it), provided, however, that (i) other than in the case of an assignment to a DIP Lender Affiliate of the assignor DIP Lender or to another DIP Lender, the Agent and the Fronting Bank must give their respective prior written consent to such assignment, which consent will not be unreasonably withheld, (ii) the aggregate amount of the Commitment and/or Loans of the assigning DIP Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall, unless otherwise agreed to in writing by the Borrower and the Agent, in no event be less than $1,000,000 or the remaining portion of such DIP Lender's Commitments, if less and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance with blanks appropriately completed, together with a processing and recordation fee of $3,500 (for which the Borrower shall have no liability). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be within ten Business Days after the execution thereof (unless otherwise agreed to in writing by the Agent), (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a DIP Lender hereunder and (B) the DIP Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning DIP Lender's rights and obligations under this Agreement, such DIP Lender shall cease to be a party hereto). 70 (c) By executing and delivering an Assignment and Acceptance, the DIP Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such DIP Lender assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents; (ii) such DIP Lender assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any Guarantor or the performance or observance by the Borrower or any Guarantor of any of its obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto, (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 3.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such DIP Lender assignor or any other DIP Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms thereto, together with such powers as are reasonably incidental hereof; and (vi) such assignee agrees that it will perform in accordance with their terms all obligations that by the terms of this Agreement are required to be performed by it as a DIP Lender. (d) The Agent shall maintain at its office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the DIP Lenders and the Commitments of, and principal amount of the Loans owing to, each DIP Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Guarantors, the Agent and the DIP Lenders shall treat each Person the name of which is recorded in the Register as a DIP Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any DIP Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning DIP Lender and the assignee thereunder together with the fee payable in respect thereto, the Agent shall, if such Assignment and Acceptance has been completed with blanks appropriately filled and consented to by the Agent and the Fronting Bank (to the extent such consent is required hereunder), (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt written 71 notice thereof to the Borrower (together with a copy thereof). No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (f) Any DIP Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.03, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower or any of the Guarantors furnished to such DIP Lender by or on behalf of the Borrower or any of the Guarantors; provided that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree in writing to be bound by the provisions of Section 10.04. (g) The Borrower hereby agrees to actively assist and cooperate with the Agent in the Agent's efforts to sell participations herein (as described in Section 10.03(a)) and assign to one or more DIP Lenders or Eligible Assignees a portion of its interests, rights and obligations under this Agreement (as set forth in Section 10.03(b)). (h) Each DIP Lender agrees that if any Primed Lender that is an Eligible Assignee wishes to become a DIP Lender then, such Primed Lender shall be entitled to assume a portion (determined as set forth below) of such DIP Lender's Commitment hereunder and acquire a corresponding portion of its outstanding Loans and Letter of Credit Outstandings for a purchase price equal to 100% of such outstanding Loans plus unreimbursed Letter of Credit Outstandings plus accrued and unpaid interest and fees payable in respect thereof. Each such assumption and assignment shall be effected in accordance with this Section 10.03. The portion of each DIP Lender's Commitment subject to assumption by such Primed Lender shall be determined as follows. The Primed Lender shall be entitled to a Commitment Percentage equal to its Scheduled Percentage. Therefore, the Commitment Percentage of each DIP Lender shall be reduced to the extent it exceeds its Scheduled Percentage (with the greatest excess being reduced first and DIP Lenders with the same excess being reduced ratably) until the aggregate amount of such reductions constitute a Commitment Percentage equal to the Primed Lender's Scheduled Percentage. The Primed Lender that wishes to become a DIP Lender shall then assume from each DIP Lender the portion of its Commitment corresponding to the reduction (if any) applicable to such DIP Lender. SECTION 10.04. Confidentiality. Each DIP Lender agrees to keep any information delivered or made available by the Borrower or any of its Subsidiaries to it confidential from anyone other than persons employed or retained by such DIP Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loan and then only on a confidential basis; provided that nothing herein shall prevent any DIP Lender from disclosing such information (i) to any of its Affiliates or to any other DIP Lender, provided such Affiliate agrees to keep such information confidential to the same extent required by the DIP Lenders hereunder, (ii) upon the order 72 of any court or administrative agency, (ii) upon the request or demand of any regulatory agency or authority, (iii) that has been publicly disclosed other than as a result of a disclosure by the Agent or any DIP Lender that is not permitted by this Agreement, (iv) in connection with any litigation to which the Agent, any DIP Lender, or their respective Affiliates may be a party to the extent reasonably required, (v) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vi) to such DIP Lender's legal counsel and independent auditors and then only on a confidential basis and (vii) to any actual or proposed participant or assignee of all or part of its rights hereunder subject to the proviso in Section 10.03(f). Each DIP Lender shall use reasonable efforts to notify the Borrower of any required disclosure under clause (ii) of this Section prior to making such disclosure. SECTION 10.05. Expenses. Whether or not the transactions hereby contemplated shall be consummated, the Borrower and the Guarantors agree to pay all reasonable expenses incurred by the Agent (including but not limited to the reasonable fees and disbursements of Davis Polk & Wardwell, special counsel for the Agent, any other counsel that the Agent shall retain and any internal or third-party appraisers, consultants and auditors advising the Agent and their counsel) in connection with the preparation, execution, delivery and administration of this Agreement and the other Loan Documents, the making of the Loans and the issuance of the Letters of Credit, the perfection of the Liens contemplated hereby, the syndication of the transactions contemplated hereby, the costs, fees and expenses of the Agent in connection with its monthly and other periodic field audits, monitoring of assets (including reasonable and customary internal collateral monitoring fees) and publicity expenses, and, following the occurrence of an Event of Default, all expenses incurred by the DIP Lenders and the Agent in the enforcement or protection of the rights of any one or more of the DIP Lenders or the Agent in connection with this Agreement or the other Loan Documents, including but not limited to the reasonable fees and disbursements of any counsel for the DIP Lenders or the Agent. Such payments shall be made on the date of the Interim Order and thereafter within five days of demand upon delivery of a statement setting forth such costs and expenses. The obligations of the Borrower and the Guarantors under this Section shall survive the termination of this Agreement and/or the payment of the Loans. SECTION 10.06. Indemnity. The Borrower and each of the Guarantors agree to indemnify and hold harmless the Agent, and the DIP Lenders and their directors, officers, employees, agents and Affiliates (each an "INDEMNIFIED PARTY") from and against any and all expenses, losses, claims, damages and liabilities incurred by such Indemnified Party arising out of claims made by any Person in any way relating to the transactions contemplated hereby, but excluding therefrom all expenses, losses, claims, damages, and liabilities to the extent that they are determined by the final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the Borrower and the Guarantors under 73 this Section shall survive the termination of this Agreement and/or the payment of the Loans. SECTION 10.07. CHOICE OF LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND THE BANKRUPTCY CODE. SECTION 10.08. No Waiver. No failure on the part of the Agent or any of the DIP Lenders to exercise, and no delay in exercising, any right, power or remedy hereunder or any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. SECTION 10.09. Extension of Maturity. Should any payment of principal of or interest or any other amount due hereunder become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, in the case of principal, interest shall be payable thereon at the rate herein specified during such extension. SECTION 10.10. Amendments, etc. (a) No modification, amendment or waiver of any provision of this Agreement or the Security and Pledge Agreement and no consent to any departure by the Borrower or any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required DIP Lenders, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given; provided, however, that no such modification or amendment shall, without the written consent of the DIP Lender affected thereby (x) increase the Commitment of a DIP Lender (it being understood that a waiver of an Event of Default shall not constitute an increase in the Commitment of a DIP Lender), or (y) reduce the principal amount of any Loan or the stated rate of interest payable thereon, or extend any date for the payment of interest hereunder or reduce any Fees payable hereunder or extend the final maturity of the Borrower's obligations hereunder; and, provided, further, that no such modification or amendment shall, without the written consent of (A) all of the DIP Lenders (i) amend or modify any provision of this Agreement that provides for the unanimous consent or approval of the DIP Lenders, (ii) amend this Section 10.10 or the definition of Required DIP Lenders or (iii) amend or modify the Superpriority Claim status of the DIP Lenders contemplated by Section 2.23 or (B) the Super-Majority DIP Lenders (as hereinafter defined), (i) release all or any substantial portion of the Collateral from the Liens granted 74 to the Agent hereunder, under the Orders or under any other Loan Document, (ii) release any Guarantor or (iii) change Schedule 3.15 or any defined term in a manner which would increase the amount of the Available Commitment. No such amendment or modification may adversely affect the rights and obligations of the Agent or any Fronting Bank hereunder or any DIP Lender in the capacity referred to in Section 6.03(a)(iv) without its prior written consent. No notice to or demand on the Borrower or any Guarantor shall entitle the Borrower or any Guarantor to any other or further notice or demand in the same, similar or other circumstances. Each assignee under Section 10.03(b) shall be bound by any amendment, modification, waiver, or consent authorized as provided herein, and any consent by a DIP Lender shall bind any Person subsequently acquiring an interest on the Loans held by such DIP Lender. No amendment to this Agreement shall be effective against the Borrower or any Guarantor unless signed by the Borrower or such Guarantor, as the case may be. (b) Notwithstanding anything to the contrary contained in Section 10.10(a), in the event that the Borrower requests that this Agreement be modified or amended in a manner that would require the unanimous consent of all of the DIP Lenders (or the consent described in clause (B) of the first sentence of Section 10.10(a)) and such modification or amendment is agreed to by the Super-Majority DIP Lenders (as hereinafter defined), then with the consent of the Borrower and the Super-Majority DIP Lenders, the Borrower and the Super-Majority DIP Lenders shall be permitted to amend the Agreement without the consent of the DIP Lender or DIP Lenders that did not agree to the modification or amendment requested by the Borrower (such DIP Lender or DIP Lenders, collectively the "MINORITY DIP LENDERS") to provide for (w) the termination of the Commitment of each of the Minority DIP Lenders, (x) the addition to this Agreement of one or more other financial institutions (each of which shall be an Eligible Assignee), or an increase in the Commitment of one or more of the Super-Majority DIP Lenders, so that the Total Commitment after giving effect to such amendment shall be in the same amount as the Total Commitment immediately before giving effect to such amendment, (y) if any Loans are outstanding at the time of such amendment, the making of such additional Loans by such new financial institutions or Super-Majority DIP Lender or DIP Lenders, as the case may be, as may be necessary to repay in full the outstanding Loans of the Minority DIP Lenders immediately before giving effect to such amendment and (z) such other modifications to this Agreement as may be appropriate. As used herein, the term "SUPER-MAJORITY DIP LENDERS" shall mean, at any time, DIP Lenders holding Loans representing at least 66-2/3% of the aggregate principal amount of the Loans outstanding, or if no Loans are outstanding, DIP Lenders having Commitments representing at least 66-2/3% of the Total Commitment. SECTION 10.11. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining 75 provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.12. Headings. Section headings used herein are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Agreement. SECTION 10.13. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument. SECTION 10.14. Prior Agreements. This Agreement and the other Loan Documents represent the entire agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between the Borrower or a Guarantor and any DIP Lender or the Agent prior to the execution of this Agreement. SECTION 10.15. Further Assurances. Whenever and so often as reasonably requested by the Agent, the Borrower and the Guarantors will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the Agent all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred by this Agreement and the other Loan Documents. SECTION 10.16. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE GUARANTORS, THE AGENT AND EACH BANK HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. 76 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and the year first written above. BORROWER: LODGIAN, INC. By: /s/ Daniel E. Ellis ------------------------------------ Title: Vice President GUARANTORS: 1075 HOSPITALITY, L.P. By: Stevens Creek Hospitality, Inc., as General Partner 12801 NWF BEVERAGE, INC. ALBANY HOTEL, INC. AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., as General Partner AMIOP ACQUISITION CORP. APICO HILLS, INC. APICO INNS OF GREEN TREE, INC. APICO INNS OF PENNSYLVANIA, INC. APICO INNS OF PITTSBURGH, INC. APICO MANAGEMENT CORP. ATLANTA-BOSTON SPE, INC. ATLANTA-BOSTON HOLDINGS LLC ATLANTA-BOSTON LODGING LLC ATLANTA-HILLSBORO LODGING, L.L.C. BRECKSVILLE HOSPITALITY, INC. BRECKSVILLE HOSPITALITY, L.P. By: Brecksville Hospitality, Inc., as General Partner BRUNSWICK MOTEL ENTERPRISES, INC. COLUMBUS HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP By: Servico Columbus, Inc., as General Partner DEDHAM BEVERAGE MANAGEMENT, INC. DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Impac SPE #3, Inc., as General Partner DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. EAST WASHINGTON HOSPITALITY LIMITED PARTNERSHIP By: Servico East Washington, Inc., as General Partner EUROPEAN VENTURES, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. FORT WAYNE HOSPITALITY ASSOCIATES II, LIMITED PARTNERSHIP By: Servico Fort Wayne II, Inc., as General Partner FOURTH STREET HOSPITALITY, INC. GADSDEN HOSPITALITY, INC. GREAT SOUTHERN MINING CO., INC. GROUPERS & COMPANY SEAFOOD RESTAURANT HARRISBURG MOTEL ENTERPRISES, INC. HEARTLANDS GARDEN GRILLE, INC HILTON HEAD MOTEL ENTERPRISES, INC. IMPAC DEVELOPMENT AND CONSTRUCTION L.L.C. IMPAC HOLDINGS III, L.L.C. IMPAC HOTEL GROUP, L.L.C. IMPAC HOTEL MANAGEMENT L.L.C. IMPAC HOTELS I, L.L.C. IMPAC HOTELS II, L.L.C. IMPAC HOTELS III, L.L.C. IMPAC SPE #1, INC. IMPAC SPE #2, INC. IMPAC SPE #3, INC. IMPAC SPE #4, INC. IMPAC SPE #5, INC. IMPAC SPE #6, INC. ISLAND MOTEL ENTERPRISES, INC. KDS CORPORATION KINSER MOTEL ENTERPRISES, INC. LAFAYETTE BEVERAGE MANAGEMENT, INC LAWRENCE HOSPITALITY ASSOCIATES, L.P. By: Servico Lawrence, Inc., as General Partner LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP By: Lodgian Richmond SPE, Inc., as General Partner LODGIAN ACQUISITION, LLC. LODGIAN AMI, INC. LODGIAN ANAHEIM, INC. LODGIAN AUSTIN BEVERAGE CORP. LODGIAN DALLAS BEVERAGE CORP. LODGIAN FINANCING CORP. LODGIAN FLORIDA, INC. LODGIAN HOTELS, INC. LODGIAN MANAGEMENT CORP. LODGIAN MARKET CENTER BEVERAGE CORP. LODGIAN MOUNT LAUREL, INC. LODGIAN ONTARIO, INC. LODGIAN RICHMOND SPE, INC. LODGIAN RICHMOND, L.L.C. LODGIAN YORK MARKET STREET, INC. MANHATTAN HOSPITALITY ASSOCIATES, L.P. By: Servico Manhattan, Inc., as General Partner MCKNIGHT MOTEL, INC. MELBOURNE HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP By: Servico Melbourne, Inc. as General Partner MINNEAPOLIS MOTEL ENTERPRISES, INC. MOON AIRPORT MOTEL, INC. MULLIGAN'S, INC. NEW ORLEANS AIRPORT MOTEL ENTERPRISES, INC. NH MOTEL ENTERPRISES, INC. PALM BEACH MOTEL ENTERPRISES, INC. PENMOCO, INC. RALEIGH MOTEL ENTERPRISES, INC. RALEIGH-DOWNTOWN ENTERPRISES, INC. ROYCE HOLDING CORP. ROYCE HOTEL CORPORATION OF DELAWARE ROYCE MANAGEMENT CORP. OF GEORGIA SAGINAW HOSPITALITY, LIMITED PARTNERSHIP By: Servico Saginaw, Inc., as General Partner SECOND FAYETTEVILLE MOTEL ENTERPRISES, INC. SECOND PALM BEACH MOTEL ENTERPRISES, INC. SERVICO ACQUISITION CORP. SERVICO AUSTIN, INC. SERVICO CEDAR RAPIDS, INC. SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, Inc., as General Partner SERVICO COLESVILLE, INC. SERVICO COLUMBIA II, INC. SERVICO COLUMBIA, INC. SERVICO COLUMBUS, INC. SERVICO CONCORD, INC. SERVICO COUNCIL BLUFFS, INC. SERVICO EAST WASHINGTON, INC. SERVICO FLAGSTAFF, INC. SERVICO FORT WAYNE II, INC. SERVICO FORT WAYNE, INC. SERVICO FRISCO, INC. SERVICO FT. PIERCE, INC. SERVICO GRAND ISLAND, INC. SERVICO HILTON HEAD, INC. SERVICO HOSPITALITY, INC. SERVICO HOTELS I, INC. SERVICO HOTELS II, INC. SERVICO HOTELS III, INC. SERVICO HOTELS IV, INC. SERVICO HOUSTON, INC. SERVICO INVESTMENT COMPANY OF DELAWARE, INC. SERVICO JAMESTOWN, INC. SERVICO LANSING, INC. SERVICO LAWRENCE II, INC. SERVICO LAWRENCE, INC. SERVICO MANAGEMENT CORPORATION SERVICO MANAGEMENT CORP. SERVICO MANHATTAN, INC. SERVICO MANHATTAN II, INC. SERVICO MARKET CENTER, INC. SERVICO MARYLAND, INC. SERVICO MELBOURNE, INC. SERVICO METAIRIE, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO NORTHWOODS, INC. SERVICO OMAHA CENTRAL, INC. SERVICO OMAHA, INC. SERVICO OPERATIONS CORPORATION SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO PENSACOLA, INC.: SERVICO ROLLING MEADOWS, INC. SERVICO ROSEVILLE, INC. SERVICO SAGINAW, INC. SERVICO SILVER SPRING, INC. SERVICO SUMMERVILLE, INC. SERVICO TUCSON, INC. SERVICO WEST DES MOINES, INC. SERVICO WEST PALM BEACH, INC. SERVICO WICHITA, INC. SERVICO WINDSOR, INC. SERVICO WINTER HAVEN, INC. SERVICO WORCESTER, INC. SERVICO, INC. SHARON MOTEL ENTERPRISES, INC. SHC OF DELAWARE, INC. SHEFFIELD MOTEL ENTERPRISES, INC. SIOUX CITY HOSPITALITY, LP By: Fourth Street Hospitality, Inc., as General Partner SIXTEEN HOTELS, INC. STEVENS CREEK HOSPITALITY, INC.. W.V.B.M., INC. WASHINGTON MOTEL ENTERPRISES, INC. WILPEN, INC. WORCESTER HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP By: Servico Worcester, Inc., as General Partner By: /s/ Daniel E. Ellis ------------------------------------ Title: Vice President AGENT: MORGAN STANLEY SENIOR FUNDING, INC. Individually and as Agent By: /s/ Stephen Hannan ------------------------------------ Title: Vice President Address: 1221 Avenue of the Americas New York, New York 10020 LENDERS: MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Stephen Hannan ------------------------------------ Title: Vice President LEHMAN COMMERCIAL PAPER INC. By: /s/ Francis X. Gilhool ------------------------------------ Title: Authorized Signatory FRONTING BANK: MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Stephen Hannan ------------------------------------ Title: Vice President ANNEX A to REVOLVING CREDIT AND GUARANTY AGREEMENT Dated as of December 31, 2001
COMMITMENT COMMITMENT BANK AMOUNT PERCENTAGE - ---- ----------- ---------- Morgan Stanley Senior Funding, Inc. $12,500,000 50% Address for Notice: Lehman Commercial Paper, Inc. $12,500,000 50% Address for Notice: Total $25,000,000 100% ----------- ----------
Exhibit A to the Revolving Credit and Guaranty Agreement FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT dated as of ___________, _____ among [NAME OF ASSIGNOR] (the "Assignor") and [NAME OF ASSIGNEE] (the "Assignee"). WHEREAS, this Assignment and Acceptance (the "Agreement") relates to the DIP Credit Agreement dated as of December 31, 2001 among Lodgian, Inc. (the "Borrower"), the Assignor and the other DIP Lenders party thereto, the Guarantors party thereto and Morgan Stanley Senior Funding, Inc., as Agent (the "Agent") (as amended from time to time, the "DIP Credit Agreement"); WHEREAS, as provided under the DIP Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower and participate in Letters of Credit in an aggregate principal amount at any time outstanding not to exceed $______; [WHEREAS, Loans made to the Borrower by the Assignor under the DIP Credit Agreement in the aggregate principal amount of $________ are outstanding at the date hereof;] [WHEREAS, Letters of Credit with a total amount available for drawing thereunder of $___________ are outstanding at the date hereof; and] WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the DIP Credit Agreement in respect of a portion of its Revolving Commitment thereunder in an amount equal to $_________ (the "Assigned Amount"), together with a corresponding portion of each of its outstanding Loans and Letter of Credit Outstandings and the Assignee proposes to accept such assignment and assume the corresponding obligations of the Assignor under the DIP Credit Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein have the respective meanings set forth in the DIP Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the DIP Credit Agreement to the extent of the Assigned Amount and a corresponding portion of each of its outstanding Loans and Letter of Credit Outstandings, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the DIP Credit Agreement to the extent of the Assigned Amount and the corresponding portion of each of its Loans and Letter of Credit Outstandings. Upon the execution and delivery hereof by the Assignor and the Assignee [and by the Borrower, the Agent and the Fronting Bank](1) and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a DIP Lender under the DIP Credit Agreement with a Commitment in an amount equal to the Assigned Amount and acquire the rights of the Assignor with respect to a corresponding portion of each of its outstanding Loans and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by the Assigned Amount, and the Assignor shall be released from its obligations under the DIP Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.(2) Commitment fees and letter of credit participation fees accrued before the date hereof are for the account of the Assignor and such fees accruing on and after the date hereof with respect to the Assigned Amount are for the account of the Assignee. Each of the Assignor and the Assignee agrees that if it receives any amount under the DIP Credit Agreement that is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and promptly pay the same to such other party. [SECTION 4. Consent of the Agent and the Fronting Bank. This Agreement is conditioned upon the consent of the Agent and each Fronting Bank pursuant to Section 10.03(b) of the DIP Credit Agreement.](3) SECTION 5. Non-Reliance on Assignor, etc. By executing and delivering this Assignment and Acceptance, the Assignor and the Assignee confirm and agree with each other as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned free and clear of any adverse claim, the Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the DIP - --------------- (1) Delete if consent is not required. (2) Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. (3) Delete if consent is not required. A-2 Credit Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the DIP Credit Agreement or any of the other Loan Documents; (ii) the Assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any Guarantor or the performance or observance by the Borrower or any Guarantor of any of its obligations under the DIP Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto, (iii) the Assignee confirms that it has received a copy of the DIP Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 3.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iv) the Assignee will, independently and without reliance upon the Agent, the Assignor or any other DIP Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the DIP Credit Agreement; (v) the Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the DIP Credit Agreement as are delegated to the Agent by the terms of the DIP Credit Agreement, together with such powers as are reasonably incidental thereof; and (vi) the Assignee agrees that it will perform in accordance with the terms all obligations that by the terms of th DIP Credit Agreement are required to be performed by it as a DIP Lender. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] By: -------------------------------------- Name: Title: A-3 [NAME OF ASSIGNEE] By: -------------------------------------- Name: Title: [The undersigned consent to the foregoing assignment. MORGAN STANLEY SENIOR FUNDING, INC., as Agent By: -------------------------------------- Name: Title:] MORGAN STANLEY SENIOR FUNDING, INC., as Fronting Bank By: -------------------------------------- Name: Title:] A-4 Exhibit B to the Revolving Credit and Guaranty Agreement FORM OF NOTE New York, New York ____________, 200_ For value received, LODGIAN, INC., a Delaware corporation (the "BORROWER"), promises to pay to the order of [NAME OF DIP LENDER] (the "LENDER") or registered assigns, the unpaid principal amount of each Loan made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the dates provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates and as provided for in the Credit Agreement. All required cash payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Stanley Senior Funding, Inc., as Agent, New York, New York. All Loans made by the Lender, the respective Types of such Loans and all repayments of the principal thereof shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the promissory notes referred to in the Revolving Credit and Guaranty Agreement dated as of December 31, 2001 among Lodgian, Inc., the Subsidiaries named therein, the Lenders party thereto, and Morgan Stanley Senior Funding, Inc., as Agent (as amended from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. This note shall be governed by and construed in accordance with the laws of the State of New York. LODGIAN, INC. By --------------------------------------- Name: Title: LOANS AND PAYMENTS OF PRINCIPAL
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B-2 Exhibit C to the Revolving Credit and Guaranty Agreement FORM OF INTERIM ORDER C-1 Exhibit D to the Revolving Credit and Guaranty Agreement FORM OF SECURITY AND PLEDGE AGREEMENT D-1 Exhibit E to the Revolving Credit and Guaranty Agreement FORM OF OPINION OF COUNSEL E-1 SCHEDULE 1.01(a) EXISTING JOINT VENTURES I. COLUMBUS HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP General Partner: Servico Columbus, Inc. (30%) Limited Partners: (70%) II. MACON HOTEL ASSOCIATES, L.L.C. Members: Impac Hotel Group, LLC (60% ordinary member); PCG/Macon Investment Corp. (40% ordinary member) III.MELBOURNE HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP General Partner: Servico Melbourne, Inc. (50%) Limited Partners: (50%) IV. NEW ORLEANS AIRPORT MOTEL ASSOCIATES, LTD General Partner: New Orleans Airport Motel Enterprises, Inc. (50%) Limited Partners: (50%) V. SERVICO CENTRE ASSOCIATES, LTD. General Partner: Palm Beach Motel Enterprises, Inc. (50%) Limited Partners: (50%) SCHEDULE 3.05 SUBSIDIARIES I. 1075 HOSPITALITY, L.P. General Partner: Stevens Creek Hospitality, Inc. (51%) Limited Partner: Lodgian Acquisition, L.L.C. (49%) II. 12801 NWF BEVERAGE, INC. Shareholder: Servico Houston, Inc. III. ALBANY HOTEL, INC. Shareholder: Lodgian Financing Corp. IV. AMI OPERATING PARTNERS, L.P. General Partner: AMIOP Acquisition Corp. Limited Partner: Lodgian Financing Corp. V. AMIOP ACQUISITION CORP. Shareholder: Lodgian Financing Corp. VI. APICO HILLS, INC. Shareholder: Lodgian Financing Corp. VII. APICO INNS OF GREEN TREE, INC. Shareholder: Lodgian Financing Corp. VIII. APICO INNS OF PENNSYLVANIA, INC. Shareholder: Sharon Motel Enterprises IX. APICO INNS OF PITTSBURGH, INC. Shareholder: Servico Operations Corp. X. APICO MANAGEMENT CORP. Shareholder: Servico Operations Corp. XI. ATLANTA-BOSTON SPE, INC. Shareholder: Impac Hotel Group, L.L.C. XII. ATLANTA-BOSTON HOLDINGS LLC Member: Impac Hotel Group L.L.C. XIII. ATLANTA-BOSTON LODGING LLC Managing Member: Atlanta - Boston SPE, Inc. Ordinary Member: Atlanta - Boston Holdings, LLC
XIV. ATLANTA-HILLSBORO LODGING, L.L.C. Member: Lodgian Financing Corp. XV. BRECKSVILLE HOSPITALITY, INC. Shareholder: Servico Operations Corporation XVI. BRECKSVILLE HOSPITALITY, L.P. General Partner: Brecksville Hospitality, Inc. (51%) Limited Partner: Lodgian Acquisition L.L.C. (49%) XVII. BRUNSWICK MOTEL ENTERPRISES, INC. Shareholder: Lodgian Financing Corp. XVIII. COLUMBUS HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP General Partner: Servico Columbus, Inc. (30%) Limited Partners: (50%) XIX. DEDHAM BEVERAGE MANAGEMENT, INC. Shareholder: Impac Hotel Group, LLC. XX. DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP General Partner: Impac SPE #3, Inc. Limited Partner: Impac Hotel Group L.L.C. XXI. DOTHAN HOSPITALITY 3053, INC. Shareholder: Lodgian Financing Corp. XXII. DOTHAN HOSPITALITY 3071, INC. Shareholder: Lodgian Financing Corp. XXIII. EAST WASHINGTON HOSPITALITY LIMITED PARTNERSHIP General Partner: Servico East Washington, Inc. (51%) Limited Partner: Servico Tucson, Inc. (49%) XXIV. EUROPEAN VENTURES, INC. Shareholder: Servico Operations Corp. XXV. FAYETTEVILLE MOTEL ENTERPRISES, INC. Shareholder: Lodgian Financing Corp. XXVI. FORT WAYNE HOSPITALITY ASSOCIATES II, LIMITED PARTNERSHIP General Partner: Servico Fort Wayne II, Inc. (51%) Limited Partner: Lodgian Acquisition LLC (49%) XXVII. FOURTH STREET HOSPITALITY, INC. Shareholder: Servico Operations Corp. XXVIII. GADSDEN HOSPITALITY, INC. Shareholder: Lodgian Financing Corp.
XXIX. GREAT SOUTHERN MINING CO., INC. Shareholder: Servico Operations Corp. XXX. GROUPERS & COMPANY SEAFOOD RESTAURANT Shareholder: Servico Operations Corp. XXXI. HARRISBURG MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. XXXII. HEARTLANDS GARDEN GRILLE, INC Shareholder: Servico Operations Corp. XXXIII. HILTON HEAD MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. XXXIV. IMPAC DEVELOPMENT AND CONSTRUCTION L.L.C. Managing Member: Impac SPE #5, Inc. Other Member: Impac Hotel Group L.L.C. XXXV. IMPAC HOLDINGS III, L.L.C. Member: Impac Hotel Group, LLC XXXVI. IMPAC HOTEL GROUP, L.L.C. Shareholder: Lodgian, Inc. XXXVII. IMPAC HOTEL MANAGEMENT L.L.C. Managing Member: Impac SPE #4, Inc. (1%) Other Member: Impac Hotel Group, L.L.C. (99%) XXXVIII. IMPAC HOTELS I, L.L.C. Managing Member: Impac SPE #1 Ordinary Member: Lodgian Financing Corp. XXXIX. IMPAC HOTELS II, L.L.C. Shareholder, Managing Member: Impac SPE #2, Inc. (1%) Other Member: Impac Hotel Group, LLC (99%) XL. IMPAC HOTELS III, L.L.C. Member: Impac SPE #6, Inc. (1%) Managing Member: Impac Holdings III, LLC (99%) XLI. IMPAC SPE #1, INC. Shareholder: Lodgian Financing Corp. XLII. IMPAC SPE #2, INC. Shareholder: Impac Hotel Group, LLC XLIII. IMPAC SPE #3, INC. Shareholder: Impac Hotel Group, LLC. XLIV. IMPAC SPE #4, INC. Shareholder: Impac Hotel Group, LLC.
XLV. IMPAC SPE #5, INC. Shareholder: Impac Hotel Group, LLC. XLVI. IMPAC SPE #6, INC. Shareholder: Impac Hotel Group, LLC XLVII. ISLAND MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. XLVIII. KDS CORPORATION Shareholder: Servico Operations Corp. XLIX. KINSER MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. L. LAFAYETTE BEVERAGE MANAGEMENT, INC LI. LAWRENCE HOSPITALITY ASSOCIATES, L.P. General Partner: Servico Lawrence, Inc. (51%) Limited Partner: Servico Lawrence II, Inc. (49%) LII. LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP General Partner: Lodgian Richmond SPE, Inc. (1%) Limited Partner: Lodgian Financing Corp. (99%) LIII. LODGIAN ACQUISITION, LLC. Member: Lodgian Financing Corp. LIV. LODGIAN AMI, INC. Shareholder: Servico Operations Corp. LV. LODGIAN ANAHEIM, INC. Shareholder: Lodgian Financing Corp. LVI. LODGIAN AUSTIN BEVERAGE CORP. Shareholder: Servico Austin, Inc. LVII. LODGIAN DALLAS BEVERAGE CORP. Shareholder: Impac Hotels I, LLC LVIII. LODGIAN FINANCING CORP. Shareholder: Lodgian, Inc. LIX. LODGIAN FLORIDA, INC. Shareholder: Servico Operations Corp. LX. LODGIAN HOTELS, INC. Shareholder: Lodgian, Inc. LXI. LODGIAN MANAGEMENT CORP. Shareholder: Servico Operations Corp.
LXII. LODGIAN MARKET CENTER BEVERAGE CORP. Shareholder: Servico Market Center, Inc. LXIII. LODGIAN MOUNT LAUREL, INC. Shareholder: Lodgian Financing Corp. LXIV. LODGIAN ONTARIO, INC. Shareholder: Lodgian Financing Corp. LXV. LODGIAN RICHMOND SPE, INC. Shareholder: Lodgian Financing Corp. LXVI. LODGIAN RICHMOND, L.L.C. Members: Lodgian Financing Corp. (99% ordinary member); Lodgian Richmond SPE, Inc. (1% managing member) LXVII. LODGIAN YORK MARKET STREET, INC. Shareholder: Servico Operations Corp. LXVIII. MANHATTAN HOSPITALITY ASSOCIATES, L.P. General Partners: Servico Manhattan, Inc. (51%) Limited Partner: Servico Manhattan II, Inc. (49%) LXIX. MACON HOTEL ASSOCIATES, L.L.C. Members: Impac Hotel Group, LLC (60% ordinary member); PCG/Macon Investment Corp. (40% ordinary member) LXX. MCKNIGHT MOTEL, INC. Shareholder: Sharon Motel Enterprises, Inc. LXXI. MELBOURNE HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP General Partner: Servico Melbourne, Inc. (50%) Limited Partners: (50%) LXXII. MINNEAPOLIS MOTEL ENTERPRISES, INC. Shareholder: Lodgian Financing Corp. LXXIII. MOON AIRPORT MOTEL, INC. Shareholder: Servico Operations Corp. LXXIV. MULLIGAN'S, INC. Shareholder: Servico Operations Corp. LXXV. NEW ORLEANS AIRPORT MOTEL ASSOCIATES, LTD General Partner: New Orleans Airport Motel Enterprises, Inc. (50%) Limited Partners: (50%) LXXVI. NEW ORLEANS AIRPORT MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. LXXVII. NH MOTEL ENTERPRISES, INC. Shareholder: Lodgian Financing Corp.
LXXVIII. PALM BEACH MOTEL ENTERPRISES, INC. Shareholder: Lodgian Financing Corp. LXXIX. PENMOCO, INC. Shareholder: Servico Operations Corp. LXXX. RALEIGH MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. LXXXI. RALEIGH-DOWNTOWN ENTERPRISES, INC. Shareholder: Servico Operations Corp. LXXXII. ROYCE HOLDING CORP. Shareholder: Servico Operations Corp. LXXXIII. ROYCE HOTEL CORPORATION OF DELAWARE Shareholder: Servico, Inc. LXXXIV. ROYCE MANAGEMENT CORP. OF GEORGIA Shareholder: Servico Operations Corp. LXXXV. SAGINAW HOSPITALITY, LIMITED PARTNERSHIP General Partner: Servico Saginaw, Inc. (51%) Limited Partner: Lodgian Acquisition, LLC (49%) LXXXVI. SECOND FAYETTEVILLE MOTEL ENTERPRISES, INC. Shareholder: Sharon Motel Enterprises, Inc. LXXXVII. SECOND PALM BEACH MOTEL ENTERPRISES, INC. Shareholder: Sharon Motel Enterprises, Inc. LXXXVIII. SERVICO ACQUISITION CORP. Shareholder: Servico, Inc. LXXXIX. SERVICO AUSTIN, INC. Shareholder: Lodgian Financing Corp. XC. SERVICO CEDAR RAPIDS, INC. Shareholder: Lodgian Financing Corp. XCI. SERVICO CENTRE ASSOCIATES, LTD. General Partner: Palm Beach Motel Enterprises, Inc. Limited Partner: (50%) XCII. SERVICO COLESVILLE, INC. Shareholder: Lodgian Financing Corp. XCIII. SERVICO COLUMBIA II, INC. Shareholder: Servico Operations Corporation XCIV. SERVICO COLUMBIA, INC. Shareholder: Lodgian Financing Corp.
XCV. SERVICO COLUMBUS, INC. Shareholder: Servico Operations Corp. XCVI. SERVICO CONCORD, INC. Shareholder: Servico Operations Corporation XCVII. SERVICO COUNCIL BLUFFS, INC. Shareholder: Servico Operations Corp. XCVIII. SERVICO EAST WASHINGTON, INC. Shareholder: Servico Operations Corp. XCIX. SERVICO FLAGSTAFF, INC. Shareholder: Lodgian Financing Corp. C. SERVICO FORT WAYNE II, INC. Shareholder: Servico Operations Corp. CI. SERVICO FORT WAYNE, INC. Shareholder: Servico Operations Corp. CII. SERVICO FRISCO, INC. Shareholder: Servico Operations Corp. CIII. SERVICO FT. PIERCE, INC. Shareholder: Lodgian Financing Corp. CIV. SERVICO GRAND ISLAND, INC. Shareholder: Lodgian Financing Corp. CV. SERVICO HILTON HEAD, INC. Shareholder: Lodgian Financing Corp. CVI. SERVICO HOSPITALITY, INC. Shareholder: Servico Operations Corp. CVII. SERVICO HOTELS I, INC. Shareholder: KDS Corporation CVIII. SERVICO HOTELS II, INC. Shareholder: KDS Corporation CIX. SERVICO HOTELS III, INC. Shareholder: KDS Corp. CX. SERVICO HOTELS IV, INC. Shareholder: KDS Corporation CXI. SERVICO HOUSTON, INC. Shareholder: Lodgian Financing Corp.
CXII. SERVICO, INC. Shareholder: Lodgian, Inc. CXIII. SERVICO INVESTMENT COMPANY OF DELAWARE, INC. Shareholder: Sheffield Motel Enterprises, Inc. CXIV. SERVICO JAMESTOWN, INC. Shareholder: Lodgian Financing Corp. CXV. SERVICO LANSING, INC. Shareholder: Servico Operations Corp. CXVI. SERVICO LAWRENCE II, INC. Shareholder: Servico Operations Corp. CXVII. SERVICO LAWRENCE, INC. Shareholder: Servico Operations Corp. CXVIII. SERVICO MANAGEMENT CORPORATION Shareholder: Servico Operations Corp. CXIX. SERVICO MANAGEMENT CORP. Shareholder: Servico Operations Corp. CXX. SERVICO MANHATTAN, INC. Shareholder: Servico Operations Corporation CXXI. SERVICO MANHATTAN II, INC. Shareholder: Servico Operations Corp. CXXII. SERVICO MARKET CENTER, INC. Shareholder: Lodgian Financing Corp. CXXIII. SERVICO MARYLAND, INC. Shareholders: Lodgian Financing Corp. CXXIV. SERVICO MELBOURNE, INC. Shareholder: Servico Operations Corp. CXXV. SERVICO METAIRIE, INC. Shareholder: Lodgian Financing Corp. CXXVI. SERVICO NEW YORK, INC. Shareholder: Lodgian Financing Corp. CXXVII. SERVICO NIAGARA FALLS, INC. Shareholder: Lodgian Financing Corp. CXXVIII. SERVICO NORTHWOODS, INC. Shareholder: Lodgian Financing Corp.
CXXIX. SERVICO OMAHA CENTRAL, INC. Shareholder: Servico Operations Corp. CXXX. SERVICO OMAHA, INC. Shareholder: Servico Operations Corp. CXXXI. SERVICO OPERATIONS CORPORATION Shareholder: Servico, Inc. CXXXII. SERVICO PENSACOLA 7200, INC. Shareholder: Lodgian Financing Corp. CXXXIII. SERVICO PENSACOLA 7330, INC. Shareholder: Lodgian Financing Corp. CXXXIV. SERVICO PENSACOLA, INC. Shareholder: Lodgian Financing Corp. CXXXV. SERVICO ROLLING MEADOWS, INC. Shareholder: Lodgian Financing Corp. CXXXVI. SERVICO ROSEVILLE, INC. Shareholder: Lodgian Financing Corp. CXXXVII. SERVICO SAGINAW, INC. Shareholder: Servico Operations Corporation CXXXVIII. SERVICO SILVER SPRING, INC. Shareholder: Lodgian Financing Corp. CXXXIX. SERVICO SUMMERVILLE, INC. Shareholder: Servico Operations Corp. CXL. SERVICO TUCSON, INC. Shareholder: Servico Operations Corp. CXLI. SERVICO WEST DES MOINES, INC. Shareholder: Servico Operations Corp. CXLII. SERVICO WEST PALM BEACH, INC. Shareholder: Lodgian Financing Corp. CXLIII. SERVICO WICHITA, INC. Shareholder: Servico Operations Corp. CXLIV. SERVICO WINDSOR, INC. Shareholder: Lodgian Financing Corp. CXLV. SERVICO WINTER HAVEN, INC. Shareholder: Lodgian Financing Corp.
CXLVI. SERVICO WORCESTER, INC. Shareholder: Servico Operations Corp. CXLVII. SHARON MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. CXLVIII. SHC OF DELAWARE, INC. Shareholder: Servico, Inc., or Servico Operations Corp. CXLIX. SHEFFIELD MOTEL ENTERPRISES, INC. Shareholder: Lodgian Financing Corp. CL. SIOUX CITY HOSPITALITY, LP General Partner: Fourth Street Hospitality, Inc. Limited Partner: Lodgian Acquisition, LLC. CLI. SIXTEEN HOTELS, INC. Shareholders: AMI Operating Parthers, LP (70%); 6 Lodgian employees (30%) CLII. STEVENS CREEK HOSPITALITY, INC. Shareholder: Servico Operations Corp. CLIII. W.V.B.M., INC. Shareholder: Impac Hotel Group, L.L.C. CLIV. WASHINGTON MOTEL ENTERPRISES, INC. Shareholder: Servico Operations Corp. CLV. WILPEN, INC. Shareholder: Sharon Motel Enterprises, Inc. CLVI. WORCESTER HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP General Partner: Servico Worcester, Inc. Limited Partner: Lodgian Acquisition, LLC
SCHEDULE 3.06 LIENS
OWNER OF RECORD LIENS OF RECORD --------------- --------------- Servico Austin, Inc. Double L. Insulation Co, Inc. ($13,486.88) Palm Beach Hotel Enterprises, Inc., a Florida Corporation, as A-1 Enterprises ($43,618.60) the sole general partner of Servico Centre Associates, Ltd. Twin Towers, Inc. ($111,533.00) Servico Windsor, Inc. Twin Towers, Inc. ($) Maintenance Warehouse/America Corp. Servico Winter Haven, Inc. ($3,250.81) Servico Hotels II, Inc. DJB Enterprises ($92,620) B&F Contracting ($346,633.72) Island Motel Enterprises, Inc. and Penmoco, Inc. Banc One Funding Corporation has a lien on all assets in connection with the Holiday Inn, Jekyll Island Lodgian AMI, Inc. Banc One Funding Corporation has a lien on all assets in connection with the Holiday Inn, Inner Harbor Lodgian AMI, Inc. Banc One Funding Corporation has a lien on all assets in connection with the Holiday Inn, Lancaster, PA Lodgian AMI, Inc. Banc One Funding Corporation has a lien on all assets in connection with the Holiday Inn International Airport (BWI) Lodgian AMI, Inc. Banc One Funding Corporation has a lien on all assets in connection with the Holiday Inn, Glen Burnie, MD Servico, Inc. Banc One Funding Corporation has a lien on all of the Stock of Lodgian AMI, Inc, Island Motel Enterprises, Inc. and Penmoco, Inc Worcester Hospitality Associates Limited Partnership Lehman Brothers Holdings, Inc. has a lien on all assets in connection with the Holiday Inn, Worcester, MA Fort Wayne Hospitality Associates II, Limited Partnership Lehman Brothers Holdings, Inc. has a lien on all assets in connection with the Holiday Inn, Fort Wayne, IN Servico Frisco, Inc. Lehman Brothers Holdings, Inc. has a lien on all assets in connection with the Holiday Inn, Frisco, CO Apico Inns of Pittsburgh, Inc. Lehman Brothers Holdings, Inc. has a lien on all assets in connection with the Holiday Inn, Monroeville, PA Melbourne Hospitality Associates Limited Partnership Lehman Brothers Holdings, Inc. has a lien on all assets in connection with the Holiday Inn, Melbourne, FL Impac Hotels II, L.L.C. Capital Company of America LLC has a lien on all assets in connection with its hotels in Denver, CO; Coconut Grove, FL; Florence, KY; Fort Mitchell KY; Hamburg, NY; Syracuse, NY; Cincinnati, OH; Tulsa, OK; Jackson, TN; Clarksburg, WV; Fairmont, WV; Morgantown, WV
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OWNER OF RECORD LIENS OF RECORD --------------- --------------- Impac Hotels III, L.L.C. Capital Company of America LLC has a lien on all assets in connection with its hotels in Augusta, GA; Lafayette, LA; Merrimack, NH; Memphis TN; Colchester, VT; Servico Council Bluffs, Inc. GMAC Commercial Mortgage Corporation and Orix Corp. have a lien on all assets in connection with the Best Western, Council Bluffs, IA Servico West Des Moines, Inc. GMAC Commercial Mortgage Corporation and Orix Corp. have a lien on all assets in connection with the Best Western, West Des Moines, IA Servico Omaha Central, Inc. GMAC Commercial Mortgage Corporation and Orix Corp. have a lien on all assets in connection with the Best Western Central, NE Servico Omaha, Inc. GMAC Commercial Mortgage Corporation and Orix Corp. have a lien on all assets in connection with the Sheraton Inn, Omaha, NE Servico Wichita, Inc. GMAC Commercial Mortgage Corporation and Orix Corp. have a lien on all assets in connection with the Holiday Inn, Wichita Airport, Wichita, KS Brecksville Hospitality, L.P. GMAC Commercial Mortgage Corporation has a lien on all assets in connection with the Holiday Inn, Richfield, OH Sioux City Hospitality, L.P. GMAC Commercial Mortgage Corporation has a lien on all assets in connection with the Hilton Hotel, Sioux City, IA 1075 Hospitality, L.P. GMAC Commercial Mortgage Corporation has a lien on all assets in connection with the Holiday Inn, August, GA Servico Fort Wayne, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Fort Wayne Hilton, Fort Wayne, IN Washington Motel Enterprises, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Holiday Inn Meadowlands, Washington PA Servico Hotels I, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Holiday Inn Phoenix West, Phoenix, AZ Servico Hotels II, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Radisson, Phoenix, AZ Servico Hotels III, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Holiday Inn, Palm Desert, CA Servico Hotels IV, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Holiday Inn, Santa Fe, NM Hilton Head Motel Enterprises, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Holiday Inn, Hilton Head, SC Moon Airport Motel, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Royce Hotel, Pittsburgh Airport McKnight Motel, Inc. Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Holiday Inn, McKnight Road East Washington Hospitality Limited Partnership DLJ/Column Financial, Inc. have a lien on all assets in connection with the Holiday Inn Airport East, Phoenix,. AZ
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OWNER OF RECORD LIENS OF RECORD --------------- --------------- Bloomington Kinser Hotel Associates Local Oklahoma Bank, N.A. has a lien on all assets in connection with the Holiday Inn, Bloomington, IN Servico Lansing, Inc. DLJ/Column Financial, Inc./CrimiMae have a lien on all assets in connection with the Holiday Inn, Lansing, MI Dedham Lodging Associates I, Limited Partnership GMAC Commercial Mortgage Corporation has a lien on all assets in connection with the Residence Inn, Dedham, MA Impac Hotel Group, LLC Fidelity Investments has a lien on all of the stock in Macon Hotel Associates, LLC Lodgian Financing Corp. Morgan Stanley Senior Funding, Inc. has a lien on all assets Servico, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico, Inc. Impac Hotel Group, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Impac Hotel Group, Inc. Sheffield Motel Enterprises, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Sheffield Motel Enterprises, Inc. Dothan Hospitality 3053, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Dothan Hospitality 3053, Inc. Dothan Hospitality 3071, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Dothan Hospitality 3071, Inc. Gadsden Hospitality, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Gadsden Hospitality, Inc. Lodgian Anaheim Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Lodgian Anaheim Inc. Lodgian Ontario Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Lodgian Ontario Inc. Servico Pensacola, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Pensacola, Inc. Servico Pensacola 7200, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Pensacola 7200, Inc. Servico Pensacola 7330, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Pensacola 7330, Inc. Servico Ft. Pierce, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Ft. Pierce, Inc. AMI Operating Partners, L.P. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Ami Operating Partners, L.P. Servico Centre Associates, Ltd. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Centre Servico West Palm Beach, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico West Palm Beach, Inc. Servico Winter Haven, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Winter Haven, Inc. Albany Hotel, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Albany Hotel, Inc. Servico Northwoods, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Northwoods, Inc. Brunswick Motel Enterprises, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Brunswick Motel Enterprises, Inc.
-3- OWNER OF RECORD LIENS OF RECORD --------------- --------------- Little Rock Lodging Assoicates I, L.P. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Little Rock Lodging Associates I, L.P. Atlanta Hillsboro Lodging, LLC Morgan Stanley Senior Funding, Inc. has a lien on all assets of Atlanta Hillsboro Lodging, LLC Lodgian Richmond, L.L.C. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Lodgian Richmond, L.L.C. Servico Rolling Meadows, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Rolling Meadows, Inc. Servico Cedar Rapids, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Cedar Rapids, Inc. Servico Metairie, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Metairie, Inc. Servico Columbia, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Columbia, Inc. Servico Colesville, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Colesville, Inc. Servico Maryland, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Maryland, Inc. NH Motel Enterprises, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of NH Motel Enterprises, Inc. Minneapolis Motel Enterprises, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Minneapolis Motel Enterprises, Inc. Servico Roseville, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Roseville, Inc. Lodgian Mount Laurel, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Lodgian Mount Laurel, Inc. Servico Jamestown, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Jamestown, Inc. Servico New York, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico New York, Inc. Servico Niagara Falls, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Niagara Falls, Inc. Servico Grand Island, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Grand Island, Inc. Fayetteville Motel Enterprises, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Fayetteville Motel Enterprises, Inc. Apico Inns of Green Tree, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Apico Inns of Green Tree, Inc. Apico Hills, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Apico Hills, Inc. Servico Hilton Head, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Hilton Head, Inc. Servico Austin, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Austin, Inc. Servico Market Center, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Market Center, Inc.
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OWNER OF RECORD LIENS OF RECORD --------------- --------------- Servico Houston, Inc. Morgan Stanley Senior Funding, Inc. has a lien on all assets of Servico Houston, Inc. Atlanta-Boston Lodging, LLC Wachovia Securities has a lien on all assets in connection with the Comfort Inn, Revere, MA Lawrence Hospitality Associates, L.P. Chase has a Leasehold Mortgage on the Holiday Inn, Lawrence, KS Manhattan Hospitality Associates, L.P. Chase has a Leasehold Mortgage on the Holiday Inn, Manhattan, KS Columbus Hospitality Associates, L.P. First Union has a lien on all assets of Columbus Hospitality Associates, L.P.
Together with all liens for capitalized leases of and or purchase money security interest in office equipment, vehicles and other similar items of the Borrower and the Guarantors. -5- SCHEDULE 3.11 LITIGATION DJB Enterprises, et al. v. Servico Radisson Phoenix AZ CV2001-014882 Hotels II, Inc. Jimmie Nell Hollis v. Servico, et al. Holiday Inn - Dothan AL CV-97-009A Hampton Inn Waldman v. Impac, et al GA 99-CV-671-GET Gowri Kailas v. Servico Metarie, Inc. Quality Inn Metarie LA 557-966 Hospitality Restoration & Builders, NY 11999-2538 Inc. v. Servico, Inc., et al Best Western International v. Servico Clarion Charleston SC Northwoods, Inc.
DJB Enterprises, et al. v. Servico Superior Court - 8/28/01 Foreclosure of lien - Hotels II, Inc. Maricopa County Plaintiffs seek $438,000 Jimmie Nell Hollis v. Servico, et al. Circuit Court - Houston Employee alleges County non payment of bonus - seeks in excess of $1M Waldman v. Impac, et al U.S. District Court - 3/11/99 Breach of Fiduciary Northern District of Duty - Plaintiff Georgia seeks in excess of $1M. Insurance coverage available (80%) Gowri Kailas v. Servico Metarie, Inc. 24th Judicial Circuit 9/8/00 Suit for return of deposit - $500,000 Hospitality Restoration & Builders, Supreme Court - State of 6/15/99 Construction Inc. v. Servico, Inc., et al New York - Erie County Dispute Best Western International v. Servico Threatened - Breach Northwoods, Inc. of contract - Claim is $402,000
SCHEDULE 3.12 INTELLECTUAL PROPERTY Federal Trademark and Servicemark Registrations and Applications: To the best of the Borrower's knowledge, the attached represents all material trademarks, trademark applications, service marks, service mark applications owned by the Borrower. Borrower owns no material United States patents, patent applications, or material United States trademark licenses or patent licenses. SCHEDULE 3.14 PRE-PETITION INDEBTEDNESS
LENDER OBLIGOR AMOUNT OUTSTANDING - ------ ------- ------------------ Banc One Capital Funding Island Motel Enterprises, Inc.(*) $3,696,000 Corporation Penmoco, Inc. (Holiday Inn, Jekyll Island)(*) Guarantors: Servico Concord, Inc.(*), Lodgian AMI, Inc.(*) and Lodgian, Inc.(*) Banc One Capital Funding Lodgian AMI, Inc. (Holiday Inn International $13,852,000 Corporation Airport (BWI))(*) Guarantors: Servico Concord, Inc.(*), Penmoco, Inc.(*), Island Motel Enterprises, Inc.(*) and Lodgian, Inc.(*) Banc One Capital Funding Lodgian AMI, Inc. (Holiday Inn Lancaster, PA)(*) $4,589,000 Corporation Guarantors: Servico Concord, Inc.,(*) Penmoco, Inc.(*), Island Motel Enterprises, Inc.(*) and Lodgian, Inc.(*) Banc One Capital Funding Lodgian AMI, Inc. (Holiday Inn Inner Harbor)(*) $29,504,000 Corporation Guarantors: Servico Concord, Inc.(*), Penmoco, Inc.(*), Island Motel Enterprises, Inc.(*) and Lodgian, Inc.(*) Banc One Capital Funding Lodgian AMI, Inc. (Holiday Inn Glen Burnie, $2,924,000 Corporation MD)(*) Guarantors: Servico Concord, Inc.,(*) Penmoco, Inc.(*), Island Motel Enterprises, Inc.(*) and Lodgian, Inc.(*) Banc One Capital Funding Dedham Lodging Associates I, Limited $6,000,000 Corporation Partnership (Residence Inn, Dedham, MA)(*) Guarantor: Lodgian, Inc.(*) Lehman Brothers Holdings, Inc. Worcester Hospitality Associates Limited $7,270,000 (Holiday Inn, Worcester, MA)(*) Guarantor: Servico, Inc.(*) Lehman Brothers Holdings, Inc Fort Wayne Hospitality Associates II, Limited $1,791,000 Partnership (Holiday Inn, Fort Wayne, IN)(*) Guarantor: Servico, Inc.(*) Lehman Brothers Holdings, Inc Servico Frisco, Inc. (Holiday Inn, Frisco, CO)(*) $4,863,000 Guarantor: Servico, Inc.(*) Lehman Brothers Holdings, Inc Apico Inns of Pittsburgh, Inc. (Holiday Inn, $4,749,000 Monroeville, PA)(*) Guarantor: Servico, Inc.(*)
LENDER OBLIGOR AMOUNT OUTSTANDING - ------ ------- ------------------ Lehman Brothers Holdings, Inc Melbourne Hospitality Associates Limited $ 5,279,000 Partnership (Holiday Inn, Melbourne, FL)(*) Guarantor: Servico, Inc.(*) Capital Company of America Impac Hotels II, L.L.C. $108,652,000 LLC Impac Hotels III, L.L.C. Guarantors: Impac Hotel Group, LLC(*) and Lodgian, Inc.(*) GMAC Commercial Mortgage Servico Council Bluffs, Inc. (Best Western, $ 15,464,000 Corporation and Orix Corp. Council Bluffs, IA) Servico West Des Moines, Inc. (Best Western, West Des Moines, IA) Servico Omaha Central, Inc. (Best Western Central, Omaha, NE) Servico Omaha, Inc. (Sheraton Inn, Omaha, NE) Servico Wichita, Inc. (Holiday Inn, Wichita Airport, Wichita, KS Guarantor: Servico, Inc.(*) GMAC Commercial Mortgage Servico Lansing, Inc. (Holiday Inn, Lansing, MI) $ 5,313,000 Corporation Guarantor: Servico, Inc.(*) GMAC Commercial Mortgage Brecksville Hospitality, L.P. (Holiday Inn, $ 11,584,000 Corporation Richfield, OH) Sioux City Hospitality, L.P. (Hilton Hotel, Sioux City, IA) 1075 Hospitality, L.P. (Holiday Inn, Augusta, GA). DLJ/Column Financial, Servico Fort Wayne, Inc. (Fort Wayne Hilton, $ 26,003,000 Fort Inc./CrimiMae Wayne, IN)(*) Washington Motel Enterprises, Inc. (Holiday Inn Meadowlands, Washington, PA)(*) Servico Hotels I, Inc. (Holiday Inn Phoenix West, Phoenix, AZ)(*) Servico Hotels II, Inc. (Radison, Phoenix, AZ)(*) Servico Hotels III, Inc. (Holiday Inn, Palm Desert, CA)(*) Servico Hotels IV, Inc. (Holiday Inn, Santa Fe, NM)(*) Hilton Head Motel Enterprises, Inc. (Holiday Inn, Hilton Head, SC)(*) Moon Airport Motel, Inc. (Royce Hotel, Pittsburgh Airport)(*) Column Financial, Inc./CrimiMae McKnight Motel, Inc. (Holiday Inn, McKnight $ 3,358,000 Road)(*) DLJ/Column Financial, Inc. East Washington Hospitality Limited Partnership $ 9,390,000 (Holiday Inn Select Airport East, Phoenix, AZ)
LENDER OBLIGOR AMOUNT OUTSTANDING - ------ ------- ------------------ Local Oklahoma Bank, N.A. Bloomington Kinser Hotel Associates (Holiday $ 2,554,000 Inn, Bloomington, IN) Guarantor: Kinser Hotel Enterprises, Inc. Morgan Stanley Senior Funding, Lodgian Financing Corporation(*) $189,634,900 Inc. Guarantors: Servico, Inc.(*) Impac Hotel Group, LLC(*) Sheffield Motel Enterprises, Inc.(*) Dothan Hospitality 3053, Inc.(*) Dothan Hospitality 3071, Inc.(*) Gadsden Hospitality, Inc.(*) Lodgian Anaheim Inc.(*) Lodgian Ontario Inc.(*) Servico Pensacola, Inc.(*) Servico Pensacola 7200, Inc.(*) Servico Pensacola 7330, Inc.(*) Servico Ft. Pierce, Inc.(*) AMI Operating Partners, L.P.(*) Servico Centre Associates, Ltd.(*) Servico West Palm Beach, Inc.(*) Servico Winter Haven, Inc.(*) Albany Hotel, Inc.(*) Servico Northwoods, Inc.(*) Brunswick Motel Enterprises, Inc.(*) Little Rock Lodging Associates I,L.P.(*) Atlanta Hillsboro Lodging, LLC(*) Lodgian Richmond, L.L.C.(*) Servico Rolling Meadows, Inc.(*) Servico Cedar Rapids, Inc.(*) Servico Metairie, Inc.(*) Servico Columbia, Inc.(*) Servico Colesville, Inc.(*) Servico Maryland, Inc.(*) NH Motel Enterprises, Inc.(*) Minneapolis Motel Enterprises, Inc.(*) Servico Roseville, Inc.(*) Lodgian Mount Laurel, Inc.(*) Servico Jamestown, Inc.(*) Servico New York, Inc.(*) Servico Niagara Falls, Inc.(*) Servico Grand Island, Inc.(*) Fayetteville Motel Enterprises, Inc.(*) Apico Inns of Green Tree, Inc.(*) Apico Hills, Inc.(*) Servico Hilton Head, Inc.(*) Servico Austin, Inc.(*)
LENDER OBLIGOR AMOUNT OUTSTANDING - ------ ------- ------------------ Servico Market Center, Inc.(*) Servico Houston, Inc.(*) Wachovia Securities, Inc. Atlanta-Boston Lodging, LLC (Comfort Inn, $ 3,422,000 Boston/Revere, MA) Guarantor: Impac Hotel Group, LLC(*) $6,750,000 City of Lawrence, Lawrence Hospitality Associates, L.P. (Holiday $ 5,852,000 Kansas Commercial Development Inn, Lawrence, KS)(*) Revenue Refunding Bonds Guarantor: Servico, Inc.(*) (Holiday Inn Project) Senior Series 1997A and $2,330,000 City of Lawrence, Kansas Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Subordinate Series 1997B $6,750,000 City of Manhattan, Manhattan Hospitality Associates, L.P. (Holiday $ 5,852,000 Kansas Commercial Development Inn, Manhattan, KS)(*) Revenue Refunding Bonds Guarantor: Servico, Inc.(*) (Holiday Inn Project) Senior Series 1997A and $2,350,000 City of Manhattan, Kansas Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Subordinate Series 1997B 12 1/4Senior Subordinated Notes Lodgian Financing Corp $200,000,000 due 2009 Guarantors: Servico, Inc.(*) Sheffield Motel Enterprises, Inc.(*) Dothan Hospitality 3053, Inc.(*) Dothan Hospitality 3071, Inc.(*) Gadsden Hospitality, Inc.(*) Servico Flagstaff, Inc.(*) Lodgian Anaheim Inc.(*) Lodgian Ontario Inc.(*) Servico Pensacola, Inc.(*) Servico Pensacola 7200, Inc.(*) Servico Pensacola 7330, Inc.(*) Servico Ft. Pierce, Inc.(*) AMI Operating Partners, L.P.(*) Servico Centre Associates, Ltd.(*) Servico West Palm Beach, Inc.(*) Servico Winter Haven, Inc.(*) Servico Silver Spring, Inc.(*) Albany Hotel, Inc.(*)
LENDER OBLIGOR AMOUNT OUTSTANDING - ------ ------- ------------------ Servico Northwoods, Inc.(*) Servico Windsor, Inc.(*) Brunswick Motel Enterprises, Inc.(*) Little Rock Lodging Associates I,L.P.(*) Atlanta Hillsboro Lodging, LLC(*) Lodgian Richmond, L.L.C.(*) Servico Rolling Meadows, Inc.(*) Servico Cedar Rapids, Inc.(*) Servico Metairie, Inc.(*) Servico Columbia, Inc.(*) Servico Colesville, Inc.(*) Servico Maryland, Inc.(*) NH Motel Enterprises, Inc.(*) Minneapolis Motel Enterprises, Inc.(*) Servico Roseville, Inc.(*) Lodgian Mount Laurel, Inc.(*) Servico Jamestown, Inc.(*) Servico New York, Inc.(*) Servico Niagara Falls, Inc.(*) Servico Grand Island, Inc.(*) Fayetteville Motel Enterprises, Inc.(*) Apico Inns of Green Tree, Inc.(*) Apico Hills, Inc.(*) Servico Hilton Head, Inc.(*) Servico Austin, Inc.(*) Servico Market Center, Inc.(*) Servico Houston, Inc.(*) Servico Hilton Head, Inc.(*) Servico Austin, Inc.(*) Servico Market Center, Inc.(*) Servico Houston, Inc.(*) Crests Lodgian Capital Trust I $195,331,000 Servico, Inc.(*) First Union Columbus Hospitality Associates, L.P. $ 5,788,386
(*) Low Leverage Guarantor SCHEDULE 3.15 HOTEL PROPERTIES PART 1 - LOW LEVERAGE GUARANTORS See Attached PART II - HIGH LEVERAGE GUARANTORS
HOTEL ADDRESS OWNER OF RECORD - ----- ------- --------------- Marriot Hotel 16455 East 40(th) Circle, Aurora, CO 80011 Impac Hotels II, LLC Mayfair House 3000 Florida Ave, Miami, FL 33131 Impac Hotels II, LLC Holiday Inn N. Miami 12210 Biscayne Blvd., Miami, FL 33181 Impac Hotels II, LLC Fairfield Inn 201 Boy Scout Rd., Augusta, GA 30909 Impac Hotels III, LLC Holiday Inn 1075 Stevens Creek Rd., Augusta, GA 30907 1075 Hospitality, L.P. Holiday Inn 1710 Kinser Pike, Bloomington, IN 47404 Kinser Motel Enterprises, Inc. Quality Inn 3537 W. Broadway, Council Bluffs, IA 51501 Servico Council Bluffs, Inc. Four Points Hotel 11040 Hickman Rd., West Des Moines, IA 50325 Servico West Des Moines, Inc. Hilton Hotel 707 4(th) St., Sioux City, IA 51101 Sioux City Hospitality, L.P. Holiday Inn 5500 W. Kellogg, Wichita, KS 67209 Servico Wichita, Inc. Holiday Inn 8050 Holiday Place, Florence, KY 41042 Impac Hotels II, LLC Holiday Inn 2100 Dixie Hwy, Ft. Mitchell, KY 41011 Impac Hotels II, LLC Courtyard 214 E. Kaliste Saloom Rd., Lafayette, LA 70508 Impac Hotels III, LLC Clarion Hotel 3650 S. 72(nd) St., Omaha, NE 68124 Servico Omaha Central, Inc. Four Points Hotel 4888 S. 118(th) St., Omaha, NE 68137 Servico Omaha, Inc. Fairfield Inn 4 Amherst Rd., Merrimack, NH 03054 Impac Hotels III, LLC Holiday Inn 100 Farrell Rd., Syracuse, NY 13209 Impac Hotels II, LLC Clarion Hotel Raleigh Downtown Enterprises, Downtown 320 Hillsborough St., Raleigh, NC 27603 Inc. Holiday Inn Downtown 800 West 8(th) St., Cincinnati, OH 45203 Impac Hotels II, LLC Holiday Inn Cleveland 4742 Brecksville Rd., Richfield, OH 49286 Brecksville Hospitality, Inc.. Courtyard 3340 South 79(th) East Ave., Tulsa, OK 74145 Impac Hotels II, LLC Fairfield Inn 535 Wiley Parker Rd., Jackson, TN 38305 Impac Hotels III, LLC Holiday Inn Sycamore 6101 Shelby Oaks Dr., Memphis, TN 38134 Impac Hotels II, LLC Fairfield Inn 15 South Park Drive, Colchester, VT 05446 Impac Hotels III, LLC Holiday Inn 100 Lodgeville Rd., Clarksburg, WV 23630 Impac Hotels II, LLC Holiday Inn I-79 and Old Grafton Rd., Fairmont, WV 26554 Impac Hotels II, LLC
HOTEL ADDRESS OWNER OF RECORD - ----- ------- --------------- Holiday Inn 1400 Saratoga Ave., Morgantown, WV 26505 Impac Hotels II, LLC Holiday Inn 5440 Camp Road, Hamburg, NY 14075 Impac Hotels II, LLC Columbus Hospitality Associates, Holiday Inn 175 East Town St., Columbus, OH 43215 L.P.
SCHEDULE 3.16 LEASES PART I - LOW LEVERAGE GUARANTORS
HOTEL LEASE TYPE LESSOR EXPIRATION ANNUAL GROUND RENT - ----- ---------- ------ ---------- ------------------ Holiday Inn BWI(**) Ground Lease Investment Company Term ends 9/11/2003, with $713,000 Baltimore, MD Dated 8/24/71 all options 9/11/2053. 890 Elkridge Landing Rd. Counsel advised that 10 Linthicum Heights, MD. year option exercised in 21090 1985 purporting to extend to 9/11/13 be exercised Lessee- Lodgian AMI, Inc. again no later than 9/10/02. Holiday Inn(*) Ground Lease Poly Choke Company, Inc. 4/30/2022 $113,000 363 Roberts Street Dated 3/11/70 East Hartford, CT 08106 Lessee- AMI Operating Partners, L.P. Holiday Inn Ground Lease A.O. Krisch, Joel Krisch 10/7/2020 $ 26,000 Glen Burnie, MD(**) Dated 5/10/68 and Rosalle K. Shaftman (term expired 10/7/00, 6323 Governor Ritchie Hwy. renewal for 20 years given Glen Burnie, MD 21061 in 1985) Lessee- Lodgian AMI, Inc.
HOTEL LEASE TYPE LESSOR EXPIRATION ANNUAL GROUND RENT - ----- ---------- ------ ---------- ------------------ Holiday Inn Inner Harbor(**) Ground Lease Kallope Pappas, Helen P. 12/31/2017 $389,000 Baltimore, MD Dated 12/31/62 Thomas, Louisa Pappas, 310 N. Lombard Street Chrysanthe Pappas, Anna Baltimore, MD 21201 Pappas, Harry P. Pappas Lessee- Lodgian AMI, Inc. Holiday Inn East Ground Lease Paul A. Herr 6/30/2004 $67,000 Lancaster, PA Dated 1/10/69 521 Greenfield Rd. Lancaster, PA 17601 Lessee- AMI Operating Partners, L.P. [VERIFY] Crowne Plaza Parking Garage UDC-Ten Eyck 12/20/2056 $709,000 (reflects an State & Lodge Streets Dated 12/20/79 Development Corporation- aggregate number which Ten Eyck Plaza III includes payments under Albany, NY 12207(*) parking lease). Lessee- Albany Hotel, Inc. Crowne Plaza Ground Lease UDC-Ten Eyck 12/20/2056 $709,000 (reflects an State & Lodge Streets Dated 12/20/79 Development Corporation- aggregate number which Ten Eyck Plaza III includes payments under Albany, NY 12207(*) ground lease) Lessee- Albany Hotel, Inc. Courtyard Ground Lease City Line Properties, Inc. Term expires 12/31/2017 $163,137 Boston, MA Dated 2/23/88 (f/k/a Comfort Inn)(*) 100 Morris Street Revere, MA 02151 Tenant- Atlanta- Boston Holdings, LLC
HOTEL LEASE TYPE LESSOR EXPIRATION ANNUAL GROUND RENT - ----- ---------- ------ ---------- ------------------ Courtyard Parking Lot Eagle Road Realty Trust Term expires 12/31/2017 $49,440 Boston, MA Lease dated (f/k/a Comfort Inn) 3/20/97 100 Morris Street Revere, MA 02151 Tenant- Atlanta- Boston Holdings, LLC Fairfield Inn Ground Pizzagalli Investment 12/30/2015 $102,000 Colchester, VT(**) Sublease Company 15 South Park Drive Dated 5/16/89 Colchester, VT 05446 Tenant- Impac Hotels III, L.L.C. Crowne Plaza Air Rights City of Cedar Rapids, Iowa 10/13/2075 $101,000 (reflects an aggregate 350 1(st) Ave. NE Lease number inclusive of annual Cedar Rapids, IA 53401 Dated 10/14/76 rental payments on air rights, ballroom lease and parking Tenant- Servico Cedar lease) Rapids, Inc. Crowne Plaza Lease of City of Cedar Rapids, Iowa 10/13/2075 $101,000 (reflects an aggregate 350 1(st) Ave. NE Ballroom Space number inclusive of annual Cedar Rapids, IA(*) 53401 Dated 10/26/77 rental payments on air rights, ballroom lease and parking Tenant- Servico Cedar lease) Rapids, Inc.
HOTEL LEASE TYPE LESSOR EXPIRATION ANNUAL GROUND RENT - ----- ---------- ------ ---------- ------------------ Crowne Plaza Lease of City of Cedar Rapids, Iowa 10/13/2075 $101,000 (reflects an 350 1(st) Ave. NE Parking Spaces aggregate number inclusive Cedar Rapids, IA(*) 53401 Dated 5/18/77 of annual rental payments on air rights, ballroom Tenant- Servico Cedar lease and parking lease) Rapids, Inc. Crowne Plaza Pedestrian City of Cedar Rapids, Iowa 3/31/2029 subject to $1.00/year 350 1(st) Ave. NE Passage Lessee right to terminate Cedar Rapids, IA(*) 53401 Dated 5/23/79 Tenant- Servico Cedar Rapids, Inc. Hilton Parking Garage Fort Wayne Downtown Expiration at the end of the $54,000 Ft. Wayne, IN(*) Dated 6/4/85 Traffic Management Board useful engineering life of 1020 S. Calhoun St. the parking garage or Ft. Wayne, IN 46802 Hotel closure. Tenant- Servico Ft. Wayne, Inc. Holiday Inn Parking Lot City of Jamestown 2003 $11,000 Jamestown, NY(*) Lease 150 W. 4(th) Street Dated 10/5/77 Jamestown, NY 14701 Tenant- Servico Jamestown, Inc. Holiday Inn Ground Lease Jekyll Island State Park 2/28/2014 $139,000 Jekyll Island, GA(**) dated 10/23/72 Authority 200 South Beachview Dr. Jekyll Island, GA 31527 Tenant- Penmoco, Inc. and Island Motel Enterprises, Inc.
HOTEL LEASE TYPE LESSOR EXPIRATION ANNUAL GROUND RENT - ----- ---------- ------ ---------- ------------------ Holiday Inn Lawrence, KS(**) Ground Lease City of Lawrence, Kansas Term expires when bonds Rents sufficient to pay the 200 McDonald Dr. Dated 1/1/97 paid in full principal, or premium, if any, Lawrence, KS 66044 and interest on project bonds and related expenses. Tenant- Lawrence Hospitality Associates, L.P. Holiday Inn Ground Lease City of Manhattan, Kansas Term expires when bonds Rents sufficient to pay the Manhattan, KS(**) Dated 1/1/97 paid in full principal, or premium, if any, 530 Richards Dr. and interest on project bonds Manhattan, KS 66502 and related expenses. Tenant- Manhattan Hospitality Associates, L.P. French Quarter Suites (A) Davis (A) Martha Sutton under (A) 9/30/2038 $33,000 Memphis, TN(*) Ground Lease the Davis lease (B) 9/30/2038 2144 Madison Ave. dated 4/26/72 (B) Horace and Ann Memphis, TN 38104 (B) Proctor Procter under the Proctor Ground Lease Lease Tenant- Impac Hotels I, LLC dated 8/24/72 Holiday Inn Select Parking Lot City of Niagra Falls 7/1/07 $50,000 Niagara Falls, NY(*) Agreement (f/k/a Clarion Hotel) Dated 7/21/97 300 Third Street Niagra Falls., NY 14303 Tenant- Servico New York, Inc.
HOTEL LEASE TYPE LESSOR EXPIRATION ANNUAL GROUND RENT - ----- ---------- ------ ---------- ------------------ Holiday Inn Ground Lease Motel Properties, Inc. 11/30/2014 $250,000 Raleigh, NC(**) Dated 8/26/69 320 Hillsborough Street, Raleigh, NC 27603 Tenant -Raleigh Downtown Enterprises, Inc. Holiday Inn Select Ground Lease Niagara County Industrial 3/28/01 $50,000 Niagara Falls, NY(*) Dated 3/29/96 Development Agency (f/k/a Clarion Hotel) 300 Third Street Niagra, Falls, NY 14303 Tenant- Servico New York, Inc. Holiday Inn Select East Ground Lease S& J Investments, L.L.C. 12/31/2049 $670,000 Phoenix, AZ(**) Dated 7/30/84 4300 E. Washington Phoenix, AZ 85034 Tenant- East Washington Hospitality, LP Holiday Inn Ground Lease City of Sheffield, Alabama 11/30/2077 Per lease agreement -during 4900 Hatch Blvd. Dated 2/6/81 renewal period (which Sheffield, AL 35660(*) commenced 11/30/1997), basis rent in the amount of $100 Tenant- Sheffield Motel annually plus such other Enterprises, Inc. amounts as lessee agreed to pay under the "net lease", including, without limitation taxes and utilities.
HOTEL LEASE TYPE LESSOR EXPIRATION ANNUAL GROUND RENT - ----- ---------- ------ ---------- ------------------ Holiday Inn Sioux City, IA Parking Space City of Sioux City, Iowa 12/31/2007 Minimum fee of $2,580/ month Rental plus additional rent for each Tenant - Sioux City Agreement month in which the dollar Hospitality, L.C. dated 1/1998 value of the use of the "ramp" exceeds $4,000 based upon current parking rates.
SCHEDULE 3.17 EXISTING INVESTMENTS Investments in the ownership of the capital stock or other evidence of an ownership interest in each of the entities is set forth in Schedules 1.01(a) and 3.05 Deposit accounts and securities accounts as attached hereto. LODGIAN, INC Attributed DIP to Low Leverage Properties SCHEDULE 3.15 (in $000's)
Proportional Attributed Location Address Owner of Record EBITDA DIP - ------------------------------------------------------------------------------------------------------------------------------- Residence Inn 259 Elm Street, Dedham Lodging 2.2% $ 539 Dedham, MA Dedham, MA 02026 Associates I, LP BANC ONE BANC ONE 2.2% 539 Holiday Inn 4859 McKnight Rd., McKnight Motel, Inc. 1.7% 415 McKnight SHG II, PA Pittsburgh, PA 15237 COLUMN/CRIMI MAE COLUMN/CRIMI MAE 1.7% 415 Holiday Inn 1500 North 51st Ave., Servico Hotels I, Inc. 1.5% 370 Phoenix West, AZ Phoenix, AZ 85043 Radisson 3333 East University Dr., Servico Hotels II, Inc. 1.4% 338 Phoenix Hotel, AZ Phoenix, AZ 85034 Holiday Inn Express 74675 Hwy 111, Servico Hotels III, Inc. 1.5% 370 Palm Desert, CA Palm Desert, CA 92260 Fort Wayne 1020 S. Calhoun St., Servico Ft. Wayne, Inc. 1.4% 362 Hilton - Servico Ft. Wayne, IN 46802 Holiday Inn 4048 Cerrillos Rd., Servico Hotels IV, Inc. 1.0% 248 Santa Fe, NM Santa Fe, NM 87505 Crowne Plaza 1160 Thorn Run Rd. Ext., Moon Airport Motel, Inc. 0.5% 121 Pittsburgh Airport Coraopolis, PA 15108 Holiday Inn 340 Racetrack Rd., Washington Motel 1.3% 333 Meadow Lands, PA Washington, PA 15301 Enterprises, Inc. Holiday Inn 1 South Forest Beach Dr., Hilton Head Motel 2.8% 703 Hilton Head, SC Hilton Head, SC 29928 Enterprises, Inc. DLJ/COLUMN/CRIMI MAE DLJ/COLUMN/CRIMI MAE 11.4% 2,845 Courtyard by Marriott 100 Morris St., Revere, Atlanta-Boston Lodging, LLC 1.5% 379 - Boston, MA MA 02151 FIRST UNION FIRST UNION 1.5% 379 Holiday Inn 7501 W. Saginaw Hwy, Servico Lansing, Inc. 3.2% 798 West Lansing, MI Lansing, MI 48917 GMAC GMAC 3.2% 798 Holiday Inn 1129 N. Summit Blvd., Servico Frisco, Inc. 1.0% 249 Frisco, CO Frisco, CO 80443 Holiday Inn 2605 North A1A, Melbourne Hospitality 2.5% 633 Melbourne, FL Indialantic, FL 32903 Associates Holiday Inn 300 E. Washington Blvd., Fort Wayne Hospitality 0.5% 122 Fort Wayne, IN Ft. Wayne, IN 46802 Associates II, L.P. Crowne Plaza 10 Lincoln Square, Worcester Hospitality 3.9% 965 Worcester, MA Worcester, MA 01608 Associates L.P. Holiday Inn 2750 Mosside Blvd., Apico Inns of Pittsburgh, Inc. 1.5% 374 Monroeville, PA Monroeville, PA 15146 LEHMAN/CRIMI MAE LEHMAN/CRIMI MAE 9.4% 2,344 NON MSDW PROPERTIES 29.3% 7,319
LODGIAN, INC Attributed DIP to Low Leverage Properties SCHEDULE 3.15 (in $000's)
Proportional Attributed Location Address Owner of Record EBITDA DIP - ------------------------------------------------------------------------------------------------------------------------------- Holiday Inn 4900 Hatch Blvd., Sheffield Motel 0.8% 201 Sheffield, AL Sheffield, AL 35660 Enterprises, Inc. Holiday Inn 3053 Ross Clark, Dothan Hospitality 3053, Inc. 0.3% 68 Dothan, AL Dothan, AL 36301 Hampton Inn 3071 Ross Clark Circle, Dothan Hospitality 3071, Inc. 0.6% 142 Dothan, AL Dothan, AL 36301 Holiday Inn Express 801 Cleveland Ave., Gadsden Hospitality, Inc. 0.4% 100 Gadsden, AL Gadsden, AL 35954 Courtyard by Marriott 1001 McClain Rd., Impac Hotels I, LLC 1.3% 333 - - Bentonville, AR Bentonville, AR 72712 Residence Inn 1401 S. Shackleford Rd., Little Rock Lodging 1.2% 303 Little Rock, AR Little Rock, AR 72211 Associates, LLC Holiday Inn 363 Roberts St., AMI Operating Partners, LP 0.8% 188 East Hartford, CT E. Hartford, CT 06108 Crowne Plaza 1601 Belvedere Rd., Royce Management Corp. 2.2% 562 West Palm Beach, FL West Palm Beach, FL 33406 Holiday Inn Express 6501 Pensacola Blvd., Servico Pensacola, Inc. 0.7% 187 Pensacola, FL Pensacola, FL 32505 Holiday Inn 7200 Plantation Rd., Servico Pensacola 7200, Inc. 0.9% 219 University Mall, FL Pensacola, FL 32504 Holiday Inn 1150 3rd St., SW, Servico Winter Haven, Inc. 1.4% 362 Winter Haven, FL Winter Haven, FL 33880 Hampton Inn 7330 Plantation Rd., Servico Pensacola 7330, Inc. 1.2% 298 Pensacola, FL Pensacola, FL 32504 Holiday Inn 5252 New Jesup Hwy, Brunswick Motel 0.9% 227 Brunswick, GA Brunswick, GA 31525 Enterprises, Inc. Courtyard by Marriott 3332 Peachtree Rd., Impac Hotels I, LLC 4.4% 1,109 - Atlanta, GA Atlanta, GA 30326 Holiday Inn Hotel & 2265 Kingston Ct., Impac Hotels I, LLC 0.3% 71 Suites Marietta, GA Marietta, GA 30067 Fairfield Inn 1311 St. Augustine Rd., Impac Hotels I, LLC 0.9% 216 Valdosta, GA Valdosta, GA 31601 Holiday Inn 1309 St. Augustine Rd., Impac Hotels I, LLC 0.8% 200 Valdosta, GA Valdosta, GA 31601 Holiday Inn 3405 Algonquin Rd., Servico Rolling Meadows, Inc. 2.3% 586 Rolling Meadows, IL Rolling Meadows, IL 60008 Quality Hotel 2261 N. Causeway Blvd., Servico Metairie, Inc. 1.2% 297 Metairie, LA Metairie, LA 70001 Hilton Inn 5485 Twin Knolls Rd., Servico Columbia, Inc. 2.6% 661 Columbia, MD Columbia, MD 21045 Holiday Inn 8777 Georgia Ave., Servico Maryland, Inc. 3.6% 899 Silver Spring, MD Silver Spring, MD 20910 Holiday Inn 999 W. Patrick St., AMI Operating Partners, LP 1.3% 318 Frederick, MD Frederick, MD 21702 Holiday Inn 1100 Cromwell Bridge Rd., AMI Operating Partners, LP 1.4% 342 Cromwell Bridge, MD Towson, MD 21286 Holiday Inn 1800 Belmont Ave., AMI Operating Partners, LP 0.5% 129 Belmont, MD Baltimore, MD 21244
LODGIAN, INC Attributed DIP to Low Leverage Properties SCHEDULE 3.15 (in $000's)
Proportional Attributed Location Address Owner of Record EBITDA DIP - ------------------------------------------------------------------------------------------------------------------------------- Crowne Plaza 350 1st Ave., NE, Servico Cedar Rapids, Inc. 1.8% 445 Cedar Rapids, IA Cedar Rapids, IA 52401 Holiday Inn 1201 West Country Rd. E, Minneapolis Motel 1.2% 303 Arden Hills/St. Paul, MN St. Paul, MN 55112 Enterprises, Inc. Courtyard by Marriott 3835 Technology Dr., Impac Hotels I, LLC 1.0% 244 - - Paducah, KY Paducah, KY 42001 Courtyard by Marriott 46 Cavalier Blvd., Impac Hotels I, LLC 0.6% 140 - Florence, KY Florence, KY 41042 Hurstbourne Hotel, 9700 Blue Grass Parkway, Impac Hotels I, LLC 0.7% 170 Louisville,KY Louisville, KY 40299 Holiday Inn 4545 N. Lindbergh Blvd., Impac Hotels I, LLC 1.6% 397 St. Louis North, MO St. Louis, MO 63044 Crowne Plaza Ten Eyck Plaza, Albany Hotel, Inc. 2.6% 642 Albany, NY Albany, NY 12207 Holiday Inn Select 300 Third St., Servico New York, Inc. 1.8% 451 Niagara Falls, NY Niagara Falls, NY 14303 Four Points 114 Buffalo Ave., Servico Niagara Falls, Inc. 0.5% 120 Niagara Falls, NY Niagara Falls, NY 14303 Holiday Inn 150 W. 4th St., Servico Jamestown, Inc. 1.0% 248 Jamestown, NY Jamestown, NY 14701 Holiday Inn 100 Whitehaven Rd., Servico Grand Island, Inc. 0.4% 90 Grand Island, NY Grand Island, NY 14072 Holiday Inn 15471 Royalton Rd., Impac Hotels I, LLC 2.6% 653 Select Strongsville, OH Strongsville, OH 44136 Holiday Inn 401 Holiday Drive, Apico Inns of 1.7% 414 Greentree, PA Pittsburgh, PA 15220 Greentree, Inc. Holiday Inn 915 Brinton Rd., Apico Hills, Inc. 0.2% 44 Parkway East, PA Pittsburgh, PA 15221 Doubletree Club 9461 Roosevelt Blvd., Impac Hotels I, LLC 2.2% 547 Philadelphia, PA Philadelphia, PA 19114 Holiday Inn 334 Arsenal Rd., AMI Operating 0.7% 167 York, PA York, PA 17402 Partners, LP Hilton Inn 5500 Crooks Rd., NH Motel 2.8% 708 Northfield, MI Troy, MI 48098 Enterprises, Inc. Clarion 7401 Northwoods Blvd., Servico Northwoods, Inc. 0.6% 161 Charleston, SC Charleston, SC 29406 Holiday Inn Sunspree 1601 N. Ocean Blvd., Impac Hotels I, LLC 1.2% 308 Myrtle Beach, SC Surfside Beach, SC 29575 French Quarter 2144 Madison Ave., Impac Hotels I, LLC 0.5% 116 Suites Memphis, TN Memphis, TN 38104 Crowne Plaza 12801 NW Freeway US 290, Servico Houston, Inc. 3.8% 958 Houston, TX Houston, TX 77040 Courtyard by Marriott 4350 Ridgemont Dr., Impac Hotels I, LLC 1.0% 246 - Abilene, TX Abilene, TX 79606 Holiday Inn 3401 South I-35, Servico Austin, Inc. 1.8% 451 Austin, TX Austin, TX 78741 Holiday Inn 1955 Market Center Blvd., Servico Market 0.5% 130 Market Center Dallas, TX Dallas, TX 75207 Center, Inc. Holiday Inn Select 4441 Hwy 114 & Ester Blvd., Impac Hotels I, LLC 2.8% 706 DFW Airport, TX Irving, TX 75063
LODGIAN, INC Attributed DIP to Low Leverage Properties SCHEDULE 3.15 (in $000's)
Proportional Attributed Location Address Owner of Record EBITDA DIP - ------------------------------------------------------------------------------------------------------------------------------- Holiday Inn Select 1855 Huron Church Road, Servico Windsor, Inc. 3.2% 805 Windsor, Ontario Windsor, Ontario, Canada N9C 2L6 Morgan Stanley Pool MORGAN STANLEY (SENIOR) MORGAN STANLEY (SENIOR) 70.7% 17,681 ----- ------ 100.0% 25,000 ----- ------ Holiday Inn Select 4300 E. Washington, East Washington Airport Phoenix, AZ Phoenix, AZ 85034 Associates, L.P Holiday Inn 200 South Beachview Dr., Island Motel Jekyll Island, GA Jekyll Island, GA 31527 Enterprises, Inc. Holiday Inn 301 W. Lombard St., Lodgian AMI, Inc. Inner Harbor, MD Baltimore, MD 21201 Holiday Inn 6323 Governor Ritchie Hwy, Lodgian AMI, Inc. Glen Burnie, MD Glen Burnie, MD 21061 Holiday Inn 890 Linthicum Heights, Lodgian AMI, Inc. BWI Airport, MD MD 21090 Holiday Inn 530 Richards Dr. Manhattan Hospitality Manhattan, KS Manhattan, KS 66502 Associates, L.P Holiday Inn 200 McDonald Dr., Lawrence Hospitality Lawrence, KS Lawrence, KS 66044 Associates, L.P Holiday Inn 521 Greenfield Rd., Lodgian AMI, Inc. Lancaster, PA Lancaster, PA 17601
PAGE 1 OF 5 SCHEDULE 3.17 ACCOUNTS BANK INFORMATION
LOCATION LOW NUMBER LEVERAGE STATE ACCOUNT/PROPERTY DESCRIPTION BANK CONTACT - ------ -------- ----- ---------------------------- ---- ------- 210 y AL Holiday Inn Bank of America James Butler 220 y AL Holiday Inn Bank of America James Butler 230 y AL Hampton Inn Bank of America James Butler 240 y AL Holiday Inn Express Bank of America James Butler 410 y AZ HOLIDAY INN PHOENIX WEST Bank of America James Butler 410 y AZ Holiday Inn West Bank of America James Butler 420 y AZ RADISON PHOENIX AIRPORT Bank of America James Butler 420 y AZ Radisson Airport Bank of America James Butler 440 y AZ HOLIDAY INN PHOENIX AIRPORT EAST Bank of America James Butler 440 y AZ Holiday Inn Select Airport Bank of America James Butler 505 y AR COURTYARD BENTONVILLE Bank of America James Butler 505 y AR Courtyard Bank of America James Butler 560 y AR LITTLE ROCK RESIDENCE Bank of America James Butler 560 y AR Residence Inn Bank of America James Butler 630 y CA Holiday Inn Express Palm Desert Bank of America James Butler 630 y CA Holiday Inn Express Palm Desert Bank of America James Butler 707 CO Marriott (Denver Airport) Bank of America James Butler 725 y CO Holiday Inn Bank of America James Butler 850 y CT Holiday Inn Bank of America James Butler 1108 y FL OMNI WPB Bank of America James Butler 1108 y FL Crowne Plaza Bank of America James Butler 1113 y FL HOLIDAY INN EXPRESS PENSACOLA Bank of America James Butler 1113 y FL Holiday Inn Express Bank of America James Butler 1116 y FL HOLIDAY INN UNIVERSITY MALL Bank of America James Butler 1116 y FL Holiday Inn University Mall Bank of America James Butler 1132 y FL HOLIDAY INN WINTER HAVEN Bank of America James Butler 1132 y FL Holiday Inn Bank of America James Butler 1160 y FL HOLIDAY INN MELBOURNE OCEANFRT Bank of America James Butler 1168 y FL HAMPTON INN PENSACOLA Bank of America James Butler 1168 y FL Hampton Inn Bank of America James Butler 1178 FL Mayfair House Hotel Bank of America James Butler 1183 FL Holiday Inn North Bank of America James Butler 1206 y GA HOLIDAY INN BRUNSWICK Bank of America James Butler 1206 y GA Holiday Inn Bank of America James Butler 1207 y GA Holiday Inn Bank of America James Butler 1212 y GA COURTYARD BUCKHEAD Bank of America James Butler 1212 y GA Courtyard Buckhead Bank of America James Butler 1255 y GA HOLIDAY INN SANTE FE Bank of America James Butler 1255 y GA Holiday Inn Hotel & Suites Bank of America James Butler 1260 GA HOLIDAY INN 1-20 @ WASHINGTON Bank of America James Butler 1260 GA Holiday Inn Bank of America James Butler 1265 GA Fairfield Inn Bank of America James Butler 1280 y GA FAIRFIELD INN VALDOSTA Bank of America James Butler 1285 y GA HOLIDAY INN VALDOSTA Bank of America James Butler 1285 y GA Holiday Inn Bank of America James Butler 1310 y IL Holiday Inn Bank of America James Butler 1421 IN Holiday Inn Bank of America James Butler 1425 y IN Hilton Hotel Bank of America James Butler 1440 y IN Holiday Inn Hotel & Suites Bank of America James Butler 1502 y LA Quality Hotel & Conference Center Bank of America James Butler 1515 LA Courtyard Bank of America James Butler 1710 y MD COLUMBIA HILTON Bank of America James Butler 1710 y MD Hilton Inn Bank of America James Butler 1720 y MD Holiday Inn Bank of America James Butler 1765 y MD IMPAC HOTEL GROUP/HI INNER HARBOR Bank of America James Butler 1765 y MD Holiday Inn Inner Harbor Bank of America James Butler 1770 y MD HOLIDAY INN GLEN BURNIE Bank of America James Butler 1770 y MD Holiday Inn Baltimore South Bank of America James Butler PHONE # ADDRESS 1 ADDRESS 2 CITY STATE POSTAL CODE ------- --------- --------- ---- ----- ----------- 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 70502 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 70502 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 ACCOUNT # ACCOUNT TYPE --------- ------------ 3267984468 COD Account 3267984476 COD Account 3267984484 COD Account 3267984492 COD Account 3276601772 Dep 3267984518 COD Account 3276601897 Dep 3267984526 COD Account 3276601764 Dep 3267984534 COD Account 3276601756 Dep 3267984542 COD Account 5043070526 Dep 3267984559 COD Account 3272205933 COD Account 3267984583 Dep 3267984617 COD Account 3267984625 COD Account 3267984633 COD Account 3276601780 Dep 3267984666 COD Account 3276601798 Dep 3267984674 COD Account 1171987399 Dep 3267984682 COD Account 1612148975 Dep 3267984708 COD Account 1612020101 Dep 1171987404 Dep 3267984724 COD Account 3267984732 COD Account 3267984740 COD Account 1229466699 Dep 3267984757 COD Account 3267984765 COD Account 3276601939 Dep 3267984773 COD Account 3276600022 Dep 3267984781 COD Account 3276599992 Dep 3267985713 COD Account 3267984799 COD Account 3276599968 Dep 3276601806 Dep 3267984815 COD Account 3267984823 COD Account 3267984831 COD Account 3267984849 COD Account 3267984856 COD Account 3267984864 COD Account 3267984872 COD Account 3276599984 Dep 3267984898 COD Account 3267984906 COD Account 3276601830 Dep 3267984914 COD Account 3276601848 Dep 3267984922 COD Account
PAGE 2 OF 5 SCHEDULE 3.17 ACCOUNTS BANK INFORMATION
LOCATION LOW NUMBER LEVERAGE STATE ACCOUNT/PROPERTY DESCRIPTION BANK CONTACT - ------ -------- ----- ---------------------------- ---- ------- 1775 y MD HOLIDAY INN Bank of America James Butler 1775 y MD Holiday Inn BWI Airport Bank of America James Butler 1776 y MD HOLIDAY INN FREDERICK Bank of America James Butler 1776 y MD Holiday Inn Bank of America James Butler 1780 y MD HOLIDAY INN CROMWELL BRIDGE Bank of America James Butler 1780 y MD Holiday Inn Cromwell Bridge (Balt.) Bank of America James Butler 1785 y MD HOLIDAY INN BELMONT Bank of America James Butler 1785 y MD Holiday Inn Belmont Bank of America James Butler 1810 IA HILTON INN SIOUX CITY Bank of America James Butler 1810 IA Hilton Inn Bank of America James Butler 1820 IA Clarion Hotel Bank of America James Butler 1830 IA SERVICO WEST DES MOINES, INC Bank of America James Butler 1830 IA Four Points Bank of America James Butler 1840 y IA Crowne Plaza Five Seasons Bank of America James Butler 1910 y MN Holiday Inn North (Arden Hills) Bank of America James Butler 2007 y KY Courtyard Bank of America James Butler 2020 KY Holiday Inn Bank of America James Butler 2035 y KY Courtyard Bank of America James Butler 2040 y KY Radisson Hotel East Bank of America James Butler 2050 KY Holiday Inn Bank of America James Butler 2100 y KS Holiday Inn Bank of America James Butler 2110 y KS LAWRENCE HOSPITALITY ASSOCIATES LP DBA Bank of America James Butler 2110 y KS Holiday Inn Bank of America James Butler 2120 KS SERVICO WICHITA INC DBA HOLIDAY INN Bank of America James Butler 2120 KS Holiday Inn Airport Bank of America James Butler 2222 y MO HOLIDAY INN ST LOUIS NORTH Bank of America James Butler 2222 y MO Holiday Inn St Louis Airport North Bank of America James Butler 2510 NE Clarion Hotel Omaha Bank of America James Butler 2520 NE Four Points Sheraton Bank of America James Butler 2700 y MA Crowne Plaza Bank of America James Butler 2727 y MA Courtyard (Bos.) Bank of America James Butler 2777 y MA Residence Inn (Bos.) Bank of America James Butler 3210 y NM Holiday Inn Bank of America James Butler 3311 y NY Crowne Plaza Bank of America James Butler 3314 y NY Holiday Inn Select Bank of America James Butler 3326 y NY Four Points Bank of America James Butler 3330 y NY Holiday Inn Bank of America James Butler 3345 y NY Holiday Inn Grand Island (Niag.) Bank of America James Butler 3348 NY Holiday Inn Farrell Road Bank of America James Butler 3398 NY Holiday Inn Bank of America James Butler 3422 NC RALEIGH DOWNTOWN ENTERPRISES INC C/O SERVICO INC Bank of America James Butler 3422 NC Holiday Inn Dntn Bank of America James Butler 3500 OH HOLIDAY INN CITY CENTER Bank of America James Butler 3510 OH Holiday Inn Bank of America James Butler 3515 y OH Holiday Inn Select Bank of America James Butler 3535 OH Holiday Inn Dntn Bank of America James Butler 3636 OK Courtyard Bank of America James Butler 3801 y PA Holiday Inn Monroeville (Pitt.) Bank of America James Butler 3802 y PA Holiday Inn Greentree Bank of America James Butler 3804 y PA Holiday Inn Parkway East Bank of America James Butler 3805 y PA Crowne Plaza (Pitt.) Bank of America James Butler 3806 y PA Holiday Inn North Hills (McKnight) Bank of America James Butler 3810 y PA Holiday Inn Meadow Lands Bank of America James Butler 3838 y PA Doubletree Club Hotel Bank of America James Butler 3875 y PA Holiday Inn - Arsenal Rd Bank of America James Butler 3890 y PA Holiday Inn East Bank of America James Butler 3930 y MI Hilton Inn Northfield Bank of America James Butler 3970 y MI Holiday Inn West Bank of America James Butler PHONE # ADDRESS 1 ADDRESS 2 CITY STATE POSTAL CODE ------- --------- --------- ---- ----- ----------- 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Treasury Management Service 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Treasury Management Service 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 ACCOUNT # ACCOUNT TYPE --------- ------------ 3276599950 Dep 3267984930 COD Account 3067294005 Dep 3267984948 COD Account 3064966394 Dep 3267984955 COD Account 3064966404 Dep 3267984963 COD Account 3276601905 Dep 3267984971 COD Account 3267984989 COD Account 3276600048 Dep 3267984997 COD Account 3267985002 COD Account 3267985010 COD Account 3267985036 COD Account 3267985051 COD Account 3267985069 COD Account 3267985077 COD Account 3267985085 COD Account 3267985101 COD Account 3276601814 Dep 3267985119 COD Account 3276601822 Dep 3267985127 COD Account 3276601913 Dep 3267985135 COD Account 3267985150 COD Account 3267985168 COD Account 3267985176 COD Account 3263038889 COD Account 3267985184 COD Account 3267985200 COD Account 3267985226 COD Account 3267985234 COD Account 3267985242 COD Account 3267985259 COD Account 3267985275 COD Account 3267985267 COD Account 3267985283 COD Account 3276600014 Dep 3267985309 COD Account 1611996993 Partnership Acct 3267985317 COD Account 3267985325 COD Account 3267985333 COD Account 3267985341 COD Account 3267985390 COD Account 3267985408 COD Account 3267985416 COD Account 3267985424 COD Account 3267985432 COD Account 3267985457 COD Account 3267985465 COD Account 3267985473 COD Account 3267985499 COD Account 3267985507 COD Account 3267985515 COD Account
PAGE 3 OF 5 SCHEDULE 3.17 ACCOUNTS BANK INFORMATION
LOCATION LOW NUMBER LEVERAGE STATE ACCOUNT/PROPERTY DESCRIPTION BANK - ------ -------- ----- ---------------------------- ----- 4010 y SC HILTON HEAD ENTERPRISES Bank of America 4010 y SC Holiday Inn Bank of America 4021 y SC BW NORTHWOODS ATRIUM CHARLESTON Bank of America 4021 y SC Clarion Hotel Charleston Bank of America 4040 y SC HOLIDAY INN MYRTLE BEACH Bank of America 4040 y SC Holiday Inn Sunspree Resort - MYR Bank of America 4205 TN Fairfield Inn Jackson Bank of America 4215 y TN FRENCH QUARTER MEMPHIS Bank of America 4215 y TN French Quarter Suites Bank of America 4242 TN Holiday Inn Sycamore View Bank of America 4310 y TX RAMADA PLAZA HOUSTON Bank of America 4310 y TX RAMADA PLAZA HOUSTON Bank of America 4310 y TX Crowne/Ramada Plaza Bank of America 4343 y TX COURTYARD ABILENE Bank of America 4343 y TX LODGIAN ABILENCE BEVERAGE CORP Bank of America 4343 y TX Courtyard Bank of America 4375 y TX SERVICO AUSTIN INC Bank of America 4375 y TX SERVICO AUSTIN INC Bank of America 4375 y TX Holiday Inn South Bank of America 4380 y TX HOLIDAY INN MARKET CENTER Bank of America 4380 y TX HOLIDAY INN MARKET CENTER Bank of America 4380 y TX Holiday Inn Market Center Bank of America 4388 y TX HOLIDAY INN DFW Bank of America 4388 y TX HOLIDAY INN DFW/BEVERAGE DALLAS Bank of America 4388 y TX Holiday Inn Select DFW Airport (Dal.) Bank of America 4545 VT IMPAC III DBA FAIRFIELD BURLINGTON Bank of America 4800 WV Holiday Inn Bank of America 4848 WV Holiday Inn Bank of America 4899 WV Holiday Inn Clarksburg Bank of America 6003 Western Regional Office Bank of America Impac I GA Fairfield Bank of America GA LODGIAN, INC. PAYROLL ACCT Bank of America GA LODGIAN DISBURSEMENT ACCOUNT Bank of America GA IMPAC II Bank of America GA IMPAC III Bank of America GA LODGIAN FINANCING CORP Bank of America GA LODGIAN INC Bank of America GA LODGIAN INC Bank of America GA LODGIAN INC Bank of America GA Courtyard by Marriott Bank of America GA Lodgian, Inc. Bank of America 3890 y PA AMI OPERATING PARTNERS - A LTD PTRSHP Bank of Lancaster 707 CO MARRIOTT DENVER AIRPORT/CAPITAL CORP OF AMERICA Bank One 707 CO MARRIOTT DENVER AIRPORT/CAPITAL CORP OF AMERICA/Security Dep Bank One 1265 GA THE CAPITAL CO OF AMERICA Bank One 1310 y IL HOLIDAY INN ROLLING MEADOWS Bank One 1421 IN RAMADA INN BLOOMINGTON Bank One 1515 LA COURTYARD LAFAYETTE Bank One 1515 LA THE CAPITAL CO OF AMERICA LLC AS MORTGAGEE OF IMPAC HOTELS Bank One 2040 y KY DOUBLETREE LOUISVILLE Bank One 2050 KY HOLIDAY INN, FLORENCE Bank One 2050 KY HOLIDAY INN, FLORENCE Bank One 2828 NH HOLIDAY INN MERRIMACK Bank One 3500 OH HOLIDAY INN CITY CENTER Bank One 3510 OH BRECKSVILLE HOSPITALITY LTD PART Bank One 3636 OK CAPITAL CORP OF AMERICA/COURTYARD TULSA Bank One 3636 OK CAPITAL CORP OF AMERICA/COURTYARD TULSA Bank One 4545 VT FAIRFIELD INN BURLINGTON Bank One CONTACT PHONE # ADDRESS 1 ADDRESS 2 CITY STATE POSTAL CODE - ------- ------- --------- --------- ---- ----- ----------- James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 Customer Service 800-547-6058 Treasury Management Service 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 Customer Service 800-547-6058 Treasury Management Service 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Treasury Management Service 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Butler 800-547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 James Buttler 800 547-6058 Real Estate Treasury Services 101 South Tryon Street Charlotte NC 28255 Customer Service 717-560-5800 1097 Commercial Ave P.O. Box 38 East Petersburg PA 17520 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Customer Service 800-404-4111 1 Bank One Plaza Chicago IL 60670 Customer Service 800-404-4111 Bank One Indiana, N.A. 7610 W. Washington Street Indianapolis IN 46231 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 800-404-4111 Department 1045 Columbus OH 43271 800-404-4111 Department 1045 Columbus OH 43271 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 Debbie Young 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 ACCOUNT # ACCOUNT TYPE - --------- ------------ 745010325 Dep 3267985523 COD Account 3276600006 Dep 3267985531 COD Account 3276599976 Dep 3267985556 COD Account 3267985580 COD Account 3276600030 Dep 3267985606 COD Account 3267985614 COD Account 5772042273 Dep 5772042232 Liquor 3267985598 COD Account 3276600055 Dep 1390070419 Liquor 3267984880 COD Account 3276601871 Dep 1390070435 Liquor 3267985630 COD Account 3276601889 Dep 1390070422 Liquor 3267985648 COD Account 3276601863 Dep 1390072653 Liquor 3267985689 COD Account 3272206519 Magers 3267985440 COD Account 3267985622 COD Account 3267985382 COD Account 3267985671 COD Account 3272293483 COD Account 3272208911 Payroll 3272208903 Accounts Payable 3272209570 Dep Acct trsf from LaSalle 3272209588 Dep Acct trsf from LaSalle 3263038863 Concentration, Master Funding 3267984443 Manager's Checks Master Funding Account 3263057186 Concentration, Master Funding 3263057202 Travel Agent 3276598945 COD Account 3263057202 Travel Agent Account 917144401 Dep 1192614780 Dep 192614863 Sec Dep 1588492973 Lockbox 616201570 Dep 181457950 Dep 1588493393 Sec Dep 7114107762 Bk Rem Clearing 88324561 Dep 618006514 Bk Rem Clearing 618006522 Sec Dep L/B1588492973 Dep 980291258 Dep 100207554 Dep 628891822 Sec Dep 628891814 Bk Rem Clearing 13051115 Bk Rem Clearing
PAGE 4 OF 5 SCHEDULE 3.17 ACCOUNTS BANK INFORMATION
LOCATION LOW NUMBER LEVERAGE STATE ACCOUNT/PROPERTY DESCRIPTION BANK CONTACT - ------ -------- ----- ---------------------------- ---- ------- LA THE CAPITAL CO OF AMERICA (Baton Rouge) Bank One Debbie Young LA THE CAPITAL CO OF AMERICA Bank One Debbie Young GA THE CAPITAL CO OF AMERICA Bank One Debbie Young 3311 y NY OMNI ALBANY CHARTER BANK Heather Shea 210 y AL SHEFFIELD MOTEL ENTERPRISES INC DBA HOLIDAY INN SHEFFIELD Colonial Bank Customer Service 210 y AL SHEFFIELD MOTEL ENTERPRISES INC DBA HOLIDAY INN SHEFFIELD Colonial Bank Customer Service 3930 y MI NH ENTERPRISES INC/HILTON NORTHFIELD Comerica 2100 y KS HOLIDAY INN MANHATTAN Commerce Bank 2100 y KS MANHATTAN HOSPITALITY ASSOCIATES Commerce Bank 2727 y MA COMFORT INN BOSTON Eastern Bank 1207 y GA HOLIDAY INN JEKYLL ISLAND First Bank of Brunswick 1160 y FL Holiday Inn (Melbourne) First Union Customer Service 1720 y MD HOLIDAY INN WASHINGTON DC First Union Customer Service 3500 OH Holiday Inn City Center First Union Customer Service 3838 y PA PHILADELPHIA LODGING First Union Customer Service 3875 y St HOLIDAY INN ARSENAL ROAD First Union 2035 y KY IMPAC HOTELS I LLC FIRSTAR 3515 y OH IMPAC HOTELS II LLC FIRSTAR 2777 y MA RESIDENCE INN DEDHAM Fleet Bank 1502 y LA SERVICO METAIRIE DBA QUALITY HOTEL Hibernia National Bank 3314 y NY SERVICO NEW YORK INC HSBC Customer Service 3326 y NY HOLIDAY INN NIAGARA FALLS HSBC Customer Service 3345 y NY SERVICO GRAND ISLAND HSBC Customer Service 4800 WV HOLIDAY INN FAIRMONT Huntington Stephen Petitto 4800 WV HOLIDAY INN FAIRMONT Huntington Stephen Petitto 4848 WV HOLIDAY INN MORGANTOWN Huntington Stephen Petitto 4848 WV HOLIDAY INN MORGANTOWN Huntington Stephen Petitto 4899 WV HOLIDAY INN BRIDGEPORT Huntington Stephen Petitto 4899 WV HOLIDAY INN BRIDGEPORT Huntington Stephen Petitto 3330 y NY HOLIDAY INN JAMESTOWN Key Bank Customer Service GA LENNOX BUILDING/IMPAC HOTEL LaSalle Ruth Hall GA LENNOX BUILDING/IMPAC HOTEL LaSalle Ruth Hall 3348 NY THE CAP CORP OF AMERICA/IMPAC HOTELS M&T Bank Customer Service 3348 NY THE CAPITAL CORP OF AMERICA AS MORTGAGEE IMPAC HOTELS II M&T Bank Customer Service 3398 NY HOLIDAY INN HAMBURG M&T Bank Customer Service 3398 NY HOLIDAY INN HAMBURG M&T Bank Customer Service 3804 y PA APICO HILLS/HOLIDAY INN PARKWAY EAST Mellon Bank 3805 y PA CLARION ROYCE PITTSBURGH/MOON ROYCE Mellon Bank 3806 y PA HOLIDAY INN MCKNIGHT ROAD Mellon Bank 3970 y MI HOLIDAY INN WEST LANSING Michigan National 1425 y IN FORT WAYNE HILTON National City Customer Service 1440 y IN HOLIDAY INN FORT WAYNE National City Customer Service 3810 y PA WASHINGTON MOTEL ASSOCIATES LTD National City Customer Service 2020 KY IMPAC HOTELS ii CAP CO OF AMER LLC PNC Bank 2020 KY IMPAC HOTELS II DBA HOLIDAY INN FT MITCHELL PNC Bank 3801 y PA APICO INNS OF PITTSBURG INC DBA HOLIDAY INN PNC Bank 3802 y PA APICO INNS GREENTREE INC PNC Bank 3535 OH HOLIDAY INN CINCINNATI Provident Bank 3535 OH HOLIDAY INN CINCINNATI Provident Bank 5950 y Ont, CA SERVICO WINDSOR Royal Bank of Canada Jo-Ann Smith 5950 y Ont, CA SERVICO WINDSOR Royal Bank of Canada Jo-Ann Smith 5950 y Ont, CA SERVICO WINDSOR Royal Bank of Canada Jo-Ann Smith 5950 y Ont, CA Holiday Inn Select Royal Bank of Canada Jo-Ann Smith 5950 y Ont, CA Holiday Inn Select Royal Bank of Canada Jo-Ann Smith 220 y AL DOTHAN HOSPITALITY 3053 SouthTrust 220 y AL DOTHAN HOSPITALITY 3053 SouthTrust 230 y AL DOTHAN HOSPITALITY 3053 SouthTrust 240 y AL GADSEN HOSPITALITY INC. SouthTrust PHONE # ADDRESS 1 ADDRESS 2 CITY STATE POSTAL CODE ------- ------- --------- --------- ------ ------------ 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 337-265-3219 Mail Code LA-2-7685 P.O. Box 3248 Layfayette LA 70502 518-426-6473 101 N. Pearl Street Albany NY 12207 877-502-2265 P.O. Box 1887 Birmingham AL 35201 877-502-2265 P.O. Box 1887 Birmingham AL 35201 248-371-5288 P.O.Box 75000 Detroit MI 48275 785-537-1234 727 Poyntz Avenue Manhattan KS 66502 785-537-1234 727 Poyntz Avenue Manhattan KS 66502 781-599-2100 270 Union Street Lynn MA 01901 912-267-9500 5340 New Jesup Highway Burnswick GA 31520 800-222-3862 10 Corporate Centre 10400 Little Patuxent Pkwy Columbia MD 21044 800-222-3862 10400 Little Patuxent Pkwy Columbia MD 21044 800-222-3862 10400 Little Patuxent Pkwy Columbia MD 21044 800-222-3862 10400 Little Patuxent Pkwy Columbia MD 21044 800-225-5332 1500 N. George Street York PA 17404 800-481-4544 5001 Houston Road Florence KY 41042 800-481-4544 14444 Pearl Road Strongsville OH 44136 800-353-3824 858 Washington Street Dedham MA 2026 800-262-5689 2200 N Causeway Metarie LA 70001 800-975-4722 8301 Niagara Falls Blvd Niagara Falls NY 14304 800-975-4722 8301 Niagara Falls Blvd Niagara Falls NY 14304 800-975-4722 8301 Niagara Falls Blvd Niagara Falls NY 14304 304-623-7100 P.O. Box 2490 Clarksburg WV 26302 304-623-7100 P.O. Box 2490 Clarksburg WV 26302 304-623-7100 P.O. Box 2490 Clarksburg WV 26302 304-623-7100 P.O. Box 2490 Clarksburg WV 26302 304-623-7100 P.O. Box 2490 Clarksburg WV 26302 304-623-7100 P.O. Box 2490 Clarksburg WV 26302 800-539-2968 P.O. Box 22114 Albany NY 22114 312-904-7232 Suite 1840 135 S. Lasalle Street Chicago IL 60603 312-904-7232 Suite 1840 135 S. Lasalle Street Chicago IL 60603 315-622-3227 101 South Salina Street Syracuse NY 13202 315-622-3227 101 South Salina Street Syracuse NY 13202 845-354-6009 P.O. Box 10090 Newburgh NY 12552 716-649-8400 One Fountain Plaza Buffalo NY 14203 800-527-1800 2005 Rt 286 Pittsburgh PA 15239 800-527-1800 Moontown Ship Office 1132 Thorn Run Rd, Ext Caraopolis PA 15101 800-527-1800 100 Ross Park Mall Drive Pittsburgh PA 15237 27777 Inksetter Road Farmington Hills MI 48333 800-774-2424 One National Center Indianapolis IN 46255 800-774-2424 One National Center Indianapolis IN 46255 800-352-0186 116 Alleghency Center Mall Pittsburgh PA 15212 877-287-2654 P.O. Box 609 Pittsburgh PA 15230 877-287-2654 P.O. Box 609 Pittsburgh PA 15230 877-287-2654 P.O. Box 609 Pittsburgh PA 15230 877-287-2654 P.O. Box 609 Pittsburgh PA 15230 800-335-2220 Mail Stop 464F One East Fourth Street Cincinnati OH 45269 800-335-2220 Mail Stop 464F One East Fourth Street Cincinnati OH 45269 519-255-8657 Business Banking Center 245 Ouellete Avenue 2nd fl Windsor ONT N9A-7J2 519-255-8657 Business Banking Center 245 Ouellete Avenue 2nd fl Windsor ONT N9A-7J2 519-255-8657 Business Banking Center 245 Ouellete Avenue 2nd fl Windsor ONT N9A-7J2 519-255-8657 Business Banking Center 245 Ouellete Avenue 2nd fl Windsor ONT N9A-7J2 519-255-8657 Business Banking Center 245 Ouellete Avenue 2nd fl Windsor ONT N9A-7J2 334-793-0700 P.O. Box 809 Dothan Alabama AL 36302 334-793-0700 P.O. Box 809 Dothan Alabama AL 36302 334-793-0700 P.O. Box 809 Dothan Alabama AL 36302 334-793-0700 P.O. Box 809 Dothan Alabama AL 36302 ACCOUNT # ACCOUNT TYPE - --------- ------------ 1588493021 Credit Card Clearing 1588492965 Lockbox 1588493039 Checking 4420050034 Dep 5152666 Dep 8007324224 Liquor 2401005612 Dep 620662607 Liquor 620662666 Dep 600082408 Dep 6016406 Dep 2090001113784 COD Account 203000812842 Dep 2090001974224 COD Account 2030152160332 Dep 2000063968446 Dep 490329430 Dep 570254060 Dep 89857450 Dep 812393006 Dep 834159961 Dep 834159988 Dep 834159970 Dep 1531104982 Sec Dep 1531012281 Bk Rem Clearing 1521107766 Sec Dep 1521007442 Bk Rem Clearing 1521107753 Sec Dep 1521009110 Bk Rem Clearing 327700021055 Dep 677742009 Trust and Asset Account 677834905 Trust and Asset Account 8890222139 Sec Dep 8700238002 Bk Rem Clearing 8890177689 Sec Dep 16373565 Bk Rem Clearing 1719287 Dep 1707251 Dep 262676 Dep 1939586002 Dep 130005548 Dep 330007579 Dep 5151000285 Dep 4802849119 Sec Dep 4800156714 Bk Rem Clearing 1022746 Dep 2011432 Dep 859100 Dep 6004284 Sec Dep 1015890 AP Disbursements $C 4002325 Dep $US 1015932 General $C 1015940 COD Account 4002259 COD Account 67877298 Liquor 67877287 Depository 67877265 Dep 67877309 Dep
Page 5 of 5 BANK INFORMATION SCHEDULE 3.17 ACCOUNTS
LOCATION LOW NUMBER LEVERAGE STATE ACCOUNT/PROPERTY DESCRIPTION BANK - ------ -------- ----- ---------------------------- ---- 2700 y MA WORCHESTER HOSPITALITY ASSC Sovereign Bank of New England 2727 y MA DBA BOSTON REVERE SunTrust FL SERVICO MANAGEMENT CORP SunTrust GA IMPAC HOTELS II LLC SunTrust GA IMPAC HOTELS LLC SunTrust 1178 FL THE CAPITAL CO OF AMERICA AS MORTGAGE OF IMPAC HOTELS II LLC Union Planters 1178 FL THE CAPITAL CO OF AMERICA AS MORTGAGE OF IMPAC HOTELS II LLC Union Planters 1183 FL THE CAPITAL CO OF AMERICA AS MORTGAGE OF IMPAC HOTELS II LLC Union Planters 1183 FL THE CAPITAL CO OF AMERICA AS MORTGAGE OF IMPAC HOTELS II LLC Union Planters 2007 y KY COURTYARD PADUCAH (MORT IMPAC HOTELS I LLC) Union Planters 4205 TN IMPACS HOTELS III LLC DBA FAIRFIELD INN SECURITY Union Planters 4205 TN IMPACS HOTELS III LLC DBA FAIRFIELD Union Planters 4242 TN THE CAPITAL COMPANY OF AMERICA LLC Union Planters 4242 TN THE CAP CO OF AMER AS MORT OF IMPAC Union Planters 850 y CT HOLIDAY INN EAST HARTFORD Webster Bank 725 y CO SERVICO FRISCO INC Wells Fargo 1840 y IA SERVICO CEDAR RAPIDS Wells Fargo 1910 y MN HOLIDAY INN ARDEN HILLS/ST PAUL Wells Fargo 2510 NE CLARION HOTEL OMAHA Wells Fargo 2520 NE SHERATON OMAHA Wells Fargo 1820 IA BEST WESTERN COUNCIL BLUFFS Wells Fargo Nebraska N.A. CONTACT PHONE # ADDRESS 1 ADDRESS 2 CITY STATE POSTAL CODE ------- ------- --------- --------- ------- ----- ----------- Customer Service 800-727-8637 75 State Street Boston MA 02110 Deborah A. Metts 404-575-2687 Treasury Management Service P.O. Box 4418 Atlanta GA 30302 N/A 800-786-8787 P.O. Box 405100/Mail Code 1062 Ft.Lauderdale Florida FL 33340 Deborah A. Metts 404-575-2687 Treasury Management P.O. Box 4418 Atlanta GA 30302 Deborah A. Metts 404-575-2687 Treasury Management P.O. Box 4418 Atlanta GA 30302 Adianez Rodriguez 877-848-2265 3516 Main Highway Coconut Grove FL 33133 Adianez Rodriguez 877-848-2265 3516 Main Highway Coconut Grove FL 33133 Adianez Rodriguez 877-848-2265 3516 Main Highway Coconut Grove FL 33133 Adianez Rodriguez 877-848-2265 3516 Main Highway Coconut Grove FL 33133 800-333-1882 US Hwy 60 West Paducah KY 42002 800-921-0086 Treasury Management 118 North Liberty Jackson TN 38301 800-921-0086 Treasury Management 118 North Liberty Jackson TN 38301 800-921-0086 118 North Liberty Jackson TN 38301 800-921-0086 118 North Liberty Jackson TN 38301 800-482-2220 P.O. Box 191 Waterbury CT 06720 503-721-5330 Domestic Coll/ MAC P6103-084 P.O. Box 3055 Portland OR 97208 Kevin Stillman 515-237-5840 P.O. Box 837 Des Moines IA 50304 503-721-5330 Domestic Coll/ MAC P6103-084 P.O. Box 3055 Portland OR 97208 503-721-5330 Domestic Coll/ MAC P6103-084 P.O. Box 3055 Portland OR 97208 503-721-5330 Domestic Coll/ MAC P6103-084 P.O. Box 3055 Portland OR 97208 402-536-2553 P.O. Box 3408 Omaha NE 68103 ACCOUNT # ACCOUNT TYPE --------- ------------ 39700038324 DEP/CHECKING 8800245105 Checking 417006207997 LIFERE 8801724835 Corp Acct 8801824650 Receivables 9660010548 Sec Dep 9660010530 Bk Rem Clearing 9660022543 Sec Dep 9660022550 Bk Rem Clearing 10006861 Dep 1210119628 Bk Rem Clearing 3500302775 Sec Dep 3500324588 Bk Rem Clearing 3500324531 Sec Dep 3311913012 Dep 3068001137 Checking 3000439578 Dep 3522097408 Dep 1155081292 Dep 1155081305 Dep 1155081401 Dep
CONFORMED COPY SECURITY AND PLEDGE AGREEMENT SECURITY AND PLEDGE AGREEMENT (this "AGREEMENT"), dated as of December 31, 2001, by and among Lodgian, Inc., a Delaware corporation (the "BORROWER"), and each of the direct and indirect subsidiaries of the Borrower that is party hereto (collectively, with the Borrower, the "GRANTORS"), certain of which Grantors is a debtor and debtor-in-possession in a case pending under chapter 11 of the Bankruptcy Code, and Morgan Stanley Senior Funding, Inc., as Collateral Agent (in such capacity, the "COLLATERAL AGENT") for the Secured Parties (as hereinafter defined): WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Grantors and other subsidiaries of the Borrower, certain financial institutions (the "DIP LENDERS") and Morgan Stanley Senior Funding, Inc., as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT", and, together with the Collateral Agent, the "AGENTS"), are entering into a Revolving Credit and Guaranty Agreement dated as of the date hereof (as amended, modified or supplemented from time to time, the "DIP CREDIT AGREEMENT"); and WHEREAS, unless otherwise defined herein, terms defined in the DIP Credit Agreement are used herein as therein defined; and WHEREAS, it is a condition precedent to the making of Loans and the issuance of Letters of Credit that the Grantors shall have granted, subject to the Carve-Out, a security interest, pledge and lien on (x) all cash and cash equivalents maintained in each Letter of Credit Account and (y) all of the Grantors' assets and properties and the proceeds thereof pursuant to applicable provisions of the Bankruptcy Code to the extent any Grantor is the subject of a Case; and WHEREAS, in the case of each Grantor that is the subject of a Case, the grant of such security interest, pledge and lien has been authorized pursuant to applicable provisions of the Bankruptcy Code by the Interim Order, and, after the entry thereof, will have been so authorized by the Final Order (collectively, the "ORDERS"); and WHEREAS, to supplement the Orders, without in any way diminishing or limiting the effect of the Orders or the security interest, pledge and lien granted thereunder, the parties hereto desire to more fully set forth their respective rights in connection with such security interest, pledge and lien; and WHEREAS, the Orders authorize the Grantors that are a subject of a Case to execute, deliver and perform this Agreement; NOW, THEREFORE, in consideration of the premises contained herein and in order to induce the DIP Lenders to make Loans and issue Letters of Credit, and to induce the Agents to act in such capacities, the Grantors hereby agree with the Collateral Agent as follows: SECTION 1. Grant of Security and Pledge. In order to secure the full and punctual payment of the Obligations, each of the Grantors hereby transfers, grants, bargains, sells, conveys, hypothecates, assigns, pledges and sets over to the Collateral Agent for its benefit and the ratable benefit of the DIP Lenders and the Agents (the DIP Lenders and the Agents, collectively, the "SECURED PARTIES") a continuing and perfected pledge and security interest in all of the Grantors' right, title and interest in and to the following (whether now owned or existing or hereafter acquired or arising and regardless of where located, the "COLLATERAL") which pledge and security interest shall have the priorities and be subject and subordinated to the Carve-Out as provided in the Orders and in the DIP Credit Agreement: (a) all "accounts" (as defined in the UCC) now owned or hereafter acquired by any of the Grantors, including but not limited to, all accounts receivable, contract rights, book debts, notes, drafts and other obligations or indebtedness owing to the Grantors arising from the sale, lease or exchange of goods or other property by them and/or the performance of services by them (including, without limitation, any such obligation that might be characterized as an account, contract right or general intangible under the Uniform Commercial Code in effect in any jurisdiction except those evidenced by instruments or chattel paper) and all of the Grantors' rights in, to and under all purchase orders for goods, services or other property, and all of the Grantors' rights to any goods, services or other property represented by any of the foregoing (including returned or repossessed goods and unpaid sellers' rights of rescission, replevin, reclamation and rights to stoppage in transit) and all monies due to or to become due to the Grantors under all contracts for the sale, lease or exchange of goods or other property and/or the performance of services by them (whether or not yet earned by performance on the part of the Grantors), in each case whether now in existence or hereafter arising or acquired and wherever arising including, without limitation, the right to receive the proceeds of said purchase orders and contracts, and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing (collectively, the "ACCOUNTS"); (b) all "inventory" (as defined in the UCC) including, but not limited to, goods and merchandise, whether now owned or hereafter acquired by each of the Grantors and wherever located, whether in the possession of a Grantor or of a bailee or other person for sale, storage, transit, processing, use or otherwise consisting of whole goods, components, supplies, materials, or consigned, returned or repossessed goods, that are held for sale or lease or to be furnished (or have been furnished) under any contract of service or that are raw materials, 2 work-in-process, finished goods or materials and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto, used or consumed in any Grantors' business or processed by or on behalf of any Grantor (collectively, the "INVENTORY"); (c) all "equipment" (as defined in the UCC) including, without limitation, (i) all machinery, all manufacturing, distribution, selling, data processing and office equipment, all furniture, furnishings, appliances, fixtures and trade fixtures, tools, tooling, molds, dies, motor vehicles, vessels, aircraft, trailers, (ii) all railcars, barges and other water carrier equipment, and all accessions, appurtenances and parts installed on and additions thereto, and replacements thereof, now owned or hereafter acquired by the Grantors (the items in this clause (ii) collectively, "ROLLING STOCK") and (iii) all other goods of every type and description (other than Inventory), in each instance whether now owned or hereafter acquired by each of the Grantors and wherever located (items (i) through (iii) collectively, the "EQUIPMENT"); (d) all rights of each Grantor under the Portland General Sale Contract, including, without limitation, the right to receive any purchase price payments, indemnity payments or other payments thereunder (it being understood that any rights constituting control of a utility or its facilities shall not be exercised unless all governmental and regulatory approvals have been obtained); (e) all "general intangibles" (as defined by the UCC), whether now owned or hereafter acquired, including, without limitation, all rights, interests, choses in action, causes of action, claims and all other intangible property of each of the Grantors of every kind and nature (other than Accounts, Trademarks (as defined herein), written agreements now or hereafter in existence granting to the Grantors any right to use any Trademark (the "TRADEMARK LICENSES"), Patents (as defined herein), written agreements now or hereafter in existence granting to the Grantors any right to practice any invention on which a Patent is in existence (the "PATENT LICENSES"), Copyrights (as defined herein), and any written agreements now or hereafter in existence granting to the Grantors any right to publication as to which a Copyright is in existence (the "COPYRIGHT LICENSES")); all general intangibles; all corporate and other business records; all loans, royalties, and other obligations receivable; all inventions, designs, trade secrets, computer programs, software, printouts and other computer materials, goodwill, registrations, licenses, ledger cards, franchises, customer lists, credit files, books, correspondence, and advertising materials; all customer and supplier contracts, firm sale orders, rights under license and franchise agreements (including all license agreements with any other Person in connection with any of the Patents and Trademarks or such other Person's names or marks, whether such Grantor is a licensor or licensee under any such license agreement), and other contracts and contract rights; all interests in partnerships and joint ventures; all tax refunds and tax refund claims; all right, title and interest under leases, subleases, licenses and 3 concessions and other agreements to the extent assignable relating to real or personal property; all payments due or made to each of the Grantors in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any property by any person or governmental authority; all credits with and other claims against carriers and shippers; all rights to indemnification; all reversionary interests in pension and profit sharing plans and revisionary, beneficial and residual interest in trusts maintained for employees of any ERISA Affiliate; all proceeds of insurance of which any of the Grantors is beneficiary; all letters of credit, guaranties, liens, security interest and other security held by or granted to each of the Grantors; and all other intangible property, whether or not similar to the foregoing (collectively, the "GENERAL INTANGIBLES"); (f) all property or interests in property now or hereafter acquired by each of the Grantors that may be owned or hereafter may come into the possession, custody or control of the Collateral Agent or any agent or affiliate of the Collateral Agent in any way or for any purpose (whether for safekeeping, deposit, custody, pledge, transmission, collection or otherwise), and all rights and interests of each of the Grantors, now existing or hereafter arising and however and wherever arising, in respect of any and all (i) notes, drafts, letters of credit, stocks, bonds, and debt and equity securities, whether or not certificated, and warrants, options, puts and calls and other rights to acquire or otherwise relating to the same; (ii) money (including all cash and cash equivalents held in each Letter of Credit Account, Commitment Account and, to the extent constituting property of a Grantor, any lockbox account or the Concentration Account); (iii) proceeds of loans, including, without limitation, Loans made under the DIP Credit Agreement; and (iv) insurance proceeds and books and records (including, without limitation, customer lists, credit files, computer programs, printouts and other computer materials and records) relating to any of the property covered by this Agreement; together, in each instance, with all accessions and additions thereto, substitutions therefor, and replacements, proceeds and products thereof; (g) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which said trademarks, trade names, trade styles and service marks have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof, all whether now owned or hereafter acquired by each of the Grantors, and all reissues, extensions or renewals thereof and all licenses thereof (together, in each case, with the goodwill of the business connected with the use of, and symbolized by each such trademark, service mark, trade name and trade dress, all of the foregoing being herein referred to as the " TRADEMARKS"). 4 (h) all letters patent of the United States or any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, all whether now owned or hereafter acquired by each of the Grantors, and all reissues, continuations, continuations-in- part or extensions thereof and all licenses thereof (all of the foregoing being herein referred to as the "PATENTS"); (i) all copyrights under the laws of the United States, or any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof, all whether now owned or hereafter acquired by each of the Grantors, and all reissues, continuations, continuations-in- part or extensions thereof and all licenses thereof (all of the foregoing being herein referred to as the "COPYRIGHTS"); (j) (i) all the shares of capital stock or other equity interests owned by each Grantor in any entity, including, without limitation, those shares listed on Schedule 1 hereto of the entities listed thereon (individually, an "ISSUER," and collectively, the "ISSUERS") and all issued and outstanding shares of capital stock or other equity interests of any Issuer obtained in the future by any Grantor and the certificates representing or evidencing all such shares or equity interests (collectively, the "PLEDGED EQUITY INTERESTS"), (ii) all other property that may be delivered to and held by the Collateral Agent in respect of the Pledged Equity Interests pursuant to the terms hereof; (iii) all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed, in respect of, in exchange for or upon the conversion of the securities referred to in clauses (i) and (ii) above; and (iv) all rights and privileges of each Grantor, as applicable, with respect to the securities and other property referred to in clauses (i), (ii) and (iii); (k) all notes and other instruments and all income and profits therefrom, and all rights and privileges with respect thereto, and all interest and other payments and distributions with respect thereto and all proceeds of the foregoing (collectively, the "PLEDGED NOTES" as set forth on Schedule 2 hereto and, together with all of the items listed in Section 1(j) above, the "PLEDGED SECURITIES"); (l) all "documents" (as defined in the UCC) or other receipts covering, evidencing or representing goods, now owned or hereafter acquired by the Grantors (collectively, the "DOCUMENTS"); 5 (m) all "chattel paper" (as defined in the UCC, including, without limitation, electronic chattel paper, as also defined in the UCC) or "instruments" (as defined in the UCC) or "letters of credit" (as defined in the UCC) and other property evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, debt instruments, drafts, bills of exchange, bills of lading, warehouse receipts, trade acceptances and other documents of title, now owned or hereafter acquired by the Grantors (collectively, the "INSTRUMENTS"); (n) the Concentration Account, all cash deposited therein from time to time, the Liquid Investments (as defined below) made pursuant to Section 6(d) and other monies and property of any kind of the Grantors in the possession or under the control of the Collateral Agent; (o) all right, title, claims and benefits now owned or hereafter acquired by the Grantors in and to any railcar leases, subleases, rental agreements and car hire contracts in which the Grantors shall at any time have any interest and any right, title, claim and benefits of the Grantors now owned or hereafter acquired in and to any management agreements concerning all such leases and agreements (collectively, the "ROLLING STOCK LEASES"); and all right, title and interest of the Grantors in the railcars and equipment, provided pursuant to any Rolling Stock Leases (the "LEASED ROLLING STOCK"); in each case, including, without limitation, all rights of the Grantors to receive any monies, revenues, payments or credits now owned or hereafter acquired by the Grantors that are generated by or attributable to the Rolling Stock or Leased Rolling Stock, including, without limitation, railcar hire payments, mileage allowances, per diem mileage payments, empty mileage allowances, mileage credits and excess mileage credits, in each case whether now existing or hereafter arising (the "ROLLING STOCK REVENUES"); (p) all rights now owned or hereafter acquired by the Grantors to receive and collect any Rolling Stock Revenues; (q) all "deposit accounts" as such term is defined in the UCC; (r) all "letter of credit rights", as such term is defined in the UCC (the "LETTER OF CREDIT RIGHTS"); (s) all other personal property of each of the Grantors, whether tangible or intangible, and whether now owned or hereafter acquired; (t) all "INVESTMENT PROPERTY" which includes all (i) Securities, whether certificated or uncertificated, (ii) Security Entitlements, (iii) Securities Accounts, 6 (iv) Commodity Contracts and (v) Commodity Accounts now owned or hereafter acquired by the Grantors; and (u) all proceeds and products of any of the foregoing, in any form, including, without limitation, any claims against third parties for loss or damage to or destruction of any or all of the foregoing and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral and (ii) cash. For the purposes of subsection (t) of this Section, the following definitions shall apply: (i) "SECURITY" means an obligation of an issuer or a share, participation, or other interests in an issuer or in property or an enterprise of an issuer: (A) that is represented by a Security certificate in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer; (B) that is one of a class or series or by its term is divisible into a class or series of shares, participations, interests, or obligations; and (C) that: (1) is, or is of a type, dealt in or traded on securities exchanges or securities markets; or (2) is a medium for investment and by its terms expressly provides that it is a security governed by Article 8 of the UCC. (ii) "SECURITY ENTITLEMENT" means the rights and property interest of an entitlement holder with respect to a Financial Asset specified in Part 5 or Article 8 of the UCC. (iii) "FINANCIAL ASSET" means: (A) a Security; (B) an obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, that is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or (C) any property that is held by a securities intermediary for another person in a Securities Account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under Article 8 of the UCC. As context requires, the term means either the interest itself or the means by which a person's claim to it is evidenced, including a certificated or uncertificated Security, a Security certificate, or a Security Entitlement. (iv) "SECURITIES ACCOUNT" means an account to which a Financial Asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for 7 whom the account is maintained as entitled to exercise the rights that comprise the Financial Asset. (v) "COMMODITY CONTRACT" means a commodity futures contract, an option on a commodity futures contract, a commodity option, or other contract that, in each case, is: (A) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to the federal commodities laws or (B) traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer. (vi) "COMMODITY ACCOUNT" means an account maintained by a commodity intermediary in which a Commodity Contract is carried for a commodity customer, and all rights of any Grantor under any commodities trading contract that does not constitute a "Commodity Contract" including the right to receive any settlement or netting payment thereunder. Notwithstanding anything contained herein to the contrary, (a) the total amount of shares of capital stock or other ownership interests of any Person pledged pursuant to this Agreement that is not organized under the laws of, or having a principal place of business in, the United States of America or any State, the District of Columbia or any territory or possession of the United States of America shall in no event exceed sixty-five percent (65%) of the total outstanding shares of capital stock or such other ownership interests thereof and (b) the security interests in the Collateral granted hereunder securing the Obligations (the "SECURITY INTERESTS") are granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Grantors with respect to any of the Collateral or any transaction in connection therewith. SECTION 2. Security for Obligations. This Agreement and the Collateral secure the payment of all Obligations of each of the Grantors. SECTION 3. Delivery of Pledged Securities. Without further order of the Bankruptcy Court, all Pledged Notes shall be delivered within 20 days after the date of entry of the Interim Order of the Bankruptcy Court to the Collateral Agent by the Grantors pursuant hereto indorsed in blank, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Collateral Agent in its reasonable judgment. All certificates representing Pledged Equity Interests shall be delivered within 20 days after the date of entry of the Interim Order of the Bankruptcy Court to the Collateral Agent by the Grantors pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed, if required, and accompanied by any 8 required transfer tax stamps, all in form and substance satisfactory to the Collateral Agent in its reasonable judgment. Without further order of the Bankruptcy Court, all Pledged Securities held by Morgan Stanley Senior Funding, Inc. ("MSSF") under that Security Agreement dated as of July 23, 1999 (the "PRE-PETITION PLEDGE AGREEMENT"), shall be and shall be deemed, for purposes of the security interests granted under the Orders and hereunder, simultaneously to be held by MSSF in the order of priority specified in the Orders, as Agent hereunder and as agent under the Pre-Petition Pledge Agreement. Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent shall have the right (for the ratable benefit of the Secured Parties), at any time in its discretion and without notice to the Grantors, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Pledged Securities. SECTION 4. Representations and Warranties. Each Grantor, jointly and severally, represents and warrants as follows: (a) The exact name of each Grantor as it appears in its certificate of incorporation (or other organizational documents) is set forth in Schedule D-1 to Exhibit D hereto. Each Grantor is organized in the jurisdiction set forth opposite the name of such Grantor in Schedule D-2 to Exhibit D hereto. (b) The Grantors own and have good and marketable title to all of the Collateral free and clear of any lien, security interest, charge or encumbrance except for the security interest created by this Agreement and the Liens permitted under the DIP Credit Agreement and under the Pre Petition Credit Agreement. The Grantors have taken all actions necessary under the Uniform Commercial Code, as in effect on the date hereof in the State of New York (the "UCC"), for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection, to perfect their interest in any Accounts purchased or otherwise acquired by them, as against their assignors and creditors of their assignors, to the extent such perfection is governed by the UCC, provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interests in any Collateral governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction. (c) The Grantors have not performed (nor will they perform) any acts that might prevent the Collateral Agent from enforcing any of the terms and conditions of this Agreement or that would limit the Collateral Agent in any such enforcement. Other than the Orders, financing statements or other similar or equivalent documents or instruments with respect to the Security Interests and the Liens permitted by the DIP Credit Agreement, no financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all 9 or any part of the Collateral is on file or of record in any jurisdiction in which such filing or recording would be effective to perfect a Lien on such Collateral. No Collateral is in the possession of any Person (other than the Grantors) asserting any claim thereto or security interest therein, except that the Collateral Agent or its designee may have possession of Collateral as contemplated hereby and except for Collateral subject to the Liens permitted by the DIP Credit Agreement. (d) Not later than 20 days after the date of entry of the Interim Order of the Bankruptcy Court, the Grantors shall deliver to the Collateral Agent an executed certificate substantially in the form of Exhibit D, completed and supplemented with the schedules and attachments contemplated thereby to the reasonable satisfaction of the Collateral Agent (the "PERFECTION CERTIFICATE"). The information set forth therein shall be correct and complete in all material respects. Not later than 20 days after the date of entry of the Interim Order of the Bankruptcy Court, the Grantors shall furnish to the Collateral Agent file search reports from each UCC filing office set forth in Schedules D-2 and D-3 to Exhibit D hereto, confirming the filing information set forth in such Schedules. (e) The Security Interests constitute valid security interests securing the Obligations under applicable law and comply with Section 2.23 of the DIP Credit Agreement. (f) The Inventory and Equipment are insured in accordance with the requirements of the DIP Credit Agreement. (g) All Inventory has or will have been produced in substantial compliance with the applicable requirements of the Fair Labor Standards Act, as amended. (h) The Grantors own all of the Pledged Securities, free and clear of any Liens, security interests or encumbrances other than the Security Interests and Liens permitted by the DIP Credit Agreement. The Pledged Equity Interests includes (i) all of the issued and outstanding capital stock or other equity interests of each direct Subsidiary (other than any such Subsidiary not organized under the laws of, or having a principal place of business in, the United States of America or any State, the District of Columbia or any territory or possession of the United States of America (each such Subsidiary, a "FOREIGN SUBSIDIARY")) and (ii) at least 65% of the issued and outstanding capital stock or other equity interests of each Foreign Subsidiary that is directly owned by a direct subsidiary that is not a Foreign Subsidiary (or, in each case, such lower percentage of such stock as is owned by the relevant Grantor). All of the Pledged Equity Interests have been duly authorized and validly issued, and is fully paid and non-assessable, and is subject to no options to purchase or similar rights of any Person. The Pledged Notes include any of the promissory notes or other instruments evidencing 10 Indebtedness owed by any Subsidiary to the Grantors. The Grantors are not and will not become parties to or otherwise bound by any agreement, other than this Agreement, the DIP Credit Agreement and the Pre-Petition Credit Agreement, that restricts in any manner the rights of any present or future holder of any of the Pledged Securities with respect thereto. No Subsidiary is under any contractual obligation to issue any additional shares of stock or any other securities, rights or indebtedness. (i) Upon the delivery of the Pledged Notes and certificates representing the Pledged Equity Interests in accordance with Section 3 hereof, (i) the Collateral Agent will have valid and perfected security interests in the Collateral consisting of such Pledged Securities subject to no prior Lien, (ii) the Collateral Agent will have "control" (as specified in Sections 8-106 and 9-115(e) of the UCC) of such Pledged Securities and (iii) the Collateral Agent will be a "protected purchaser" (within the meaning of Section 8-303(a) of the UCC) thereof. (j) Except for the Orders, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the grant and pledge by each of the Grantors of the security interests granted hereby, the validity and enforceability thereof or for the execution, delivery or performance of this Agreement by each of the Grantors or for the perfection of the security interests or the exercise by the Collateral Agent of its rights and remedies hereunder. (k) If and when any Financial Asset or Security Entitlement is held in the Concentration Account and pursuant to a control agreement, the Collateral Agent will have "control" (as defined in Article 8 of the UCC) thereof and will be a "protected purchaser" (as defined in said Article 8) thereof. (l) In respect of all Security Entitlements owned by the Grantors, and all Securities Accounts to which the related Financial Assets are credited, the jurisdiction (determined as provided in Section 8-110(e) of the UCC) of the "securities intermediary" (as defined in Section 8-102(a)(14) of the UCC) is, and will at all times continue to be, located in the United States. SECTION 5. Further Assurances. (a) Unless they shall have given the Collateral Agent not less than 15 days' prior notice thereof, the Grantors will not (i) change their names, identities or organizational structures in any manner or (ii) change their jurisdictions of organization. The Grantors shall not in any event change the location of any Collateral if such change would cause the Security Interests in such Collateral to lapse or cease to be perfected. 11 (b) Each of the Grantors agrees that from time to time, at its own expense and without further order of the Bankruptcy Court, it will promptly execute, deliver, file and record all further statements, assignments, additional pledge agreements, instruments, documents, notices and other agreements or other paper, and take all further action (including, without limitation, any mortgages, filings of financing or continuation statements or amendments thereto under the UCC and any filings with the United States Patent and Trademark Office or the United States Copyright Office), that may be necessary, or that the Collateral Agent may reasonably request, in order to create, preserve, confirm, validate, perfect and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce any of its rights, powers and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, and without further order of the Bankruptcy Court, each of the Guarantors will file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as the Collateral Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby. (c) Each Grantor hereby authorizes the Collateral Agent to execute and file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor where permitted by applicable law. (d) The Grantors agree that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement to the extent permitted by applicable law. The Grantors shall pay the costs of any recording or filing of any financing or continuation statements concerning the Collateral and reasonable costs incidental thereto. (e) Each Grantor will keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Collateral Agent or the Required DIP Lenders may reasonably require in order to reflect the Security Interests. (f) Each Grantor will furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports, evidence and information in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. (g) If requested by the Collateral Agent, each Grantor will immediately deliver and pledge each Instrument to the Collateral Agent, appropriately endorsed to the Collateral Agent, provided that so long as no Event of Default has occurred and is continuing, the Grantors may retain for collection in the ordinary course any Instruments (other than checks and drafts constituting payments in 12 respect of Accounts, as to which the provisions of Section 6(a) shall apply) received by them in the ordinary course of business and the Collateral Agent shall, promptly upon request of the Grantors, make appropriate arrangements for making any other Instrument pledged by a Grantor available to it for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate to the Collateral Agent, against trust receipt or like document). (h) Each Grantor hereby covenants and agrees that, with respect to any material letter of credit hereafter arising to which it is a beneficiary, it shall obtain the consent of the issuer thereof to the assignment of the proceeds of such letter of credit to the Collateral Agent. SECTION 6. Concentration Account. Except as otherwise provided in any Order applicable to a Grantor: (a) The Grantors shall instruct all account debtors and other Persons obligated in respect of any Accounts or in respect of any Rolling Stock Revenues to make all payments in respect of such Accounts or Rolling Stock Revenues to an account maintained by the Grantors at either the Collateral Agent or another bank or financial institution satisfactory to the Collateral Agent (and, if such account shall not be at the Collateral Agent, if requested by the Collateral Agent, such bank or finance institution shall have entered into a "Control Agreement" with the Collateral Agent with respect to such account) by instructing that such payments be either (i) remitted to a post office box which shall be in the name and under the control of the Collateral Agent or (ii) remitted by immediately available funds or other electronic or ACH transmissions directly to such account, or (iii) to one or more banks in any state (other than Louisiana) in the United States as designated or approved by the Collateral Agent under a Lockbox Letter substantially in the form of Exhibit E hereto duly executed by the Grantors and such bank or under other arrangements, in form and substance satisfactory to the Collateral Agent, pursuant to which the Grantors shall have irrevocably instructed such other bank (and such other bank shall have agreed) to remit all proceeds of such payments directly to the Collateral Agent for deposit into the Concentration Account or as the Collateral Agent may otherwise instruct such other bank. All such payments made to the Collateral Agent shall be deposited in the Concentration Account. In addition to the foregoing, each Grantor agrees that if the proceeds of any Collateral hereunder (including the payments made in respect of Accounts or Rolling Stock Revenues) shall be received by it when an Event of Default has occurred and is continuing, it shall as promptly as possible deposit such proceeds into the Concentration Account. Until so deposited, all such proceeds shall be held in trust by the Grantors for and as the property of the Collateral Agent and the other Secured Parties and shall not be commingled with any other funds or property of the Grantors. 13 (b) The balance from time to time standing to the credit of the Concentration Account shall, except (i) upon the occurrence and continuation of a Default and (ii) as otherwise provided in Section 2.13 of the DIP Credit Agreement, be available for distribution to the Grantors to the extent that current day receipts are insufficient to fund approved expenditures substantially consistent with the Budget, and so long as no Default has occurred and is continuing. To the extent that current day receipts exceed approved expenditures, such excess funds shall be transferred to the Concentration Account. If immediately available cash on deposit in the Concentration Account is not sufficient to make any distribution to the Grantors referred to in the previous sentence of this Section 6(b), the Collateral Agent shall liquidate as promptly as practicable Liquid Investments (as defined below) as required to obtain sufficient cash to make such distribution and, notwithstanding any other provision of this Section 6, such distribution (other than the distribution of any immediately available cash then on deposit) shall not be made until such liquidation has taken place. Upon the occurrence and continuation of an Event of Default, the Collateral Agent shall, if so instructed by the Required DIP Lenders, apply or cause to be applied (subject to collection) any or all of the balance from time to time standing to the credit of the Concentration Account in the manner specified in Section 18. (c) Any income received by the Collateral Agent with respect to the balance from time to time standing to the credit of the Concentration Account, including any interest or capital gains on Liquid Investments (as defined below), shall remain, or be deposited, in the Concentration Account. All right, title and interest in and to the cash amounts on deposit from time to time in the Concentration Account together with any Liquid Investments from time to time made pursuant to Subsection 6(d) hereof shall vest in the Collateral Agent, shall constitute part of the Collateral hereunder and shall not constitute payment of the Obligations until applied thereto as hereinafter provided. (d) Amounts on deposit in the Concentration Account shall be invested and re-invested from time to time in such Liquid Investments as the Grantors shall determine, which Liquid Investments shall be held in the name and be under the control of the Collateral Agent, provided that, if an Event of Default has occurred and is continuing, the Collateral Agent shall, if instructed by the Required DIP Lenders, liquidate any such Liquid Investments and apply or cause to be applied the proceeds thereof to the payment of the Obligations in the manner specified in Section 18. For purposes of this Agreement, "LIQUID INVESTMENTS" means Permitted Investments; provided that (x) each Liquid Investment shall mature within 30 days after it is acquired by the Collateral Agent and (y) in order to provide the Collateral Agent, for the benefit of the Secured Parties, with a perfected security interest therein, each Liquid Investment shall be either: 14 (i) evidenced by negotiable certificates or instruments, or if non-negotiable then issued in the name of the Collateral Agent, which (together with any appropriate instruments of transfer) are delivered to, and held by, the Collateral Agent or an agent thereof (which shall not be the Grantors or any of their Affiliates) in the State of New York; or (ii) in book-entry form and issued by the United States and subject to pledge under applicable state law and Treasury regulations and as to which (in the opinion of counsel to the Collateral Agent) appropriate measures shall have been taken for perfection of the Security Interests. SECTION 7. As to Equipment and Inventory. Each Grantor shall: (a) [intentionally deleted] (b) subject to provisions of the DIP Credit Agreement, maintain or cause to be maintained in good repair, working order and condition, excepting ordinary wear and tear and damage due to casualty, all of the Equipment, and make or cause to be made all appropriate repairs, renewals and replacements thereof, to the extent not obsolete and consistent with past practice of such Grantor, as quickly as practicable after the occurrence of any loss or damage thereto that are necessary or reasonably desirable to such end, except where the failure to do any of the foregoing would not result in a Material Adverse Effect; (c) (i) if requested by the Collateral Agent, in the case of Equipment now owned constituting goods in which a security interest is perfected by a notation on the certificate of title or similar evidence of the ownership of such goods, and (ii) within 10 days of acquiring any other similar Equipment (x) having a value in excess of $100,000 or (y) having a value in excess of $100,000, if the aggregate of all such items owned by the Grantors at any time is greater than $1,000,000, deliver to the Collateral Agent any and all certificates of title, applications for title or similar evidence of ownership of such Equipment and shall cause the Collateral Agent to be named as lienholder on any such certificate of title or other evidence of ownership. Each Grantor shall promptly inform the Collateral Agent of any additions to or deletions from the Equipment and shall not permit any such items to become a fixture to real estate; (d) if requested by the Collateral Agent, at its own cost and expense, cause to be plainly, distinctly, permanently and conspicuously placed, fastened or painted upon each side of each item of Rolling Stock a legend in letters not less than one inch in height bearing such words as the Collateral Agent may request indicating the Lien over and security interest in such Rolling Stock created hereby. Each Grantor may permit the Rolling Stock to be operated within the United States, but shall not permit the Rolling Stock to be operated outside the boundaries of the continental United States; 15 (e) within five (5) Business Days after entering into, amending, modifying or terminating any Rolling Stock Lease, deliver a copy of such Rolling Stock Lease, amendment or modification or notice of such termination to the Collateral Agent; (f) not, without the prior written consent of the Required DIP Lenders, sell, lease, exchange, assign or otherwise dispose of, or grant any option with respect to, any Equipment or Inventory except that, subject to the rights of the Collateral Agent and the Secured Parties hereunder if an Event of Default has occurred and be continuing, the Grantors may (i) sell, lease or exchange Inventory and obsolete, unused or unnecessary Equipment, in each case in the ordinary course of business, and (ii) consummate any disposition of assets permitted by the terms of the DIP Credit Agreement; (g) until satisfaction in full of the Obligations, at any time when an Event of Default has occurred and is continuing: (i) perform any and all reasonable actions requested by the Collateral Agent to enforce the Collateral Agent's security interest in the Inventory and all of the Collateral Agent's rights hereunder, such as leasing warehouses to the Collateral Agent or its designee, placing and maintaining signs, appointing custodians, transferring Inventory to warehouses, and delivering to the Collateral Agent warehouse receipts and documents of title in the Collateral Agent's name; and (ii) if any Inventory is in the possession or control of any warehouseman, bailee or any of the Grantors' agents, contractors or processors or any other third party, notify the Collateral Agent thereof and notify such agents, contractors or processors or third parties of the Collateral Agent's security interest therein and, upon request of the Collateral Agent acting on the instruction of the Required DIP Lenders, instruct them to hold all such Inventory for the Collateral Agent and such Grantor's account, as their interests may appear, and subject to the Collateral Agent's instructions. At any time when an Event of Default has occurred and is continuing, the Collateral Agent shall have the right to hold all Inventory subject to the Security Interest granted hereunder and the right to take possession of the Inventory or any part thereof and to maintain such possession on a Grantor's premises or to remove any or all of the Inventory to such other place or places as the Collateral Agent desires in its sole discretion. If the Collateral Agent exercises its right to take possession of the Inventory, such Grantor, upon the Collateral Agent's demand, will assemble the Inventory and make it available to the Collateral Agent at such Grantor's premises at which it is located. SECTION 8. As to Accounts. (a) Each Grantor will hold and preserve such records and chattel paper and will permit representatives of the Collateral Agent, at any time during normal 16 business hours, to inspect and make abstracts from such records and chattel paper in accordance with Section 5.06 of the DIP Credit Agreement. (b) Except as otherwise provided in this subsection (b), each Grantor shall continue to collect, in accordance with its customary practice, at its own expense, all amounts due or to become due to such Grantor under the Accounts (including, without limitation, Accounts that are delinquent, such Accounts to be collected in accordance with lawful collection procedures) and shall apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account. Prior to the occurrence and continuance of an Event of Default, such Grantor shall have the right to adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon, all in accordance with its customary practices. In connection with such collections, upon the occurrence and during the continuation of an Event of Default, the Grantors shall take such actions as the Grantors or the Collateral Agent may deem necessary or advisable to enforce collection of the Accounts; provided, that upon written notice by the Collateral Agent to any Grantor, following the occurrence and during the continuation of an Event of Default, of its intention so to do, the Collateral Agent shall have the right to notify, or to instruct the Grantors to so notify, the account debtors or obligors under any Accounts of the assignment of such Accounts to the Collateral Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent or its designee and, upon such notification and at the expense of such Grantor, to enforce collection of any such Accounts, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by such Grantor of the notice referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including instruments) received by such Grantor in respect of the Accounts shall be received in trust for the benefit of the Collateral Agent (for the ratable benefit of the Secured Parties) hereunder, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and either (A) released to the Grantors if such Event of Default shall have been cured or waived or (B) if such Event of Default shall be continuing, applied as provided by Section 18, and (ii) the Grantors shall not, without the written consent of the Collateral Agent, adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. SECTION 9. As to Trademarks, Patents and Copyrights. (a) Each Grantor shall, either itself or through licensees, continue to use the Trademarks as each is currently used in the Grantor's business in order to 17 maintain the Trademarks in full force free from any claim of abandonment for nonuse and each such Grantor will not (and will not permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated, unless such failure to use a Trademark is not reasonably likely to have a Material Adverse Effect. (b) No Grantor will do any act, or omit to do any act, whereby the Patents or Copyrights may become abandoned or dedicated and each such Grantor shall notify the Collateral Agent immediately if it knows of any reason or has reason to know that any application or registration relating to any material Copyright, Trademark or Patent may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Copyright Office, the United States Patent and Trademark Office or any court) regarding any Grantor's ownership of any Copyright, Patent or Trademark, its right to register the same or to keep and maintain the same, unless such abandonment or dedication is not reasonably likely to have a Material Adverse Effect. (c) Each Grantor will give the Collateral Agent 30 days prior written notice of its intention to file, either itself or through any agent, employee or licensee, an application for the registration of any Copyright with the United States Copyright Office or any Patent or Trademark with the United States Patent and Trademark Office, or with any similar office or agency in any other country or any political subdivision thereof. (d) Each Grantor will take all necessary steps in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain in all material respects each application and registration of all material Trademarks, Patents and Copyrights, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings. (e) Each Grantor will, without further order of the Bankruptcy Court, perform all acts and execute and deliver all further agreements, instruments and documents, including, without limitation, assignments for security in form suitable for filing with the United States Patent and Trademark Office and the United States Copyright Office, respectively, requested by the Collateral Agent at any time to evidence, perfect, maintain, record and enforce the Collateral Agent's security interest in all Trademarks, Patents and Copyrights and the goodwill and general intangibles of the Grantors relating thereto or represented thereby, or otherwise in furtherance of the provisions of this Agreement, and each Grantor hereby appoints the Collateral Agent its attorney-in-fact and authorizes the Collateral Agent to execute and file one or more financing statements and similar 18 documents (which may be signed only by the Collateral Agent) or copies thereof or of this Security Agreement with respect to Patents, Trademarks and Copyrights. All acts of such attorney are hereby ratified and confirmed; such power, being coupled with an interest, shall be irrevocable until the Obligations are paid in full. (f) In the event that any Copyright, Copyright License, Patent, Patent License, Trademark or Trademark License is infringed, misappropriated or diluted by a third party, each of the Grantors shall notify the Collateral Agent promptly after it learns thereof and shall, unless the Grantors shall reasonably determine that any such action would be of negligible economic value to it (without accounting for any liens on the proceeds of any recovery), promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as the Grantors shall reasonably deem appropriate under the circumstances to protect such Copyright, Copyright License, Patent, Patent License, Trademark or Trademark License. Each Grantor will, upon acquiring knowledge of any use by any person of any term or design likely to cause confusion with any material Trademark, promptly notify the Collateral Agent of such use, and, if requested by the Collateral Agent, shall join with the Collateral Agent, at such Grantor's expense, in such action as the Collateral Agent, in its reasonable discretion, may deem advisable for the protection of the Collateral Agent's interest in and to the Trademarks. (g) Each Grantor shall continue to use reasonable and proper statutory notice in connection with its use of each registered Patent, Trademark and Copyright. SECTION 10. As to the Pledged Securities; Voting Rights; Dividends; Etc. (a) Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in its name, and the Collateral Agent will promptly give to the Grantors copies of any notices and communications received by the Collateral Agent with respect to Pledged Securities registered in the name of the Collateral Agent or its nominee. (b) So long as no Event of Default shall have occurred and be continuing: (i) the Grantors (as applicable) shall be entitled from time to time to exercise any and all voting and other consensual rights, ratifications and waivers pertaining to the Pledged Securities or any part thereof for any purpose not inconsistent with the terms of this Agreement or any of the Loan Documents; 19 (ii) notwithstanding the provisions of Section 1 hereof, such Grantors shall be entitled to receive and retain any and all dividends paid in respect of the Pledged Securities; provided, that any and all (A) dividends paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Securities, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Securities in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of, or in redemption of, or in exchange for, any Pledged Securities shall, unless otherwise provided in the Loan Documents, forthwith be delivered to the Collateral Agent to hold as Pledged Securities and shall, if received by any of the Grantors, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Grantor, and be forthwith delivered to the Collateral Agent as Pledged Securities in the same form as so received (with any necessary endorsement); and (iii) the Collateral Agent shall execute and deliver (or cause to be executed and delivered) to the Grantors (as applicable), upon receiving a written request from the Grantors accompanied by a certificate signed by its principal financial officer stating that no Event of Default has occurred and is continuing, all such proxies, powers of attorney, consents, ratifications and waivers in respect of any of the Pledged Equity Interests that is registered in the name of the Collateral Agent or its nominee as shall be specified in such request and be in form and substance satisfactory to the Collateral Agent in its reasonable judgment, as the Grantors (as applicable) may reasonably request for the purpose of enabling such Grantors to exercise the voting and other rights they are entitled to exercise pursuant to paragraph (i) above and to receive the dividends they are authorized to receive and retain pursuant to paragraph (ii) above. (c) Upon the occurrence and during the continuance of an Event of Default: (i) upon written notice from the Collateral Agent to the Grantors (as applicable) to such effect, all rights of such Grantors (as applicable) to 20 exercise the voting and other consensual rights they would otherwise be entitled to exercise pursuant to Section 10(b)(i) and to receive the dividends they would otherwise be authorized to receive and retain pursuant to Section 10(b)(ii) shall cease, and all such rights shall thereupon become vested in the Collateral Agent, who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Securities any such dividends; and (ii) all dividends and other distributions that are received by such Grantors contrary to the provisions of this Section shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Collateral Agent as Pledged Securities in the same form as so received (with any necessary endorsement). SECTION 11. The Mortgages. In the event that any of the Collateral hereunder is also subject to a valid and enforceable Lien under the terms of any mortgage, deed of trust or lease hold mortgage and the terms of such mortgage, deed of trust or lease hold mortgage are inconsistent with the terms of this Agreement, then with respect to such Collateral, the terms of such mortgage, deed of trust or lease hold mortgage shall be controlling in the case of fixtures and real estate leases, letting and licenses of, and contracts and agreements relating to the lease of, real property, and the terms of this Agreement shall be controlling in the case of all other Collateral. SECTION 12. Insurance. Not later than 20 days after the Petition Date, the Grantors will cause the Collateral Agent to be named as an insured party and loss payee on each insurance policy covering risks relating to any of its Inventory and Equipment. The Grantors will deliver to the Collateral Agent, upon request of the Collateral Agent, the insurance policies for such insurance or certificates of insurance evidencing such coverage. Each such insurance policy shall include effective waivers by the insurer of all claims for insurance premiums against the Collateral Agent or any Secured Party, provide for coverage to the Collateral Agent regardless of the breach by the Grantors of any warranty or representation made therein, not be subject to co-insurance, and provide that no cancellation, termination or material modification of such policies shall be effective until at least 30 days after receipt by the Collateral Agent of notice thereof (except in the case of termination for non-payment of premium, when 10 days notice shall be given). The Grantors hereby appoint the Collateral Agent as their attorney-in-fact to make proofs of loss, claims for insurance and adjustments with insurers, and to execute or endorse all documents, checks or drafts in connection with payments made as a result of any insurance policies to the extent that the Grantors fail or refuse to do so within 10 days after a request by the Collateral Agent. Upon the occurrence and during the continuance of any Event of Default, all insurance 21 payments shall be held, applied and paid to the Collateral Agent as specified in Section 17 hereof. SECTION 13. Transfers to Others; Liens; Additional Shares. (a) Each Grantor shall not sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except for dispositions permitted by the DIP Credit Agreement. (b) Each Grantor shall not create or suffer to exist any Lien upon or with respect to any of the Collateral to secure any obligation of any person or entity, except for Liens permitted by the DIP Credit Agreement. (c) Each Grantor (as applicable) agrees that it will (i) cause each of the Issuers that are wholly-owned Subsidiaries not to issue any stock or other securities in addition to or substitution for the Pledged Equity Interests issued by such Issuer, except to a Grantor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional shares of stock or other securities of each Issuer of the Pledged Equity Interests. SECTION 14. Collateral Agent Appointed Attorney-in-fact. Each Grantor hereby irrevocably appoints the Collateral Agent such Grantor's attorney-in-fact (which appointment shall be irrevocable and deemed coupled with an interest), with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent's discretion, but at each Grantor's expense, upon and during the occurrence and continuation of an Event of Default, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to Section 12, (b) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (c) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (i) or (ii) above, (d) to sell, transfer, assign or otherwise deal in or with the Collateral or the proceeds or avails thereof, as fully and effectually as if the Collateral Agent were the absolute owner thereof, 22 (e) to extend the time of payment of any or all of the Collateral and to make any allowance and other adjustments with reference thereto, (f) to receive, endorse and collect all instruments made payable to the Grantors representing any dividend or other distribution in respect of the Pledged Securities or any part thereof and to give full discharge for the same, and (g) to file or settle, compromise, prosecute or defend any claims, actions or proceedings that the Collateral Agent may deem necessary or desirable to collect any of the Collateral or otherwise enforce the Collateral Agent's rights with respect thereto; provided, that the Collateral Agent shall give each Grantor not less than ten days prior notice of the time and place of any sale or other intended disposition of any of the Collateral, except any Collateral that is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Collateral Agent and the Grantors agree that such notice constitutes "reasonable notification" within the meaning of Section 9-612 of the UCC. SECTION 15. Collateral Agent May Perform. If any Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Collateral Agent incurred in connection therewith shall be payable by the Grantors under Section 19. SECTION 16. The Collateral Agent's Duties. The provisions of Article 8 of the DIP Credit Agreement shall inure to the benefit of the Collateral Agent in respect of this Agreement and shall be binding upon the parties to the DIP Credit Agreement in such respect. The powers conferred on the Collateral Agent hereunder are solely to protect its interests and the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral Agent to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral, including, without limitation, ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Securities, whether or not the Collateral Agent has or is deemed to have knowledge of such matters. The Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and the Collateral Agent shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, 23 carrier, forwarding agency, consignee or other agent or bailee selected by the Collateral Agent in good faith and with reasonable care. The Collateral Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder; provided that the Collateral Agent shall be responsible if it executes and delivers any release of the Collateral that is not authorized by the Grantors, the requisite DIP Lenders, or the terms of the DIP Credit Agreement or this Agreement, if such execution and delivery is the result of its own gross negligence or willful misconduct. The Collateral Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by the Grantors. Pursuant to Article 8 of the DIP Credit Agreement, the Collateral Agent has been authorized by the Secured Parties to take all such action provided to be taken by it as Collateral Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and methods of realization upon the Collateral), the Collateral Agent shall act or refrain from acting in accordance with written instructions from the Required DIP Lenders or, in the absence of such instructions, in accordance with its discretion. SECTION 17. Remedies. If any Event of Default shall have occurred and be continuing, and subject to the provisions of Article 7 of the DIP Credit Agreement: (a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, and without application to or order of the Bankruptcy Court, all the rights and remedies of a secured party on default under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) and also may, without being required to give any notice, except as specifically provided herein or as may be required by mandatory provisions of law, (i) withdraw all cash and Liquid Investments in the Concentration Account and apply such cash and Liquid Investments and other cash, if any, then held by it as Collateral as specified in Section 18 and (ii) if there shall be no such cash or Liquid Investments, or if such cash and Liquid Investments shall be insufficient to pay all the Obligations in full, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may, in its sole discretion, deem commercially reasonable. The Collateral Agent or any Secured Party may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily 24 sold in a recognized market or is of a type that is the subject of widely distributed standard price quotations, at any private sale). The Grantors will execute and deliver such documents and take such other action as the Collateral Agent deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale, the Collateral Agent shall have the right to deliver, assign and transfer to the purchaser the Collateral sold. Each purchaser at any such sale shall hold the Collateral so sold to it absolutely and free from any claim or right of whatever kind, including any equity or right of redemption of the Grantors that may be waived, and the Grantors, to the extent permitted by law, hereby specifically waive all rights of redemption, stay or appraisal that they have or may have under any law now existing or hereafter adopted. Each Grantor agrees that, to the extent notice of such sale shall be required by law, ten days notice to the Grantors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may determine. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. In the case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold shall be retained by the Collateral Agent until the selling price is paid by the purchaser thereof, but the Collateral Agent shall not incur any liability in the case of the failure of such purchaser to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may again be sold upon like notice. The Collateral Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. For the purposes of obtaining executory process, each Grantor does hereby confess judgment in favor of the Collateral Agent for the full amount of the Obligations. In furtherance and not in derogation of the Collateral Agent's rights hereunder and under the other Loan Documents, each Grantor does by these presents consent, agree and stipulate that upon the occurrence of an Event of Default and so long as it is continuing, it shall be lawful for the Collateral Agent, and the Grantors do hereby authorize the Collateral Agent, to cause any and all of the Collateral to be seized and sold under executory or ordinary process, at the Collateral Agent's sole option, without appraisement, appraisement being hereby expressly waived, as an entirety or in parcels as the Collateral Agent may determine, to the highest bidder for cash, and otherwise exercise the rights, powers and remedies afforded herein and under applicable Louisiana law. Any 25 and all declarations of fact made by authentic act before a Notary Public in the presence of two witnesses by a person declaring that such facts lie within his or her knowledge shall constitute authentic evidence of such facts for the purpose of executory process. Each Grantor hereby waives in favor of the Collateral Agent: (a) the benefit of appraisement as provided in Louisiana Code of Civil Procedure Articles 2332, 2336, 2723 and 2724, and all other laws conferring the same; (b) the demand and three days delay accorded by Louisiana Code of Civil Procedure Articles 2639 and 2721; (c) the notice of seizure required by Louisiana Code of Civil Procedure Articles 2293 and 2721; (d) the three days delay provided by Louisiana Code of Civil Procedure Articles 2331 and 2722; and (e) the benefit of the other provisions of Louisiana Code of Civil Procedure Articles 2331, 2722, and 2723, not specifically mentioned above. The Collateral Agent is hereby appointed agent and attorney-in-fact for the Grantors and is hereby authorized and empowered to carry out and enforce all of the incorporeal rights in which the Grantors have granted a security interest to the Collateral Agent hereunder. This mandate and power of attorney, being coupled with an interest, is irrevocable so long as the Security Interests granted hereunder remain in effect. In the event the Collateral or any part thereof is seized as an incident to an action for the recognition or enforcement of this Agreement by executory process, ordinary process, sequestration, writ of fieri facias, or otherwise, the Grantors and the Collateral Agent agree that the court issuing any such order shall, if petitioned for by the Collateral Agent, direct the applicable sheriff to appoint as a keeper of the Collateral, the Collateral Agent or any agent designated by the Collateral Agent or any person named by the Collateral Agent at the time such seizure is effected. This designation is pursuant to Louisiana Revised Statutes 9:5136-9:5140.1 and the Collateral Agent shall be entitled to all the rights and benefits afforded thereunder as the same may be amended. It is hereby agreed that the keeper shall be entitled to receive as compensation, in excess of its costs and expenses incurred in the administration or preservation of the Collateral, an amount equal to five (5%) percent of the gross revenues and other amounts received by the keeper, payable on a monthly basis. The designation of keeper made herein shall not be deemed to require the Collateral Agent to provoke the appointment of such a keeper. (b) For the purpose of enforcing any and all rights and remedies under this Agreement the Collateral Agent may, at any time when an Event of Default has occurred and is continuing, (i) require the Grantors to, and the Grantors agree that they will, at their expense and upon the request of the Collateral Agent, forthwith assemble all or any part of the Collateral as directed by the Collateral Agent and make it available at a place designated by the Collateral Agent that is, in the Collateral Agent's opinion, reasonably convenient to the Collateral Agent and the Grantors, whether at the premises of the Grantors or otherwise, (ii) to the extent permitted by applicable law, enter, with or without process of law and without breach of the peace, any premises where any of the Collateral is or may be located, and without charge or liability to it seize and remove such Collateral 26 from such premises, (iii) have access to and use each Grantor's books and records relating to the Collateral and (iv) prior to the disposition of the Collateral, store or transfer it without charge by the Grantors in or by means of any storage or transportation facility owned or leased by the Grantors, process, repair or recondition it or otherwise prepare it for disposition in any commercially reasonable manner and to the extent the Collateral Agent deems appropriate in its reasonable judgment and, in connection with such preparation and disposition, use without charge any Trademark, trade name, Copyright, Patent or technical process used by the Grantors; provided that such use of any federally registered trademark shall be subject to such oversight of the quality of the goods and services to which such mark is affixed as is necessary to maintain such registration. The Collateral Agent may also render any or all of the Collateral unusable at each Grantor's premises and may dispose of such Collateral on such premises without liability for rent or costs. (c) The Collateral Agent may instruct the Grantors not to make any further use of the Patents, Copyrights or Trademarks or any mark similar thereto for any purpose to the extent that such use would be inconsistent with the exercise by the Collateral Agent of any other remedies under this Section. (d) The Collateral Agent may license, or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any of the Trademarks, Patents or Copyrights included in the Collateral throughout the world for such term or terms, on such conditions and in such manner as the Collateral Agent shall in its sole discretion determine. (e) The Collateral Agent may (without assuming any obligations or liability thereunder), at any time and from time to time, enforce (and shall have the exclusive right to enforce) against any licensee or sublicensee all rights and remedies of the Grantors in, to and under any one or more license agreements with respect to the Collateral, and take or refrain from taking any action thereunder, and each of the Grantors hereby releases the Collateral Agent from, and agrees to hold the Collateral Agent free and harmless from and against any claims arising out of, any action taken or omitted to be taken with respect to any such license agreement. (f) Upon request by the Collateral Agent, the Grantors will execute and deliver to the Collateral Agent a power of attorney, in form and substance satisfactory to the Collateral Agent in its reasonable judgment, for the implementation of any lease, assignment, license, sublicense, grant of option, sale or other disposition of a Copyright, Patent or Trademark. In the event of any such license, assignment, sale or other disposition of the Collateral, or any of it, each Grantor shall supply, to the Collateral Agent or its designee, its know-how and expertise relating to the manufacture and sale of the products bearing or in connection with the Trademarks, or the products or services made or rendered in 27 connection with Patents or Copyrights, and its customer lists and other records relating to the Trademarks, Patents or Copyrights, and to the distribution of said products. (g) In order to implement the assignment, sale or other disposal of any of the Trademarks, Patents or Copyrights, the Collateral Agent may, at any time, pursuant to the authority granted in Section 14 hereof, execute and deliver on behalf of the Grantors, one or more instruments of assignment of the Trademarks, Patents or Copyrights (or any application of registration thereof), in form suitable for filing, recording or registration in any country. (h) All cash proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 19 hereof) in whole or in part against, all or any part of the Obligations as provided for in Section 18. (i) If at any time when the Collateral Agent shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to this Section 17, and such Pledged Securities or the part thereof to be sold shall not be effectively registered under the Securities Act of 1933, as amended, and as from time to time in effect, and the rules and regulations thereunder ( the "SECURITIES ACT"), the Collateral Agent is hereby expressly authorized to sell such Pledged Securities or such part thereof by private sale in such manner and under such circumstances as the Collateral Agent may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Collateral Agent, in compliance with applicable securities laws, (a) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or such part thereof shall have been filed under such Securities Act, (b) may approach and negotiate with a restricted number of potential purchasers to effect such sale and (c) may restrict such sale to purchasers as to their number, nature of business and investment intention including, without limitation, to purchasers each of whom will represent and agree to the satisfaction of the Collateral Agent that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities, or part thereof, it being understood that the Collateral Agent may cause or require each Grantor, and each Grantor hereby agrees upon the written request of the Collateral Agent, to cause (i) a legend or legends to be placed on the certificates to be delivered to such purchasers to the effect that the Pledged Securities represented thereby have not been registered under the Securities Act and setting forth or referring to restrictions on the transferability of such securities; and (ii) the issuance of stop transfer instructions to such Issuer's transfer agent, if any, with respect to the Pledged Securities, or, if such Issuer 28 transfers its own securities, a notation in the appropriate records of such Issuer. The Grantors will execute and deliver such documents and take such other action as the Collateral Agent deems necessary or advisable in its reasonable judgment in order that any such sale may be made in compliance with the law. Upon any such sale the Collateral Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Pledged Securities so sold. Each purchaser at any such sale shall hold the Pledged Securities so sold absolutely and free from any claim or right of whatsoever kind of the Grantors, including any equity or right of redemption of the Grantors that may be waived, and each Grantor, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal that it has or may later have under any law now existing or hereafter adopted. The notice (if any) of such sale required by Section 13 shall (1) in the case of a public sale, state the time and place fixed for such sale, (2) in the case of a sale at a broker's board or on a securities exchange, state the board or exchange at which such sale is to be made and the day on which the Pledged Securities, or the portion thereof so being sold, will first be offered for sale at such board or exchange, and (3) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix in the notice of such sale. At any such sale the Pledged Securities may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may determine. The Collateral Agent shall not be obligated to make any such sale pursuant to any such notice. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In the case of any sale of all or any part of the Pledged Securities on credit or for future delivery, the Pledged Securities so sold shall be retained by the Collateral Agent until the selling price is paid by the purchaser thereof, but the Collateral Agent shall not incur any liability in the case of the failure of such purchaser to take up and pay for the Pledged Securities so sold and, in the case of any such failure, such Pledged Securities may again be sold upon like notice. The Collateral Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Pledged Securities, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. In the event of any such sale, each Grantor does hereby consent and agree that the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price the Collateral Agent may deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were public and deferred until after registration as aforesaid. 29 SECTION 18. Application of Proceeds. (a) Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held in the Concentration Account that are to be applied to the obligations secured hereby in accordance with the priorities established by the Orders shall be applied by the Collateral Agent, subject to the Carve-Out, in the following order of priority; FIRST, to payment of the reasonable expenses (including any associated fees or commissions) of such sale or other realization, including reasonable compensation to the Collateral Agent, its agents and counsel, and all expenses, liabilities and advances incurred or made by the Collateral Agent in connection therewith, and any other unreimbursed expenses for which the Collateral Agent or any Secured Party is to be reimbursed pursuant to Sections 10.05 and 10.06 of the DIP Credit Agreement or Section 19 hereof and to unpaid fees owing to the Collateral Agent or the Fronting Banks under the DIP Credit Agreement; SECOND, to the ratable payment of unpaid principal of Loans and, subject to the second sentence of subsection (b) below, Letter of Credit Obligations; THIRD, to the ratable payment of accrued but unpaid interest on the Obligations in accordance with the provisions of the DIP Credit Agreement; FOURTH, to the ratable payment of all other Obligations, until all Obligations shall have been paid in full; and FINALLY, to payment to each of the Grantors or their successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. (b) The Collateral Agent may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof. If at any time any monies collected or received by the Collateral Agent are distributable pursuant to this Section in respect of a Letter of Credit Obligation that is a contingent obligation at such time, then the Collateral Agent shall invest such amounts in Liquid Investments selected by it and shall hold all such amounts so distributable and all such Liquid Investments and the net proceeds thereof in trust for application to the payment of such Letter of Credit Obligation at such time as such Letter of Credit Obligation is no longer a contingent obligation. If the Collateral Agent 30 holds any amounts that were distributable in respect of any Letter of Credit Obligations after all Letters of Credit have expired and all amounts payable with respect thereto have been paid, such amounts shall be applied in the order set forth in subsection (a) above. As used herein in this Section 18, "LIQUID INVESTMENT" means (i) direct obligations of the United States or any agency thereof, (ii) obligations guaranteed by the United States or any agency thereof, (iii) time deposits and money market deposit accounts issued by or guaranteed by or placed with a Secured Party, and (iv) fully collateralized repurchase agreements for securities described in clause (i) or (ii) above entered into with a Secured Party, provided in each case that such Liquid Investment (x) matures within 30 days after it is first included in the Collateral and (y) is in a form, and is issued and held in a manner, that in the reasonable judgment of the Collateral Agent permits appropriate measures to have been taken to perfect security interests therein. (c) In making the determinations and allocations required by this Section, the Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on information supplied by the Secured Parties as to the amounts of the Obligations held by them. All distributions made by the Collateral Agent pursuant to this Section shall be final, and the Collateral Agent shall have no duty to inquire as to the application by any Secured Party of any amount distributed to them. However, if at any time the Collateral Agent determines that an allocation or distribution previously made pursuant to this Section was based on a mistake of fact (including, without limiting the generality of the foregoing, mistakes based on any assumption that principal or interest had been paid by payments that were subsequently recovered from the recipient thereof), the Collateral Agent may in its discretion, but shall not be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Collateral Agent and the Secured Parties receive the distributions to which they would have been entitled if such mistake of fact had not been made. SECTION 19. Indemnity and Expense. (a) Each Grantor, jointly and severally, agrees to indemnify each of the Secured Parties from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement) and the agreements attached hereto, except claims, losses or liabilities directly arising from such Secured Party's own gross negligence or willful misconduct. (b) The Grantors will upon demand pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or 31 other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (iv) the failure by any of the Grantors to perform or observe any of the provisions hereof. (c) In the event that any of the Grantors fails to comply with the provisions of the DIP Credit Agreement or this Agreement, such that the value of any Collateral or the validity, perfection, rank or value of any Security Interest is thereby diminished or potentially diminished or put at risk, the Collateral Agent, if requested by the Required DIP Lenders may, but shall not be required to, effect such compliance on behalf of the Grantors, and the Grantors shall reimburse the Collateral Agent for the costs thereof on demand. All insurance expenses and all expenses of protecting, storing, warehousing, insuring, handling, maintaining, and shipping the Collateral, any and all excise, property, sales, and use taxes imposed by any state, federal, or local authority on any of the Collateral, all reasonable costs and expenses in respect of periodic inspections of the Collateral to the extent the same may be requested by the Required DIP Lenders from time to time (but not more frequently than once in each fiscal year of the Grantors unless an Event of Default has occurred and is continuing), or in respect of the sale or other disposition thereof, shall be borne and paid by the Grantors; and if each of the Grantors fails to promptly pay any portion thereof when due, the Collateral Agent or, if an Event of Default has occurred and is continuing, any Secured Party, may, at its option, but shall not be required to, pay the same and charge the Grantors' account therefor, and each of the Grantors agrees to reimburse the Collateral Agent or such Secured Party therefor on demand. All sums so paid or incurred by the Collateral Agent or any Secured Party for any of the foregoing and any and all other sums for which the Grantors may become liable hereunder and all costs and expenses (including reasonable attorneys' fees, legal expenses and court costs) reasonably incurred by the Collateral Agent or, if an Event of Default has occurred and is continuing, any Secured Party, in enforcing or protecting the Security Interests or any of their rights or remedies under this Agreement, shall, together with interest thereon from the date of demand for payment until paid at the rate applicable to ABR Borrowings plus 2.00%, be additional Obligations hereunder and under the DIP Credit Agreement. (d) The Grantors assume all responsibility and liability arising from the use of the Trademarks, Patents and Copyrights, and the Grantors hereby, jointly and severally, indemnify and hold each of the Secured Parties harmless from and against any claim, suit, loss, damage or expense (including reasonable attorneys' fees) arising out of any alleged defect in any product manufactured, promoted or sold by any of the Grantors in connection with any Trademark or out of the manufacture, promotion, labeling, sale or advertisement of any such product by any of the Grantors except as the same may have resulted from the gross negligence or willful misconduct of such Secured Party. 32 (e) Each of the Grantors agrees that no Secured Party assumes, and no Secured Party shall have any responsibility for, the payment of any sums due or to become due under any agreement or contract included in the Collateral or the performance of any obligations to be performed under or with respect to any such agreement or contract by any of the Grantors, and except as the same may have resulted from the gross negligence or willful misconduct of such Secured Party, each of the Grantors hereby jointly and severally agrees to indemnify and hold such Secured Party harmless with respect to any and all claims by any person relating hereto. SECTION 20. Appointment of Co-Collateral Agents. At any time or times, in order to comply with any legal requirement in any jurisdiction, the Collateral Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Collateral Agent, or to act as separate agent or agents on behalf of the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Collateral Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions relating to the Collateral Agent contained herein). SECTION 21. Security Interest Absolute. All rights of the Collateral Agent and security interests hereunder, and all obligations of each of the Grantors hereunder, shall be absolute and unconditional, irrespective of any circumstance that might constitute a defense available to, or a discharge of, any guarantor or other obligor in respect of the Obligations. SECTION 22. Amendments; Etc. No amendment or waiver of any provision of this Agreement, nor any consent to any departure by any of the Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by the Grantors and the Collateral Agent with the consent of the Required DIP Lenders (or, solely in the case of this Section 21 or Section 23(b), with the consent of all the DIP Lenders, and, solely in the case of Section 23(e), with the consent of the Super-Majority DIP Lenders), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The Grantors shall be entitled to assume that the Collateral Agent has obtained the requisite consent of the DIP Lenders to any such change, waiver, discharge or termination hereunder to which the Collateral Agent has consented in writing. SECTION 23. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing and shall be given as provided for in the DIP Credit Agreement. 33 SECTION 24. Termination of Security Interests; Release of Collateral. (a) This Agreement shall create a continuing security interest in the Collateral. (b) Upon the payment in full of all Obligations, the termination of the Commitments under the DIP Credit Agreement and the expiration or cancellation of all Letters of Credit, the Security Interests shall terminate and all rights to the Collateral shall revert to the Grantors; provided that, if no Event of Default has occurred and is continuing and the Grantors grant to the Collateral Agent, for the benefit of the Secured Parties, a security interest in Liquid Investments (or cause to be issued by a bank acceptable to the Required DIP Lenders a letter of credit naming the Collateral Agent as beneficiary) in an amount exceeding the greater of (A) 105% of the sum of (i) all outstanding letters of credit and (ii) all payments to beneficiaries of Letters of Credit that have not yet been remitted by the Borrowers, in each case (plus any accrued and unpaid interest thereon) as of the date of such termination, and (B) such other amount as is required under Section 2.03(b) of the DIP Credit Agreement, all on terms and conditions and pursuant to documentation reasonably satisfactory to the Required DIP Lenders, the Letters of Credit need not have expired or been cancelled in order for the Security Interests to terminate. (c) Upon the consummation of any sale or exchange of Collateral permitted by clause (i) of Section 7(f), the Security Interests created hereby in the Collateral subject to such sale or exchange (but not in any proceeds arising from such sale or exchange) shall cease immediately without any further action on the part of any Secured Party or the Collateral Agent. (d) Except as provided otherwise in the DIP Credit Agreement, upon the consummation of any disposition of assets and the payment of proceeds therefrom, each as permitted by the terms of the DIP Credit Agreement, the Collateral Agent shall release the Collateral (but not any proceeds thereof) sold pursuant to such disposition of assets. Any such release shall not require the consent of any Secured Party, and the Collateral Agent shall be fully protected in relying on a certificate of the Grantors as to whether any particular disposition of assets is permitted by the terms of the DIP Credit Agreement. (e) In addition to releases of Collateral effected by subsection (c) or permitted pursuant to subsection (d), at any time and from time to time prior to the termination of the Security Interests, the Collateral Agent may release any of the Collateral with the prior written consent of the Required DIP Lenders; provided that any release of all or a substantial portion of the Collateral (for purposes of this proviso, such term shall have the definition ascribed to it in the DIP Credit Agreement) shall require the consent of the Super-Majority DIP Lenders. 34 (f) Upon the termination of the Security Interests or any release of any Collateral permitted by this Section, the Collateral Agent will, at the expense of the Grantors, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be. SECTION 25. Governing Law. This Agreement shall be governed by and construed in accordance with (a) the laws of the State of New York, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York and (b) Federal law (including, without limitation, the Bankruptcy Code) to the extent the same has pre-empted the law of the State of New York or such other jurisdiction. SECTION 26. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. SECTION 27. Waivers, Non-exclusive Remedies. No failure on the part of the Collateral Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Collateral Agent of any right under this Agreement or any other Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other remedies provided by law. SECTION 28. Successors and Assigns. This Agreement is for the benefit of the Collateral Agent and the Secured Parties and their successors and assigns, and in the event of an assignment of all or any of the Obligations in accordance with the provisions of the DIP Credit Agreement, the rights hereunder, to the extent applicable to the indebtedness or obligation so assigned, shall be deemed transferred with such indebtedness or obligation. This Agreement shall be binding on and inure to the benefit of the Grantors and their successors and permitted assigns. SECTION 29. Severability. If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Collateral Agent and the Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any 35 provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 36 IN WITNESS WHEREOF, each of the Grantors and the Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. GRANTORS: LODGIAN, INC. 1075 HOSPITALITY, L.P. By: Stevens Creek Hospitality, Inc. as General Partner 12801 NWF BEVERAGE, INC. ALBANY HOTEL, INC. AMI OPERATING PARTNERS, L.P. By: AMIOP Acquisition Corp., as General Partner AMIOP ACQUISITION CORP. APICO HILLS, INC. APICO INNS OF GREEN TREE, INC. APICO INNS OF PENNSYLVANIA, INC. APICO INNS OF PITTSBURGH, INC. APICO MANAGEMENT CORP. ATLANTA-BOSTON SPE, INC. ATLANTA-BOSTON HOLDINGS LLC ATLANTA-BOSTON LODGING LLC ATLANTA-HILLSBORO LODGING, L.L.C. BRECKSVILLE HOSPITALITY, INC. BRECKSVILLE HOSPITALITY, L.P. By: Brecksville Hospitality, Inc., as General Partner BRUNSWICK MOTEL ENTERPRISES, INC. COLUMBUS HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP By: Servico Columbus, Inc. as General Partner DEDHAM BEVERAGE MANAGEMENT, INC. DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP By: Impac SPE #3, Inc., as General Partner DOTHAN HOSPITALITY 3053, INC. DOTHAN HOSPITALITY 3071, INC. EAST WASHINGTON HOSPITALITY LIMITED PARTNERSHIP By: Servico East Washington, Inc., as General Partner EUROPEAN VENTURES, INC. FAYETTEVILLE MOTEL ENTERPRISES, INC. FORT WAYNE HOSPITALITY ASSOCIATES II, LIMTED PARTNERSHIP By: Servico Fort Wayne II, Inc., as General Partner FOURTH STREET HOSPITALITY, INC. GADSDEN HOSPITALITY, INC. GREAT SOUTHERN MINING CO., INC. GROUPERS & COMPANY SEAFOOD RESTAURANT HARRISBURG MOTEL ENTERPRISES, INC. HEARTLANDS GARDEN GRILLE, INC HILTON HEAD MOTEL ENTERPRISES, INC. IMPAC DEVELOPMENT AND CONSTRUCTION L.L.C. IMPAC HOLDINGS III, L.L.C. IMPAC HOTEL GROUP, L.L.C. IMPAC HOTEL MANAGEMENT L.L.C. IMPAC HOTELS I, L.L.C. IMPAC SPE #1, INC. IMPAC SPE #2, INC. IMPAC SPE #3, INC. IMPAC SPE #4, INC. IMPAC SPE #5, INC. IMPAC SPE #6, INC. ISLAND MOTEL ENTERPRISES, INC. KDS CORPORATION KINSER MOTEL ENTERPRISES, INC. LAFAYETTE BEVERAGE MANAGEMENT, INC LAWRENCE HOSPITALITY ASSOCIATES, L.P. By: Servico Lawrence, Inc., as General Partner LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP By: Lodgian Richmond SPE, Inc., as General Partner LODGIAN ACQUISITION, LLC. LODGIAN AMI, INC. LODGIAN ANAHEIM, INC. LODGIAN AUSTIN BEVERAGE CORP. LODGIAN DALLAS BEVERAGE CORP. LODGIAN FINANCING CORP. LODGIAN FLORIDA, INC. LODGIAN HOTELS, INC. LODGIAN MANAGEMENT CORP. LODGIAN MARKET CENTER BEVERAGE CORP. LODGIAN MOUNT LAUREL, INC. LODGIAN ONTARIO, INC. LODGIAN RICHMOND SPE, INC. LODGIAN RICHMOND, L.L.C. LODGIAN YORK MARKET STREET, INC. MANHATTAN HOSPITALITY ASSOCIATES, L.P. By: Servico Manhattan, Inc., as General Partner MCKNIGHT MOTEL, INC. MELBOURNE HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP By: Servico Melbourne, Inc. as General Partner MINNEAPOLIS MOTEL ENTERPRISES, INC. MOON AIRPORT MOTEL, INC. MULLIGAN'S, INC. NEW ORLEANS AIRPORT MOTEL ENTERPRISES, INC. NH MOTEL ENTERPRISES, INC. PALM BEACH MOTEL ENTERPRISES, INC. PENMOCO, INC. RALEIGH MOTEL ENTERPRISES, INC. RALEIGH-DOWNTOWN ENTERPRISES, INC. ROYCE HOLDING CORP. ROYCE HOTEL CORPORATION OF DELAWARE ROYCE MANAGEMENT CORP. OF GEORGIA SAGINAW HOSPITALITY, LIMITED PARTNERSHIP By: Servico Saginaw, Inc., as General Partner SECOND FAYETTEVILLE MOTEL ENTERPRISES, INC. SECOND PALM BEACH MOTEL ENTERPRISES, INC. SERVICO ACQUISITION CORP. SERVICO AUSTIN, INC. SERVICO CEDAR RAPIDS, INC. SERVICO CENTRE ASSOCIATES, LTD. By: Palm Beach Motel Enterprises, as General Partner SERVICO COLESVILLE, INC. SERVICO COLUMBIA II, INC. SERVICO COLUMBIA, INC. SERVICO COLUMBUS, INC. SERVICO CONCORD, INC. SERVICO COUNCIL BLUFFS, INC. SERVICO EAST WASHINGTON, INC. SERVICO FLAGSTAFF, INC. SERVICO FORT WAYNE II, INC. SERVICO FORT WAYNE, INC. SERVICO FRISCO, INC. SERVICO FT. PIERCE, INC. SERVICO GRAND ISLAND, INC. SERVICO HILTON HEAD, INC. SERVICO HOSPITALITY, INC. SERVICO HOTELS I, INC. SERVICO HOTELS II, INC. SERVICO HOTELS III, INC. SERVICO HOTELS IV, INC. SERVICO HOUSTON, INC. SERVICO INVESTMENT COMPANY OF DELAWARE, INC. SERVICO JAMESTOWN, INC. SERVICO LANSING, INC. SERVICO LAWRENCE II, INC. SERVICO LAWRENCE, INC. SERVICO MANAGEMENT CORPORATION SERVICO MANAGEMENT CORP. SERVICO MANHATTAN, INC. SERVICO MANHATTAN II, INC. SERVICO MARKET CENTER, INC. SERVICO MARYLAND, INC. SERVICO MELBOURNE, INC. SERVICO METAIRIE, INC. SERVICO NEW YORK, INC. SERVICO NIAGARA FALLS, INC. SERVICO NORTHWOODS, INC. SERVICO OMAHA CENTRAL, INC. SERVICO OMAHA, INC. SERVICO OPERATIONS CORPORATION SERVICO PENSACOLA 7200, INC. SERVICO PENSACOLA 7330, INC. SERVICO PENSACOLA, INC.: SERVICO ROLLING MEADOWS, INC. SERVICO ROSEVILLE, INC. SERVICO SAGINAW, INC. SERVICO SILVER SPRING, INC. SERVICO SUMMERVILLE, INC. SERVICO TUCSON, INC. SERVICO WEST DES MOINES, INC. SERVICO WEST PALM BEACH, INC. SERVICO WICHITA, INC. SERVICO WINDSOR, INC. SERVICO WINTER HAVEN, INC. SERVICO WORCESTER, INC. SERVICO, INC. SHARON MOTEL ENTERPRISES, INC. SHC OF DELAWARE, INC. SHEFFIELD MOTEL ENTERPRISES, INC. SIOUX CITY HOSPITALITY, L.P. By: Fourth Street Hospitality, Inc., as General Partner SIXTEEN HOTELS, INC. STEVENS CREEK HOSPITALITY, INC.. W.V.B.M., INC. WASHINGTON MOTEL ENTERPRISES, INC. WILPEN, INC. WORCESTER HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP By: Servico Worcester, Inc., as General Partner By: /s/ Daniel E. Ellis ------------------------------- Title: Vice President COLLATERAL AGENT: MORGAN STANLEY SENIOR FUNDING, INC. as Collateral Agent By: /s/ Stephen Hannan ------------------------------- Title: Vice President EXHIBIT A TRADEMARK SECURITY AGREEMENT (TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK APPLICATIONS AND TRADEMARK LICENSES) WHEREAS, [NAME OF GRANTOR], a [corporation] (together with any successors thereto, the "GRANTOR") owns, or in the case of licenses, is a party to, the Trademark Collateral (as defined below); WHEREAS, Grantor, as a [Borrower] [Guarantor], the [other] Borrower[s] party thereto, the other Guarantors party thereto, the Lenders party thereto (the "DIP LENDERS"), and Morgan Stanley Senior Funding, Inc. as Administrative Agent are parties to a Revolving Credit and Guaranty Agreement dated as of December 31, 2001 (as the same may be amended from time to time, the "DIP CREDIT AGREEMENT"); WHEREAS, pursuant to the terms of a Security and Pledge Agreement dated as of December 31, 2001 (as such agreement may be further amended from time to time, the "DIP SECURITY AGREEMENT") among Grantor, the other lien grantors party thereto and Morgan Stanley Senior Funding, Inc., as Collateral Agent for the Secured Parties (as defined in the DIP Security Agreement) (in such capacity, together with its successors in such capacity, "GRANTEE"), Grantor has granted to Grantee for the benefit of the Secured Parties a continuing security interest in substantially all the assets of Grantor, including all right, title and interest of Grantor in, to and under the Trademark Collateral (as defined herein), whether now owned or existing or hereafter acquired or arising, to secure the Obligations (as defined in the DIP Credit Agreement); NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor does hereby grant to Grantee, to secure the Obligations, a continuing security interest in all of Grantor's right, title and interest in, to and under the following (all of the following items or types of property being herein collectively referred to as the "TRADEMARK COLLATERAL"), whether now owned or existing or hereafter acquired or arising: (i) each Trademark (as defined in the DIP Security Agreement) owned by Grantor, including, without limitation, each Trademark registration and application referred to in Schedule A-1 hereto, and all of the goodwill of the business connected with the use of, or symbolized by, each Trademark; (ii) each Trademark License (as defined in the DIP Security Agreement), including, without limitation, each Trademark License identified in Schedule A-1 hereto, and all of the goodwill of the business connected with the use of, or symbolized by, each Trademark licensed pursuant thereto; and (iii) all proceeds of and revenues from the foregoing, including, without limitation, all proceeds of and revenues from any claim by Grantor against third parties for past, present or future unfair competition with, or violation of intellectual property rights in connection with or injury to, or infringement or dilution of, any Trademark owned by Grantor, including, without limitation, any Trademark referred to in Schedule A-1 hereto, and all rights and benefits of Grantor under any Trademark License, including, without limitation, any Trademark License identified in Schedule A-1 hereto, or for injury to the goodwill associated with any of the foregoing. Grantor hereby irrevocably constitutes and appoints Grantee and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of Grantor or in its name, from time to time, in Grantee's discretion, so long as any Event of Default (as defined in the DIP Credit Agreement) has occurred and is continuing, to take with respect to the Trademark Collateral any and all appropriate action which Grantor might take with respect to the Trademark Collateral and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Trademark Security Agreement and to accomplish the purposes hereof. Except to the extent permitted in the DIP Credit Agreement, Grantor agrees not to sell, license, exchange, assign or otherwise transfer or dispose of, or grant any rights with respect to, or mortgage or otherwise encumber, any of the foregoing Trademark Collateral. The foregoing security interest is granted in conjunction with the security interests granted to Grantee pursuant to the DIP Security Agreement. Grantor does hereby further acknowledge and affirm that the rights and remedies of Grantee with respect to the security interest in the Trademark Collateral granted hereby are more fully set forth in the DIP Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. IN WITNESS WHEREOF, Grantor has caused this Trademark Security Agreement to be duly executed by its officer thereunto duly authorized as of the _____ day of _______________, 200__. [NAME OF GRANTOR] By: ------------------------------ Title: Acknowledged: By: -------------------------- Title: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, ___________________, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that __________________, ________________ of [NAME OF GRANTOR], personally known to me to be the same person whose name is subscribed to the foregoing instrument as such __________________, appeared before me this day in person and acknowledged that (s)he signed, executed and delivered the said instrument as her/his own free and voluntary act and as the free and voluntary act of said Company, for the uses and purposes therein set forth being duly authorized so to do. GIVEN under my hand and Notarial Seal this _______ day of ______________________, 200__. [Seal] - -------------------------------- Signature of notary public My Commission expires ---------- EX-10.37 8 g75096ex10-37.txt FINAL ORDER AUTHORIZING DEBTORS TO USE CASH SCHEDULE A-1 TO TRADEMARK SECURITY AGREEMENT See Attached EXHIBIT B PATENT SECURITY AGREEMENT (PATENTS, PATENT APPLICATIONS AND PATENT LICENSES) WHEREAS, [NAME OF GRANTOR, a corporation] (together with any successors thereto, the "GRANTOR") owns, or in the case of licenses, is a party to, the Patent Collateral (as defined below); WHEREAS, Grantor, as a [Borrower] [Guarantor], the [other] Borrower[s] party thereto, the other Guarantors party thereto, the Lenders party thereto (the "DIP LENDERS"), and Morgan Stanley Senior Funding, Inc., as Administrative Agent are parties to a Revolving Credit and Guaranty Agreement dated as of December 31, 2001 (as the same may be amended from time to time, the "DIP CREDIT AGREEMENT"); and WHEREAS, pursuant to the terms of a Security and Pledge Agreement dated as of December 31, 2001 (as such agreement may be further amended from time to time, the "DIP SECURITY AGREEMENT") among Grantor, the other lien grantors party thereto and Morgan Stanley Senior Funding, Inc., as Collateral Agent for the Secured Parties (as defined in the DIP Security Agreement) (in such capacity, together with its successors in such capacity, "GRANTEE"), Grantor has granted to Grantee for the benefit of the Secured Parties a continuing security interest in substantially all the assets of Grantor, including all right, title and interest of Grantor in, to and under the Patent Collateral (as defined herein), whether now owned or existing or hereafter acquired or arising, to secure the Obligations (as defined in the DIP Credit Agreement); NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor does hereby grant to Grantee, to secure the Obligations, a continuing security interest in all of Grantor's right, title and interest in, to and under the following (all of the following items or types of property being herein collectively referred to as the "PATENT COLLATERAL"), whether now owned or existing or hereafter acquired or arising: (i) each Patent (as defined in the DIP Security Agreement) owned by Grantor, including, without limitation, each Patent referred to in Schedule B-1 hereto; (ii) each Patent License (as defined in the DIP Security Agreement), including, without limitation, each Patent License identified in Schedule B-1 hereto; and (iii) all proceeds of and revenues from the foregoing, including, without limitation, all proceeds of and revenues from any claim by Grantor against third parties for past, present or future infringement of any Patent owned by Grantor, including, without limitation, any Patent referred to in Schedule B-1 hereto (including, without limitation, any such Patent issuing from any application referred to in Schedule B-1 hereto), and all rights and benefits of Grantor under any Patent License, including, without limitation, any Patent License identified in Schedule B-1 hereto. Grantor hereby irrevocably constitutes and appoints Grantee and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of Grantor or in its name, from time to time, in Grantee's discretion, so long as any Event of Default (as defined in the DIP Credit Agreement) has occurred and is continuing, to take with respect to the Patent Collateral any and all appropriate action which Grantor might take with respect to the Patent Collateral and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Patent Security Agreement and to accomplish the purposes hereof. Except to the extent permitted in the DIP Credit Agreement, Grantor agrees not to sell, license, exchange, assign or otherwise transfer or dispose of, or grant any rights with respect to, or mortgage or otherwise encumber, any of the Patent Collateral. The foregoing security interest is granted in conjunction with the security interests granted to Grantee pursuant to the DIP Security Agreement. Grantor does hereby further acknowledge and affirm that the rights and remedies of Grantee with respect to the security interest in the Patent Collateral granted hereby are more fully set forth in the DIP Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to be duly executed by its officer thereunto duly authorized as of the day of , 200__. [NAME OF GRANTOR] By: ------------------------------------- Title: Acknowledged: By: - ------------------------------------ Title: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, ______________________, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that ___________________, of [NAME OF GRANTOR], personally known to me to be the same person whose name is subscribed to the foregoing instrument as such ___________________, appeared before me this day in person and acknowledged that (s)he signed, executed and delivered the said instrument as her/his own free and voluntary act and as the free and voluntary act of said Company, for the uses and purposes therein set forth being duly authorized so to do. GIVEN under my hand and Notarial Seal this ______ day of _____________ ______________________, 200__. [Seal] Signature of notary public My Commission expires --------- SCHEDULE B-1 TO PATENT SECURITY AGREEMENT PATENTS A. U.S. Patents and Design Patents
I.D. No. Patent No. Issued Expiration Title
B. U.S. Patent Applications
Case No. Serial No. Date Filing Title
C. Foreign Patents
I.D. No. Patent No. Issued Expiration Country Title
PATENT LICENSES
Parties Name of Agreement Licensor/Licensee Date of Agreement Subject Matter
EXHIBIT C COPYRIGHT SECURITY AGREEMENT (COPYRIGHTS, COPYRIGHT REGISTRATIONS, COPYRIGHT APPLICATIONS AND COPYRIGHT LICENSES) WHEREAS, [NAME OF GRANTOR], a _________________________ [corporation] (together with any successors thereto, the "GRANTOR") owns, or in the case of licenses, is a party to, the Copyright Collateral (as defined below); WHEREAS, Grantor, as a [Borrower] [Guarantor], the [other] Borrower[s] party thereto, the other Guarantors party thereto, the Lenders party thereto (the "DIP LENDERS"), and Morgan Stanley Senior Funding, Inc., as Administrative Agent are parties to a Revolving Credit and Guaranty Agreement dated as of December 31, 2001 (as the same may be amended from time to time, the "DIP CREDIT AGREEMENT"); and WHEREAS, pursuant to the terms of a Security and Pledge Agreement dated as of December 31, 2001 (as such agreement may be further amended from time to time, the "DIP SECURITY AGREEMENT") among Grantor, the other lien grantors party thereto and Morgan Stanley Senior Funding, Inc., as Collateral Agent for the Secured Parties (as defined in the DIP Security Agreement) (in such capacity, together with its successors in such capacity, "GRANTEE"), Grantor has granted to Grantee for the benefit of the Secured Parties a continuing security interest in substantially all the assets of Grantor, including all right, title and interest of Grantor in, to and under the Copyright Collateral (as defined herein), whether now owned or existing or hereafter acquired or arising, to secure the Obligations (as defined in the DIP Security Agreement); NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor does hereby grant to Grantee, to secure the Obligations, a continuing security interest in all of Grantor's right, title and interest in, to and under the following (all of the following items or types of property being herein collectively referred to as the "COPYRIGHT COLLATERAL"), whether now owned or existing or hereafter acquired or arising: (i) each Copyright (as defined in the DIP Security Agreement) owned by Grantor, including, without limitation, each Copyright registration or application therefor referred to in Schedule C-1 hereto; (ii) each Copyright License (as defined in the DIP Security Agreement), including, without limitation, each Copyright License identified in Schedule C-1 hereto; and (iii) all proceeds of and revenues from, accounts and general intangibles arising out of, the foregoing, including, without limitation, all proceeds of and revenues from any claim by Grantor against third parties for past, present or future infringement of any Copyright, including, without limitation, any Copyright owned by Grantor referred to in Schedule C-1 annexed hereto, and all rights and benefits of Grantor under any Copyright License, including, without limitation, any Copyright License identified in Schedule C-1 hereto. Grantor hereby irrevocably constitutes and appoints Grantee and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of Grantor or in its name, from time to time, in Grantee's discretion, so long as any Event of Default (as defined in the DIP Credit Agreement) has occurred and is continuing, to take with respect to the Copyright Collateral any and all appropriate action which Grantor might take with respect to the Copyright Collateral and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Copyright Security Agreement and to accomplish the purposes hereof. Except to the extent permitted by the DIP Credit Agreement, Grantor agrees not to sell, license, exchange, assign or otherwise transfer or dispose of, or grant any rights with respect to, or mortgage or otherwise encumber, any of the foregoing Copyright Collateral. The foregoing security interest is granted in conjunction with the security interests granted to Grantee pursuant to the DIP Security Agreement. Grantor does hereby further acknowledge and affirm that the rights and remedies of Grantee with respect to the security interest in the Copyright Collateral granted hereby are more fully set forth in the DIP Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. IN WITNESS WHEREOF, Grantor has caused this Copyright Security Agreement to be duly executed by its officer thereunto duly authorized as of the _____ day of ___________________, 200__. [NAME OF GRANTOR] By: -------------------------------------- Title: Acknowledged: By: - --------------------------------------- Title: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, ________________________________, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that ________________, of [NAME OF GRANTOR], personally known to me to be the same person whose name is _________________________ subscribed to the foregoing instrument as such ______________________, appeared before me this day in person and acknowledged that (s)he signed, executed and delivered the said instrument as her/his own free and voluntary act and as the free and voluntary act of said Company, for the uses and purposes therein set forth being duly authorized so to do. GIVEN under my hand and Notarial Seal this _______ day of ____________ _________________. [Seal] - --------------------------------------- Signature of notary public My Commission expires ----------------- SCHEDULE C-1 TO COPYRIGHT SECURITY AGREEMENT COPYRIGHTS AND COPYRIGHT REGISTRATIONS
Registration No. Registration Date Title
APPLICATIONS FOR COPYRIGHT REGISTRATION
Serial No. Date Filed Title
COPYRIGHT LICENSES Name of Agreement Parties Licensor/Licensee Date of Agreement Subject Matter As Licensee As Licensor EXHIBIT D PERFECTION CERTIFICATE The undersigned are duly authorized officers of [NAMES OF ALL GRANTORS] (the "GRANTORS"). With reference to the Security and Pledge Agreement dated as of December 31, 2001 among the Grantors and Morgan Stanley Senior Funding, Inc., as Collateral Agent (terms defined therein being used herein as therein defined), the undersigned certify to the Collateral Agent and each Secured Party as follows: A. INFORMATION REQUIRED FOR FILINGS AND SEARCHES FOR PRIOR FILINGS. 1. Name; Jurisdiction of Organization . Set forth below is the exact name, type of entity and jurisdiction of organization of each Grantor as it appears in its organizational documents: 2. Prior Names. (a) Set forth below is each other name that each Grantor has had since its organization, together with the date of the relevant change: (b) Except as set forth in Schedule A-2(b) hereto, no Grantor has changed its corporate structure in any way within the past five years. (c) None of any Grantor's Collateral was acquired from another Person within the past five years, except (i) property sold to a Grantor by another Person in the ordinary course of such other Person's business; (ii) property with respect to which the Liens under the Security and Pledge Agreement are to be perfected by taking possession or control thereof; (iii) property acquired in transactions described in Schedule A-2(c) hereto; and (iv) other property having an aggregate fair market value not exceeding $_____________________________. 3. Filing Office. In order to perfect the Liens granted by the Grantors under the Security and Pledge Agreement, a duly signed financing statement on Form UCC-1, with the collateral described as set forth on Schedule A-3(a) hereto, should be on file in the Uniform Commercial Code filing office in the jurisdiction of organization of each Grantor as set forth in Part A-1 hereof. Within 30 days hereafter, the Grantors will deliver to the Collateral Agents to be attached hereto as Schedule A-3(b), a true copy of each such filing duly acknowledged by the filing officer. B. ADDITIONAL INFORMATION REQUIRED FOR SEARCHES FOR PRIOR FILINGS UNDER OLD ARTICLE 9. 1. Current Locations. (a) The chief executive office of each Grantor is located at the following address:
NAME OF GRANTOR MAILING ADDRESS COUNTY STATE
(b) The following are all places of business of any Grantor not identified above:
NAME OF GRANTOR MAILING ADDRESS COUNTY STATE
(c) The following are all locations not identified above where any Grantor maintains any Inventory:
NAME OF GRANTOR MAILING ADDRESS COUNTY STATE
(d) The following are the names and addresses of all Persons (other than the Grantors) that have possession of any Grantor's Inventory:
NAME OF GRANTOR MAILING ADDRESS COUNTY STATE
2. Prior Locations . (a) Set forth below is the information required by paragraphs (a) and (b) of Part B-1 above with respect to each other location or place of business maintained by any Grantor at any time during the past five years: (b) Set forth below is the information required by paragraphs (c) and (d) of Part B-1 above with respect to each other location or bailee where or with whom any Grantor's Inventory has been lodged at any time during the past four months: C. SEARCH REPORTS. Attached hereto as Schedule C-1 is a true copy of a file search report from the central UCC filing office in each jurisdiction identified in Part A-1 and Part B above with respect to each name set forth in Part A-1 and Part A-2 above (searches in local filing offices, if any, are not required). Attached hereto as Schedule C-2 is a true copy of each financing statement or other filing identified in such file search reports. D. UCC FILINGS. Attached hereto as Schedule D-1 is a schedule setting forth filing information with respect to the filings referred to in Part A-3 above. All filing fees and taxes payable in connection with such filings have been paid. Attached hereto as Schedule D-2 is a true copy of each such filing duly acknowledged by the filing officer. IN WITNESS WHEREOF, I have hereunto set my hand this __ day of __________________, _____. ---------------------------------------- Name: Title: SCHEDULE A-3 TO PERFECTION CERTIFICATE DESCRIPTION OF COLLATERAL All assets of the debtor, whether now owned or hereafter acquired, wherever located, and all proceeds thereof. SCHEDULE D-1 TO PERFECTION CERTIFICATE SCHEDULE OF FILINGS I. 1075 HOSPITALITY, L.P. II. 12801 NWF BEVERAGE, INC. III. ALBANY HOTEL, INC. IV. AMI OPERATING PARTNERS, L.P. V. AMIOP ACQUISITION CORP VI. APICO HILLS, INC. VII. APICO INNS OF GREEN TREE, INC. VIII. APICO INNS OF PENNSYLVANIA, INC. IX. APICO INNS OF PITTSBURGH, INC. X. APICO MANAGEMENT CORP. XI. ATLANTA-BOSTON SPE, INC. XII. ATLANTA-BOSTON HOLDINGS, LLC XIII. ATLANTA-BOSTON LODGING, LLC XIV. ATLANTA-HILLSBORO LODGING, L.L.C. XV. BRECKSVILLE HOSPITALITY, INC. XVI. BRECKSVILLE HOSPITALITY, L.P. XVII. BRUNSWICK MOTEL ENTERPRISES, INC. XVIII. COLUMBUS HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP XIX. DEDHAM BEVERAGE MANAGEMENT, INC. XX. DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP XXI. DOTHAN HOSPITALITY 3053, INC. XXII. DOTHAN HOSPITALITY 3071, INC. XXIII. EAST WASHINGTON HOSPITALITY LIMITED PARTNERSHIP XXIV. EUROPEAN VENTURES, INC. XXV. FAYETTEVILLE MOTEL ENTERPRISES, INC. XXVI. FORT WAYNE HOSPITALITY ASSOCIATES II, LIMITED PARTNERSHIP XXVII. FOURTH STREET HOSPITALITY, INC. XXVIII. GADSDEN HOSPITALITY, INC. XXIX. GREAT SOUTHERN MINING CO., INC XXX. GROUPERS & COMPANY SEAFOOD RESTAURANT XXXI. HARRISBURG MOTEL ENTERPRISES, INC. XXXII. HEARTLANDS GARDEN GRILLE, INC. XXXIII. HILTON HEAD MOTEL ENTERPRISES, INC. XXXIV. IMPAC DEVELOPMENT AND CONSTRUCTION, L.L.C. XXXV. IMPAC HOLDINGS III, L.L.C. XXXVI. IMPAC HOTEL GROUP, L.L.C. XXXVII. IMPAC HOTEL MANAGEMENT L.L.C. XXXVIII. IMPAC HOTELS I, L.L.C. XXXIX. IMPAC SPE #1, INC. XL. IMPAC SPE #2, INC. XLI. IMPAC SPE #3, INC. XLII. IMPAC SPE #4, INC. XLIII. IMPAC SPE #5, INC. XLIV. IMPAC SPE #6, INC. XLV. ISLAND MOTEL ENTERPRISES, INC. XLVI. KDS CORPORATION XLVII. KINSER MOTEL ENTERPRISES, INC. XLVIII. LAFAYETTE BEVERAGE MANAGEMENT, INC. XLIX. LAWRENCE HOSPITALITY ASSOCIATES, L.P L. LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP LI. LODGIAN ACQUISITION, LLC. LII. LODGIAN AMI, INC. LIII. LODGIAN ANAHEIM, INC. LIV. LODGIAN AUSTIN BEVERAGE, CORP. LV. LODGIAN DALLAS BEVERAGE, CORP. LVI. LODGIAN FINANCING CORP. LVII. LODGIAN FLORIDA, INC. LVIII. LODGIAN HOTELS, INC. LIX. LODGIAN MANAGEMENT CORP LX. LODGIAN MARKET CENTER BEVERAGE, CORP. LXI. LODGIAN MOUNT LAUREL, INC. LXII. LODGIAN ONTARIO, INC. LXIII. LODGIAN RICHMOND SPE, INC. LXIV. LODGIAN RICHMOND, L.L.C. LXV. LODGIAN YORK MARKET STREET, INC. LXVI. MANHATTAN HOSPITALITY ASSOCIATES, L.P. LXVII. MCKNIGHT MOTEL, INC. LXVIII. MELBOURNE HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP LXIX. MINNEAPOLIS MOTEL ENTERPRISES, INC. LXX. MOON AIRPORT MOTEL, INC. LXXI. MULLIGAN'S, INC. LXXII. NEW ORLEANS AIRPORT MOTEL ENTERPRISES, INC. LXXIII. NH MOTEL ENTERPRISES, INC. LXXIV. PALM BEACH MOTEL ENTERPRISES, INC. LXXV. PENMOCO, INC. LXXVI. RALEIGH MOTEL ENTERPRISES, INC. LXXVII. RALEIGH DOWNTOWN ENTERPRISES, INC. LXXVIII. ROYCE HOLDING CORP. LXXIX. ROYCE HOTEL CORPORATION OF DELAWARE LXXX. ROYCE MANAGEMENT CORP. OF GEORGIA LXXXI. SAGINAW HOSPITALITY, LIMITED PARTNERSHIP LXXXII. SECOND FAYETTEVILLE MOTEL ENTERPRISES, INC. LXXXIII. SECOND PALM BEACH MOTEL ENTERPRISES, INC. LXXXIV. SERVICO ACQUISITION CORP. LXXXV. SERVICO AUSTIN, INC. LXXXVI. SERVICO CEDAR RAPIDS, INC. LXXXVII. SERVICO CENTRE ASSOCIATES, LTD. LXXXVIII. SERVICO COLESVILLE, INC. LXXXIX. SERVICO COLUMBIA II, INC. XC. SERVICO COLUMBIA, INC. XCI. SERVICO COLUMBUS, INC. XCII. SERVICO CONCORD, INC. XCIII. SERVICO COUNCIL BLUFFS, INC. XCIV. SERVICO EAST WASHINGTON, INC. XCV. SERVICO FLAGSTAFF, INC. XCVI. SERVICO FORT WAYNE II, INC. XCVII. SERVICO FORT WAYNE, INC. XCVIII. SERVICO FRISCO, INC. XCIX. SERVICO FT. PIERCE, INC. C. SERVICO GRAND ISLAND, INC. CI. SERVICO HILTON HEAD, INC. CII. SERVICO HOSPITALITY, INC. CIII. SERVICO HOTELS I, INC. CIV. SERVICO HOTELS II, INC. CV. SERVICO HOTELS III, INC. CVI. SERVICO HOTELS IV, INC. CVII. SERVICO HOUSTON, INC. CVIII. SERVICO INVESTMENT COMPANY OF DELAWARE, INC. CIX. SERVICO JAMESTOWN, INC. CX. SERVICO LANSING, INC. CXI. SERVICO LAWRENCE II, INC. CXII. SERVICO LAWRENCE, INC. CXIII. SERVICO MANAGEMENT CORPORATION CXIV. SERVICO MANAGEMENT CORP. CXV. SERVICO MANHATTAN, INC. CXVI. SERVICO MANHATTAN II, INC. CXVII. SERVICO MARKET CENTER, INC. CXVIII. SERVICO MARYLAND, INC. CXIX. SERVICO MELBOURNE, INC. CXX. SERVICO METAIRIE, INC. CXXI. SERVICO NEW YORK, INC. CXXII. SERVICO NIAGARA FALLS, INC. CXXIII. SERVICO NORTHWOODS, INC. CXXIV. SERVICO OMAHA CENTRAL, INC. CXXV. SERVICO OMAHA, INC. CXXVI. SERVICO OPERATIONS CORPORATION CXXVII. SERVICO PENSACOLA 7200, INC. CXXVIII. SERVICO PENSACOLA 7330, INC. CXXIX. SERVICO PENSACOLA, INC. CXXX. SERVICO ROLLING MEADOWS, INC. CXXXI. SERVICO ROSEVILLE, INC. CXXXII. SERVICO SAGINAW, INC. CXXXIII. SERVICO SILVER SPRING, INC. CXXXIV. SERVICO SUMMERVILLE, INC. CXXXV. SERVICO TUCSON, INC. CXXXVI. SERVICO WEST DES MOINES, INC. CXXXVII. SERVICO WEST PALM BEACH, INC. CXXXVIII. SERVICO WICHITA, INC. CXXXIX. SERVICO WINDSOR, INC. CXL. SERVICO WINTER HAVEN, INC. CXLI. SERVICO WORCESTER, INC. CXLII. SERVICO, INC. CXLIII. SHARON MOTEL ENTERPRISES, INC. CXLIV. SHC OF DELAWARE, INC. CXLV. SHEFFIELD MOTEL ENTERPRISES, INC. CXLVI. SIOUX CITY HOSPITALITY, L.P. CXLVII. SIXTEEN HOTELS, INC. CXLVIII. STEVENS CREEK HOSPITALITY, INC. CXLIX. W.V.B.M., INC. CL. WASHINGTON MOTEL ENTERPRISES, INC. CLI. WILPEN, INC. CLII. WORCESTER HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP SCHEDULE D-2 TO THE PERFECTION CERTIFICATE ORGANIZATION OF GRANTORS - 1075 HOSPITALITY, L.P. State of Partnership Georgia - 12801 NWF BEVERAGE, INC. State of Incorporation Texas - ALBANY HOTEL, INC. State of Incorporation Florida - AMI OPERATING PARTNERS, L.P. State of Incorporation Delaware - AMIOP ACQUISITION CORP. State of Incorporation Delaware - APICO HILLS, INC. State of Incorporation Pennsylvania - APICO INNS OF GREEN TREE, INC. State of Incorporation Pennsylvania - APICO INNS OF PENNSYLVANIA, INC. State of Incorporation Pennsylvania - APICO INNS OF PITTSBURGH, INC. State of Incorporation Pennsylvania - APICO MANAGEMENT CORP. State of Incorporation Pennsylvania - ATLANTA-BOSTON SPE, INC. State of Incorporation Georgia - ATLANTA-BOSTON HOLDINGS, LLC State of Organization Georgia - ATLANTA-BOSTON LODGING, LLC State of Organization Georgia - ATLANTA-HILLSBORO LODGING, L.L.C. State of Incorporation Georgia - BRECKSVILLE HOSPITALITY, INC. State of Incorporation Ohio - BRECKSVILLE HOSPITALITY, L.P. State of Partnership Ohio - BRUNSWICK MOTEL ENTERPRISES, INC. State of Incorporation Georgia - COLUMBUS HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP State of Partnership Florida - DEDHAM BEVERAGE MANAGEMENT, INC. State of Incorporation Massachusetts - DEDHAM LODGING ASSOCIATES I, Limited Partnership State of Partnership Georgia - DOTHAN HOSPITALITY 3053, INC. State of Incorporation Alabama - DOTHAN HOSPITALITY 3071, INC. State of Incorporation Alabama - EAST WASHINGTON HOSPITALITY LIMITED PARTNERSHIP State of Partnership Florida - EUROPEAN VENTURES, INC. State of Incorporation Florida - FAYETTEVILLE MOTEL ENTERPRISES, INC. State of Incorporation North Carolina - FORT WAYNE HOSPITALITY ASSOCIATES II, Limited Partnership State of Partnership Florida - FOURTH STREET HOSPITALITY, INC. State of Incorporation Iowa - GADSDEN HOSPITALITY, INC. State of Incorporation Alabama - GREAT SOUTHERN MINING CO., INC. State of Incorporation Alabama - GROUPERS & COMPANY SEAFOOD RESTAURANT State of Incorporation South Carolina - HARRISBURG MOTEL ENTERPRISES, INC. State of Incorporation Pennsylvania - HEARTLANDS GARDEN GRILLE, INC. State of Incorporation Kansas - HILTON HEAD MOTEL ENTERPRISES, INC. State of Incorporation South Carolina - IMPAC DEVELOPMENT AND CONSTRUCTION, L.L.C. State of Organization Georgia - IMPAC HOLDINGS III, L.L.C. State of Incorporation Georgia - IMPAC HOTEL GROUP, L.L.C. State of Incorporation Georgia - IMPAC HOTEL MANAGEMENT L.L.C. State of Organization Georgia - IMPAC HOTELS I, L.L.C. State of Organization Georgia - IMPAC SPE #1, INC. State of Incorporation Georgia - IMPAC SPE #2, INC. State of Incorporation Georgia - IMPAC SPE #3, INC. State of Incorporation Georgia - IMPAC SPE #4, INC. State of Incorporation Georgia - IMPAC SPE #5, INC. State of Incorporation Georgia - IMPAC SPE #6, INC. State of Incorporation Georgia - ISLAND MOTEL ENTERPRISES, INC. State of Incorporation Georgia - KDS CORPORATION State of Incorporation Nevada - KINSER MOTEL ENTERPRISES, INC. State of Incorporation Indiana - LAFAYETTE BEVERAGE MANAGEMENT, INC. Awaiting information on this entity. - LAWRENCE HOSPITALITY ASSOCIATES, L.P. State of Partnership Kansas - LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP State of Incorporation Georgia - LODGIAN ACQUISITION, LLC. State of Incorporation Georgia - LODGIAN AMI, INC. State of Incorporation Maryland - LODGIAN ANAHEIM, INC. State of Incorporation California - LODGIAN AUSTIN BEVERAGE, CORP. State of Incorporation Texas - LODGIAN DALLAS BEVERAGE, CORP. State of Incorporation Texas - LODGIAN FINANCING CORP. State of Incorporation Delaware - LODGIAN FLORIDA, INC. State of Incorporation Florida - LODGIAN HOTELS, INC. State of Incorporation Delaware - LODGIAN MANAGEMENT CORP. State of Incorporation Delaware - LODGIAN MARKET CENTER BEVERAGE, CORP. State of Incorporation Texas - LODGIAN MOUNT LAUREL, INC. State of Incorporation New Jersey - LODGIAN ONTARIO, INC. State of Incorporation California - LODGIAN RICHMOND SPE, INC. State of Incorporation Georgia - LODGIAN RICHMOND, L.L.C. State of Incorporation Georgia - LODGIAN YORK MARKET STREET, INC. State of Incorporation Pennsylvania - MANHATTAN HOSPITALITY ASSOCIATES, L.P. State of Incorporation Kansas - MCKNIGHT MOTEL, INC. State of Incorporation Pennsylvania - MELBOURNE HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP State of Partnership Florida - MINNEAPOLIS MOTEL ENTERPRISES, INC. State of Incorporation Minnesota - MOON AIRPORT MOTEL, INC. State of Incorporation Pennsylvania - MULLIGAN'S, INC. State of Incorporation Alabama - NEW ORLEANS AIRPORT MOTEL ENTERPRISES, INC. State of Incorporation Louisiana - NH MOTEL ENTERPRISES, INC. State of Incorporation Michigan - PALM BEACH MOTEL ENTERPRISES, INC. State of Incorporation Florida - PENMOCO, INC. State of Incorporation Michigan - RALEIGH MOTEL ENTERPRISES, INC. State of Incorporation North Carolina - RALEIGH DOWNTOWN ENTERPRISES, INC. State of Incorporation North Carolina - ROYCE HOLDING CORP. State of Incorporation Delaware - ROYCE HOTEL CORPORATION OF DELAWARE State of Incorporation Delaware - ROYCE MANAGEMENT CORP. OF GEORGIA State of Incorporation Georgia - SAGINAW HOSPITALITY, LIMITED PARTNERSHIP State of Partnership Michigan - SECOND FAYETTEVILLE MOTEL ENTERPRISES, INC. State of Incorporation North Carolina - SECOND PALM BEACH MOTEL ENTERPRISES, INC. State of Incorporation Florida - SERVICO ACQUISITION CORP. State of Incorporation Florida - SERVICO AUSTIN, INC. State of Incorporation Texas - SERVICO CEDAR RAPIDS, INC. State of Incorporation Iowa - SERVICO CENTRE ASSOCIATES, LTD. State of Partnership Florida - SERVICO COLESVILLE, INC. State of Incorporation Maryland - SERVICO COLUMBIA II, INC. State of Incorporation Maryland - SERVICO COLUMBIA, INC. State of Incorporation Maryland - SERVICO COLUMBUS, INC. State of Incorporation Florida - SERVICO CONCORD, INC. State of Incorporation California - SERVICO COUNCIL BLUFFS, INC. State of Incorporation Iowa - SERVICO EAST WASHINGTON, INC. State of Incorporation Florida - SERVICO FLAGSTAFF, INC. State of Incorporation Arizona - SERVICO FORT WAYNE II, INC. State of Incorporation Florida - SERVICO FORT WAYNE, INC. State of Incorporation Florida - SERVICO FRISCO, INC. State of Incorporation Colorado - SERVICO FT. PIERCE, INC. State of Incorporation Delaware - SERVICO GRAND ISLAND, INC. State of Incorporation New York - SERVICO HILTON HEAD, INC. State of Incorporation South Carolina - SERVICO HOSPITALITY, INC. State of Incorporation Florida - SERVICO HOTELS I, INC. State of Incorporation Florida - SERVICO HOTELS II, INC. State of Incorporation Florida - SERVICO HOTELS III, INC. State of Incorporation Florida - SERVICO HOTELS IV, INC. State of Incorporation Florida - SERVICO HOUSTON, INC. State of Incorporation Texas - SERVICO INVESTMENT COMPANY OF DELAWARE, INC State of Incorporation Delaware - SERVICO JAMESTOWN, INC. State of Incorporation New York - SERVICO LANSING, INC. State of Incorporation Michigan - SERVICO LAWRENCE II, INC. State of Incorporation Kansas - SERVICO LAWRENCE, INC. State of Incorporation Kansas - SERVICO MANAGEMENT CORPORATION State of Incorporation Texas - SERVICO MANAGEMENT CORP. State of Incorporation Florida - SERVICO MANHATTAN, INC. State of Incorporation Kansas - SERVICO MANHATTAN II, INC. State of Incorporation Kansas - SERVICO MARKET CENTER, INC. State of Incorporation Texas - SERVICO MARYLAND, INC. State of Incorporation Maryland - SERVICO MELBOURNE, INC. State of Incorporation Florida - SERVICO METAIRIE, INC. State of Incorporation Louisiana - SERVICO NEW YORK, INC. State of Incorporation New York - SERVICO NIAGARA FALLS, INC. State of Incorporation New York - SERVICO NORTHWOODS, INC. State of Incorporation Florida - SERVICO OMAHA CENTRAL, INC. State of Incorporation Nebraska - SERVICO OMAHA, INC. State of Incorporation Nebraska - SERVICO OPERATIONS CORPORATION State of Incorporation Florida - SERVICO PENSACOLA 7200, INC. State of Incorporation Delaware - SERVICO PENSACOLA 7330, INC. State of Incorporation Delaware - SERVICO PENSACOLA, INC. State of Incorporation Delaware - SERVICO ROLLING MEADOWS, INC. State of Incorporation Illinois - SERVICO ROSEVILLE, INC. State of Incorporation Minnesota - SERVICO SAGINAW, INC. State of Incorporation Michigan - SERVICO SILVER SPRING, INC. State of Incorporation Florida - SERVICO SUMMERVILLE, INC. State of Incorporation South Carolina - SERVICO TUCSON, INC. State of Incorporation Arizona - SERVICO WEST DES MOINES, INC. State of Incorporation Iowa - SERVICO WEST PALM BEACH, INC. State of Incorporation Florida - SERVICO WICHITA, INC. State of Incorporation Kansas - SERVICO WINDSOR, INC. State of Incorporation Florida - SERVICO WINTER HAVEN, INC. State of Incorporation Florida - SERVICO WORCESTER, INC. State of Incorporation Florida - SERVICO, INC. State of Incorporation Delaware - SHARON MOTEL ENTERPRISES, INC. State of Incorporation Pennsylvania - SHC OF DELAWARE, INC. State of Incorporation Delaware - SHEFFIELD MOTEL ENTERPRISES, INC. State of Incorporation Alabama - SIOUX CITY HOSPITALITY, L.P. State of Partnership Iowa - SIXTEEN HOTELS, INC. State of Incorporation Maryland - STEVENS CREEK HOSPITALITY, INC. State of Incorporation Georgia - W.V.B.M., INC. State of Incorporation West Virginia - WASHINGTON MOTEL ENTERPRISES, INC. State of Partnership Pennsylvania - WILPEN, INC. State of Incorporation Pennsylvania - WORCESTER HOSPITALITY ASSOCIATES, LIMITED PARTNERSHIP State of Partnership Florida SCHEDULE D-3 TO THE PERFECTION CERTIFICATE FILE SEARCH REPORT AND PRIOR FILINGS SCHEDULE D-4(A) TO THE PERFECTION CERTIFICATE DESCRIPTION OF COLLATERAL All assets of the debtor, whether now owned or hereafter acquired, wherever located, and all proceeds thereof. SCHEDULE D-4(B) TO THE PERFECTION CERTIFICATE FINANCING STATEMENTS SCHEDULE D-5 TO THE PERFECTION CERTIFICATE FILING INFORMATION EXHIBIT E [FORM OF LOCKBOX LETTER] ____________ ___, 200_ [Name and Address of Lockbox bank] Re: [Name of Grantor] To Whom It May Concern: We hereby notify you that effective ___________________, 200_, we have transferred exclusive ownership and control of our lock-box account[s] no[s]. _____________________ (the "LOCKBOX ACCOUNT[S]") maintained with you [under the terms of the [Lockbox Agreement] attached hereto as Exhibit A] to Morgan Stanley Senior Funding, Inc., as Collateral Agent (the "COLLATERAL AGENT"). We hereby irrevocably instruct you to make all payments to be made by you out of or in connection with the Lockbox Account[s] (i) to the Collateral Agent for credit to account no. _______________ maintained by it at its office at ____________________ or (ii) as you may otherwise be instructed by the Collateral Agent. We also hereby notify you that the Collateral Agent shall be irrevocably entitled to exercise any and all rights in respect of or in connection with the Lockbox Account[s], including, without limitation, the right to specify when payments are to be made out of or in connection with the Lockbox Account[s]. All funds deposited into the Lockbox Account[s] will not be subject to deductions, set-off, banker's lien or any other right in favor of any other person than the Collateral Agent, except that you may set-off against the Lockbox Account[s] the face amount of any check deposited in and credited to such Lockbox Account[s] which is subsequently returned for any reason. Your compensation for providing the services contemplated herein shall be as mutually agreed between you and us from time to time and we will continue to pay such compensation. Please confirm your acknowledgment of and agreement to the foregoing instructions by signing in the space provided below. Very truly yours, [NAME OF GRANTOR] By: ------------------------------------- Name: Title: Acknowledged and agreed to as of this ____ day of ___________________, 200_. [LOCKBOX BANK] By: ---------------------------------- Name: Title: SCHEDULE 1 TO SECURITY AND PLEDGE AGREEMENT DESCRIPTION OF PLEDGED SECURITIES
Grantor's Percentage of Grantor Issuer Ownership Interest Stevens Creek Hospitality 1075 Hospitality, L.P. 51% Lodgian Acquisition, LLC. 1075 Hospitality, L.P. 49% 12801 NWF Beverage Servico Houston, Inc. Management, Inc. 100% Lodgian Financing Corp. Albany Hotel, Inc. 100% AMIOP Acquisition Corp. AMI Operating Partners, L.P. Lodgian Financing Corp AMI Operating Partners, L.P. Lodgian Financing Corp. AMIOP Acquisition Corporation 100% Lodgian Financing Corp. APICO Hills, Inc. 100% Lodgian Financing Corp. APICO Inns of Green Tree, Inc. 100% APICO Inns of Sharon Motel Enterprises Pennsylvania, Inc. 100% Servico Operations Corp. APICO of Pittsburgh, Inc. 100% Servico Operations Corp. APICO Management Corp. 100% Impac Hotel Group, L.L.C. Atlanta-Boston SPE, Inc. 100% Impac Hotel Group, L.L.C. Atlanta-Boston Holdings L.L.C. Atlanta-Boston SPE, Inc. Atlanta-Boston Lodging L.L.C. 1% Atlanta-Boston Holdings, LLC Atlanta-Boston Lodging L.L.C. 99% Atlanta-Hillsboro Lodgian Financing Corp. Lodging, L.L.C. 100% Servico Operations Corporation Brecksville Hospitality, Inc.100% Brecksville Hospitality, Inc. Brecksville Hospitality, L.P. 51% Lodgian Acquisition L.L.C. Brecksville Hospitality, L.P. 49%
Grantor's Percentage of Grantor Issuer Ownership Interest Brunswick Motel Lodgian Financing Corp. Enterprises, Inc. 100% Columbus Hospitality Associates, Servico Columbus, Inc. Limited Partnership 30% Dedham Beverage Impac Hotel Group, LLC Management, Inc. 100% Dedham Lodging Impac Hotel Group, L.L.C. Associates I, L.P. Dedham Lodging Impac SPE #3, Inc. Associates I, L.P. Lodgian Financing Corp. Dothan Hospitality 3053, Inc. 100% Lodgian Financing Corp. Dothan Hospitality 3071, Inc. 100% East Washington Hospitality Servico East Washington, Inc. Limited Partnership 51% East Washington Hospitality Servico Tucson, Inc. Limited Partnership 49% Servico Operations, Corp. European Ventures, Inc. 100% Fayetteville Motel Lodgian Financing Corp. Enterprises, Inc. 100% Fort Wayne Hospitality Servico Fort Wayne II, Inc. Associates II, L.P. 51% Fort Wayne Hospitality Lodgian Acquisition LLC Associates II, L.P. 49% Servico Operations Corp. Fourth Street Hospitality, Inc. 100% Lodgian Financing Corp. Gadsden Hospitality, Inc. 100% Servico Operations Corp. Great Southern Mining Co., Inc. 100% Groupers & Company Seafood Servico Operations Corp. Restaurant 100% Harrisburg Motel Servico Operations Corp. Enterprises, Inc. 100% Servico Operations Corp. Heartlands Garden Grille, Inc. 100%
Grantor's Percentage of Grantor Issuer Ownership Interest Hilton Head Motel Servico Operations Corp. Enterprises, Inc. 100% Impac Development and Impac SPE #5, Inc. Construction L.L.C. Impac Development and Impac Hotel Group L.L.C. Construction L.L.C. Impac Hotel Group, L.L.C. Impac Holdings III, L.L.C. 100% Lodgian, Inc. Impac Hotel Group, L.L.C. 100% Impac SPE #4, Inc. Impac Management L.L.C. 1% Impac Hotel Group L.L.C. Impac Management L.L.C. 99% Impac SPE #1, Inc. Impac Hotels I, L.L.C. Lodgian Financing Corp. Impac Hotels I, L.L.C. Impac SPE #2, Inc. Impac Hotels II, L.L.C. 1% Impac Hotel Group, L.L.C.. Impac Hotels II, L.L.C. 99% Impac SPE #6, Inc. Impac Hotels III, L.L.C. 1% Impac Holding III, LLC Impac Hotels III, L.L.C. 99% Lodgian Financing Corp. Impac SPE #1, Inc. 100% Impac Hotel Group, L.L.C. Impac SPE #2, Inc. 100% Impac Hotel Group, L.L.C. Impac SPE #3, Inc. 100% Impac Hotel Group, L.L.C. Impac SPE #4, Inc. 100% Impac Hotel Group, L.L.C. Impac SPE #5, Inc. 100% Impac Hotel Group, L.L.C. Impac SPE #6, Inc. 100% Servico Operations Corp. Island Motel Enterprises 100%* Servico Operations Corp KDS Corporation 100% Servico Operations Corp Kinser Motel Enterprises 100% Lawrence Hospitality Servico Lawrence, Inc. Associates, L.P. 51%
Grantor's Percentage of Grantor Issuer Ownership Interest Lawrence Hospitality Servico Lawrence II, Inc. Associates, L.P. 49% Little Rock Lodging Associates, Lodgian Richmond SPE, Inc. Limited Partnership 1% Little Rock Lodging Associates, Lodgian Financing Corp. Limited Partnership 99% Lodgian Financing Corp. Lodgian Acquisition, LLC 100% Servico Operations Corp. Lodgian AMI, Inc. 100%* Lodgian Financing Corp. Lodgian Anaheim, Inc.. 100% Servico Austin, Inc. Lodgian Austin Beverage Corp. 100% Lodgian, Inc. Lodgian Capital Trust I 100% Impac Hotels I, LLC Lodgian Dallas Beverage Corp. 100% Lodgian, Inc. Lodgian Financing Corp. 100% Servico Operations Corp. Lodgian Florida, Inc. 100% Lodgian, Inc. Lodgian Hotels, Inc. 100% Servico Operations Corp. Lodgian Management Corp. 100% Lodgian Market Center Servico Market Center, Inc. Beverage Corp. 100% Lodgian Financing Corp. Lodgian Mount Laurel 100% Lodgian Financing Corp. Lodgian Ontario, Inc. 100% Lodgian Financing Corp. Lodgian Richmond SPE, Inc. 100% Lodgian Financing Corp. Lodgian Richmond, LLC 99% Lodgian Richmond SPE, Inc. Lodgian Richmond, LLC 1% Servico Operations Corp. Lodgian York Market Street, Inc. 100% Impac Hotel Group, L.L.C. Macon Hotel Associates, L.L.C. 60%** Manhattan Hospitality Servico Manhattan, Inc. Associates, L.P. 51% Manhattan Hospitality Servico Manhattan II, Inc. Associates, L.P. 49%
Grantor's Percentage of Grantor Issuer Ownership Interest Sharon Motel Enterprises, Inc. McKnight Motel, Inc. 100% Melbourne Hospitality Associates, Servico Melbourne, Inc. Limited Partnership 50% Minneapolis Motel Lodgian Financing Corp. Enterprises, Inc. 100% Servico Operations Corp. Moon Airport Motel, Inc. 100% Servico Operations Corp. Mulligan's, Inc. 100% New Orleans Airport Motel New Orleans Airport Motel Enterprises, Inc. Associates, Ltd. 100% New Orleans Airport Motel Servico Operations Corp. Enterprises, Inc. 100% Lodgian Financing Corp. NH Motel Enterprises, Inc. 100% Palm Beach Motel Lodgian Financing Corp. Enterprises, Inc. 100% Servico Operations Corp. Penmoco, Inc. 100%* Servico Operations Corp. Raleigh Motel Enterprises, Inc. 100% Raleigh-Downtown Servico Operations Corp. Enterprises, Inc. 100% Servico Operations Corp. Royce Holdings Corp. 100% Royce Hotel Corporation Servico, Inc. of Delaware 100% Royce Management Corporation Servico Operations Corp. of Georgia 100% Servico Saginaw, Inc. Saginaw Hospitality, LP 51% Lodgian Acquisition, LLC Saginaw Hospitality, LP 49% Second Fayetteville Motel Sharon Motel Enterprises, Inc. Enterprises, Inc. 100% Second Palm Beach Motel Sharon Motel Enterprises, Inc. Enterprises, Inc. 100% Servico, Inc. Servico Acquisition Corp. 100%
Grantor's Percentage of Grantor Issuer Ownership Interest Lodgian Financing Corp. Servico Austin, Inc. 100% Lodgian Financing Corp. Servico Cedar Rapids, Inc. 100% Palm Beach Motel Enterprises, Inc. Servico Centre Associates, Ltd. 100% Lodgian Financing Corp. Servico Colesville, Inc. 100% Servico Operations Corp. Servico Columbia II, Inc. 100% Lodgian Financing Corp. Servico Columbia, Inc 100% Servico Operations Corp. Servico Columbus, Inc. 100% Servico Operations Corp. Servico Concord, Inc. 100%* Servico Operations Corp. Servico Council Bluffs, Inc. 100% Servico Operations Corp. Servico East Washington, Inc. 100% Lodgian Financing Corp. Servico Flagstaff, Inc. 100% Servico Operations Corp. Servico Fort Wayne II, Inc. 100% Servico Operations Corp. Servico Fort Wayne, Inc. 100% Servico Operations Corp. Servico Frisco, Inc. 100% Lodgian Financing Corp. Servico Ft. Pierce, Inc. 100% Lodgian Financing Corp. Servico Grand Island, Inc. 100% Lodgian Financing Corp. Servico Hilton Head, Inc. 100% Servico Operations Corp. Servico Hospitality, Inc. 100% KDS Corporation Servico Hotels I, Inc. 100% KDS Corporation Servico Hotels II, Inc. 100% KDS Corporation Servico Hotels III, Inc. 100% KDS Corporation Servico Hotels IV, Inc. 100% Lodgian Financing Corp. Servico Houston, Inc. 100% Sheffield Motel Enterprises, Servico Investment Company of Inc. Delaware, Inc. 100% Lodgian Financing Corp. Servico Jamestown, Inc. 100%
Grantor's Percentage of Grantor Issuer Ownership Interest Servico Operations Corp. Servico Lansing, Inc. 100% Servico Operations Corp. Servico Lawrence II, Inc. 100% Servico Operations Corp. Servico Lawrence , Inc. 100% Servico Management Corp. Servico Operations Corp. (Texas) 100% Servico Operations Corp. Servico Management Corp. 100% Servico Operations Corp. Servico Manhattan, Inc. 100% Servico Operations Corp. Servico Manhattan II, Inc. 100% Lodgian Financing Corp. Servico Market Center, Inc. 100% Lodgian Financing Corp. Servico Maryland, Inc. 100% Servico Operations Corp. Servico Melbourne, Inc. 100% Lodgian Financing Corp. Servico Metairie, Inc. 100% Lodgian Financing Corp. Servico New York, Inc. 100% Lodgian Financing Corp. Servico Niagara Falls, Inc. 100% Lodgian Financing Corp. Servico Northwoods, Inc. 100% Servico Operations Corp. Servico Omaha Central, Inc. 100% Servico Operations Corp. Servico Omaha, Inc. 100% Servico, Inc. Servico Operations Corp. 100% Lodgian Financing Corp. Servico Pensacola 7200, Inc, 100% Lodgian Financing Corp. Servico Pensacola 7330, Inc, 100% Lodgian Financing Corp. Servico Pensacola, Inc, 100% Lodgian Financing Corp. Servico Rolling Meadows, Inc. 100% Lodgian Financing Corp. Servico Roseville, Inc. 100% Servico Operations Corp. Servico Saginaw, Inc. 100% Lodgian Financing Corp. Servico Silver Spring, Inc. 100% Servico Operations Corp. Servico Summerville, Inc. 100% Servico Operations Corp. Servico Tucson, Inc. 100%
Grantor's Percentage of Grantor Issuer Ownership Interest Servico Operations Corp. Servico West Des Moines, Inc. 100% Lodgian Financing Corp. Servico West Palm Beach, Inc. 100% Servico Operations Corp. Servico Wichita, Inc. 100% Lodgian Financing Corp. Servico Windsor, Inc. 100% Lodgian Financing Corp. Servico Winter Haven, Inc. 100% Servico Operations Corp. Servico Worcester, Inc. 100% Lodgian, Inc. Servico, Inc. 100% Servico Operations Corp. Sharon Motel Enterprises, Inc. 100% Servico, Inc. or Servico Operations Corp. SHC of Delaware, Inc. 100% Lodgian Financing Corp. Sheffield Motel Enterprises, Inc. 100% Forth Street Hospitality, Inc. Sioux City Hospitality, LP 100% Lodgian Acquisition, LLC Sioux City Hospitality, LP 100% AMI Operating Partners Sixteen Hotels, Inc. 70% Servico Operations Corp. Stevens Creek Hospitality, Inc. 100% Impac Hotel Group, L.L.C. W.V.B.M., Inc. 100% Washington Motel Servico Operations Corp. Enterprises, Inc. 100% Sharon Motel Enterprises, Inc. Wilpen, Inc. 100% Worcester Hospitality Servico Worcester, Inc. Associates, LP 100% Worcester Hospitality Lodgian Acquisition, LLC Associates, LP 100%
* The stock of these entities is pledged to Banc One Funding Corporation. ** The membership interest in this entity is pledged to Fidelity Investments. SCHEDULE 2 TO SECURITY AND PLEDGE AGREEMENT PLEDGED NOTES NONE EXHIBIT 10.37 CADWALADER, WICKERSHAM & TAFT Attorneys for the Debtors and Debtors in Possession 100 Maiden Lane New York, New York 10038 (212) 504-6000 Gregory M. Petrick (GP-2175) Adam C. Rogoff (AR-0820) Barry N. Seidel (BS-1945) UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 LODGIAN, INC., et al., Case No. 01-16345 (BRL) Debtors. (Jointly Administered) FINAL ORDER AUTHORIZING DEBTORS TO USE CASH COLLATERAL IN WHICH CERTAIN MORTGAGE LENDERS CLAIM AN INTEREST Lodgian, Inc. ("Lodgian") and the other above-captioned debtors (collectively, the "Guarantors" and, together with Lodgian, the "Debtors"), as debtors in possession, having filed with the Court their "Motion Pursuant to Sections 105, 361, 363, 364, 503(b) and 507 of the Bankruptcy Code and Rule 4001 of the Federal Rules of Bankruptcy Procedure for Entry of Orders (I) Authorizing the Debtors-in-Possession to (A) Obtain Postpetition Financing, (B) Grant Liens and Priority Administrative Expense Claim Status, (C) Modify the Automatic Stay, and (D) Enter into Financing Agreement; (II) Approving the Use of Cash Collateral and Granting Adequate Protection; and (III) Scheduling Final Hearing on Postpetition Financing and Use of Cash Collateral and Approving Form and Manner of Notice of Such Final Hearing" (the Motion"); and the Debtors having requested, in accordance with Rule 4001(c) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), that the Court schedule a hearing on an expedited basis (the "Interim Hearing") to consider granting the interim relief requested by the Debtors in the Motion, so as to avoid immediate and irreparable harm to the Debtors, their creditors and estates (the "Interim Relief"); and, it appearing that the Debtors furnished notice of the Interim Hearing and the Interim Relief telephonically or by fax to the United States Trustee for the Southern District of New York ( the "US Trustee"), the Debtors' twenty (20) largest unsecured creditors as set forth on the consolidated list of unsecured creditors accompanying the Debtors' chapter 11 petitions (the "20 Largest Creditors"), and each of those parties which the Debtors believe asserts, or may assert, an interest in the Debtors' cash, as set forth in Exhibit D to the Motion (collectively, the "Prepetition Mortgage Lenders"); and the Interim Hearing to consider the Interim Relief requested in the Motion having been held by this Court on December 21, 2001; and the Court having considered the Motion and the arguments of counsel, and having granted Interim Relief to the extent set forth in the Court's "Interim Order Authorizing Debtors To Use Cash Collateral In Which Certain Mortgage Lenders Claim An Interest" dated December 21, 2001 (the "Interim Cash Collateral Order"); and pursuant to the Interim Cash Collateral Order, the Court having scheduled a final hearing to consider the relief requested in the Motion (the "Final Hearing") for January 23, 2002; and it appearing that the Debtors have provided notice of the Final Hearing and the Motion as required by the Interim Cash Collateral Order and that such notice is due and sufficient; and the Final Hearing having been adjourned from time to time and having come on for hearing before the Court on February 14, 2002; and the Court having reviewed and considered all pleadings filed in opposition to the Motion (collectively, the - 2 - "Objections") and having heard the arguments of counsel; and sufficient cause appearing therefor, AND IT APPEARING that: A. The Debtors filed petitions for reorganization under title 11, United States Code (the "Bankruptcy Code") on December 20, 2001 and December 21, 2001; B. The filing of such petitions commenced cases under chapter 11 of the Bankruptcy Code (collectively, the "Cases"); C. The Debtors, as debtors in possession, have been continued in possession and management of their business and property pursuant to Sections 1107 and 1108 of the Bankruptcy Code; D. No trustee has been appointed in the Debtors' Cases; E. An official committee of unsecured creditors has been appointed by the Office of the United States Trustee to serve in the Debtors' Cases (the "Committee") and such committee has engaged counsel and a financial advisor and is active in the Debtors' Cases; F. The Court has jurisdiction over the Motion pursuant to 28 U.S.C. Section 1334 and the Motion constitutes a core proceeding pursuant to 28 U.S.C. Sections 157(b)(2)(A), (D), (G) and (M); G. The Debtors continue to have an immediate need to use cash collateral to operate their business; H. Absent the ability to use cash collateral, the Debtors will not be able to operate their business and the Debtors, their creditors and estates will suffer irreparable harm as a result of the loss of the Debtors' going concern value. Accordingly, - 3 - the granting of the Motion is in the best interests of the Debtors, their creditors and estates; I. The notice of the Final Hearing provided by the Debtors was appropriate and sufficient; J. Lodgian, as borrower, and the Guarantors, as guarantors, are also seeking approval from this Court to enter into a Revolving Credit and Guaranty Agreement (the "DIP Credit Agreement") with certain lenders (the "DIP Lenders") and Morgan Stanley Senior Funding, Inc. ("MSSF"), as administrative and collateral agent for the DIP Lenders, pursuant to which the Debtors wish to borrow, pursuant to Sections 364(b), (c) and (d) of the Bankruptcy Code, on a revolving credit basis, up to $25,000,000 to supplement the Debtors' working capital requirements and enable the Debtors to meet their postpetition obligations; and K. The Debtors have engaged in discussions with many of the Prepetition Mortgage Lenders and have reached agreements which, subject to the entry of appropriate Stipulated Orders, will result in the withdrawal of the Objections. IT IS THEREFORE ORDERED that: 1. Any term not otherwise defined herein shall have the meaning ascribed to such term in the Motion. 2. (a) The provisions of this Order shall not apply to the MSSF Prepetition Mortgage Lenders or to MSSF, as agent under the prepetition Credit Agreement dated July 23, 1999 (the "Prepetition Agent"), or to the use by the Debtors of cash or other property as to which the Prepetition Agent or the MSSF Prepetition Mortgage Lenders claim an interest (the "MSSF Prepetition Collateral"). The Debtors' right to use MSSF Prepetition Collateral, including cash collateral, shall in all respects be - 4 - governed by this Court's Interim Order (I) Authorizing Debtors (A) to Obtain Post-Petition Financing Pursuant to 11 U.S.C. Sections 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3) and 364(d)(1) and (B) to Utilize Cash Collateral Pursuant to 11 U.S.C. Section 363, (II) Granting Adequate Protection to Pre-Petition Secured Parties Pursuant to 11 U.S.C. Sections 361, 362 and 363 and (III) Scheduling Final Hearing Pursuant to Bankruptcy Rules 4001(B) and 4001(C), as such order may be modified or superseded by a final order. (b) The provisions of this Order shall not apply to The Chase Manhattan Bank (f/k/a Chemical Bank), as Trustee for the Registered Holders of DLJ Mortgage Acceptance Corporation, Commercial Mortgage Pass-Through Certificates, Series 1995-CF2 and LaSalle Bank National Bank, as Trustee for the benefit of Certificateholders of American Southwest Financial Securities Corporation Commercial Pass-Through Certificates, Series 1995-C1 (collectively, the "Trusts") or to Lennar Partners, Inc. ("Lennar"), as special servicer to the Trusts, or to the use by the Debtors of cash or other property as to which the Trusts claim an interest (the "Trust Collateral"). The Debtors' right to use Trust Collateral, including cash collateral, shall in all respects be governed by this Court's "Stipulation and Order Among The Debtors And Lennar Partners, Inc., As Special Servicer, Providing For (i) Limited Use of Cash Collateral And Adequate Protection And (ii) Related Relief". (c) The provisions of this Order shall not apply to Registered Holders of the First Union-Lehman Brothers Commercial Mortgage Trust II, Commercial Mortgage Pass-Through Certificates, Series 1997-C2 ("Trust I"), LaSalle Bank, N.A., as Trustee for the Registered Holders of the LB Commercial Conduit Mortgage Trust II, Multiclass Pass-Through Certificates, Series 1996-C2 ("Trust II"), and State Street Bank and Trust Company, as Trustee for the Registered Holders of First Union-Lehman - 5 - Brothers Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 1997-C1 ("Trust III", and together with Trust I and Trust II, the "Trusts") or to Criimi Mae Services, L.P., as special servicer to the Trusts, or to the use by the Debtors of cash or other property as to which the Trusts claim an interest (the "Trust Collateral"). The Debtors' right to use Trust Collateral, including cash collateral, shall in all respects be governed by this Court's "Stipulation and Order Among The Debtors And Criimi Mae Services, L.P., As Special Servicer, Providing For (i) Limited Use of Cash Collateral And Adequate Protection And (ii) Related Relief". (d) To the extent the Motion requests an order "priming" Qualified Prepetition Liens held or asserted by various creditors, the Debtors have agreed to adjourn the Motion as to such request. 3. The Debtors are hereby authorized to use their cash, including cash constituting "cash collateral" (as such term is defined in Section 363(a) of the Bankruptcy Code) in which the Debtors' Prepetition Mortgage Lenders assert a security or other interest, upon the terms and conditions set forth herein. This Order supersedes the Interim Cash Collateral Order and shall govern the Debtors' use of cash collateral from and after the date hereof. 4. Each Debtor is hereby authorized to use cash in which a Prepetition Mortgage Lender claims an interest only to: (a) pay its own Designated Expenses; (b) pay the Designated Expenses of any other Debtor in its collateral pool (i.e., any Debtors whose properties serve as collateral for each other's secured loans); or (c) make Limited Intercompany Advances. - 6 - 5. As used herein, "Designated Expenses" shall mean each Debtor's: (a) property level operating expenses (including, without limitation, payroll, utilities(1), franchise fees, food and beverage, taxes, and supplies); (b) capital expenditures; (c) pro rata share (based upon its last month's revenue as a percentage of the Debtors' total revenue) of actual Lodgian corporate overhead expenses for that month; and (d) pro rata share (based upon its last month's revenue as a percentage of the Debtors' total revenue) of the Debtors' actual reorganization expenses, for that month. "Designated Expenses" shall not include any prepetition expenses or interest on any prepetition indebtedness unless an order of the Bankruptcy Court approving payment of such prepetition expenses or such interest has been entered. 6. As used herein, a "Limited Intercompany Advance" shall mean a cash advance which meets each of the following criteria: (a) The Debtor making the advance is the owner of a Hotel Property(2); (1) To the extent the Debtors establish a segregated bank account for the benefit of one or more utility companies (the "Utility Reserve Account"), such account shall be ratably funded up to $1 million by each Debtor (based on the ratio that the projected revenue from each of the Debtors' hotels bears to the total projected revenue for all of the Debtors' hotels) with its cash collateral. Notwithstanding the provision of any Order of this Court to the contrary, no lien, security interest or other encumbrance on the Utility Reserve Account shall be granted to any person; notwithstanding the foregoing, the Debtors, with this Court's approval, may grant an interest in the Utility Reserve Account to one or more utility companies as "adequate assurance" of the Debtors' future performance of its obligations to such utility companies. Upon the effective date of a plan(s) in the Debtors' Cases (or on such earlier date as the Court shall determine) any funds remaining in the Utility Reserve Account shall be returned to each of the Debtors in proportion to their respective cash contributions into such account. Upon such return, such funds shall become property of the estate of the Debtor receiving such funds and shall be subject to all liens granted on such Debtor's property in priority order. (2) Such Debtor shall be credited with interest on such advance at the same rate Lodgian is charged for borrowing money under the DIP Credit Agreement (the "DIP Rate") (estimated today to be approximately 6% per annum) from the day of advance until repaid. - 7 - (b) the Debtor receiving the advance is a Low Leverage Debtor; (c) the cash so advanced is only used to pay Designated Expenses; (d) the cash so advanced constitutes a chapter 11 administrative priority claim (under Section 364(b) of the Bankruptcy Code), which claim is secured by a lien on all of the Debtor/borrower's property (a "Specific I/C Lien") which is subject and junior to the Carveout if the DIP Lenders have been granted a lien under Section 364(d) of the Bankruptcy Code (a "DIP Priming Lien") with respect to such property, and the following liens: (w) any DIP Priming Lien on the borrowing Debtor's property, (x) any and all liens, mortgages and other security interests existing on or as of the Filing Date which are valid, perfected and unavoidable or to interests in such property arising out of liens arising after the Filing Date as permitted by Section 546(b) of the Bankruptcy Code (collectively, the "Qualified Prepetition Liens"), (y) any Specific AP Lien (as hereinafter defined) granted with respect to such property; and (z) any Primed Lender AP Lien granted with respect to such property, provided that the property subject to any Specific I/C Lien shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance action under the Bankruptcy Code; (e) The Debtor/borrower shall be charged interest at the DIP Rate on cash advanced to such Debtor from the date of advance to the date of repayment; and (f) the cash so advanced may be repaid by the Debtor/borrower at any time without penalty and shall be repaid on the effective date of any plan of reorganization for the Debtor/borrower or upon the sale of the Debtor/borrower's Hotel Property. 7. Nothing herein contained is intended to, nor shall, adjudicate, or create any presumption or inference with respect to: (a) the validity, priority, avoidability or amount of any claim of any Prepetition Mortgage Lender against any of the Debtors (a "Prepetition Mortgage Lender Claim"), or - 8 - (b) the validity, priority, extent or enforceability of any security interest, mortgage or any other lien or encumbrance on any property of the Debtors which secures, or purports to secure, any Prepetition Mortgage Lender Claim. The Debtors reserve all of their rights to (i) challenge the validity, enforceability, priority or extent of the Prepetition Mortgage Lender Claims or the liens, security interests or mortgages securing such claims, and (ii) to assert any claims or causes of action against the Prepetition Mortgage Lenders or their agents. Each of the Prepetition Mortgage Lenders shall be entitled to the adequate protection provided under this Order unless the Court shall determine such lender to be an unsecured creditor. 8. As "adequate protection" for any diminution in a Prepetition Mortgage Lender's interest in a particular Debtor's property (including cash collateral) resulting from such Debtor's use of such property during its Case, (a) such Prepetition Mortgage Lender shall be granted a replacement lien (a "Specific AP Lien") on all of the prepetition and postpetition property (including, without limitation, all postpetition hotel revenue and other charges) of such lender's Debtor/borrower(s), which lien shall be junior only to (x) any DIP Priming Lien on such property, (y) any Qualified Prepetition Liens on such property and (z) the Carveout; (b) subject to the provisions of paragraph 9 hereof, such Prepetition Mortgage Lender shall be granted a replacement lien (the "General AP Lien") on all of the prepetition and postpetition property (including, without limitation, all postpetition hotel revenue and other charges) owned by the Debtors, which lien shall be pari passu with other General AP Liens granted to other lenders on such property, but subject and junior to the Carveout, but only if a DIP Priming Lien has been granted with respect to such property, and the following liens: (u) any DIP Priming Lien on such property, (v) any Qualified Prepetition Liens on such property and any Section 506(c) charges assessed against such liens, (w) all Specific AP Liens on such property, (x) any Primed Lender AP Lien on such property, (y) any Specific I/C Lien on such property; and (z) any liens - 9 - granted to the DIP Lenders under Section 364(c) of the Bankruptcy Code on such property, but only if such property is owned by a Low Leverage Debtor; (c) the property subject to any Specific AP Lien or General AP Lien shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code; (d) such replacement liens shall be valid and enforceable against all parties in interest without the need for such Prepetition Mortgage Lenders to file or record financing statements, mortgages, notices of lien or similar instruments in any jurisdiction or take any other action in order to validate and perfect the security interests and liens to be granted to them as adequate protection as provided above; and (e) the Debtors shall provide to each Prepetition Mortgage Lender a monthly statement of operating results and sources and uses of cash with respect to such lender's Hotel Property, no later than thirty (30) days after the end of each calendar month. 9. Notwithstanding any provision hereof to the contrary, (a) no lien or security interest shall be granted to any Prepetition Mortgage Lender as adequate protection if such grant would be an ultra vires act or would otherwise not be an act authorized by the certificate of incorporation or similar constitutive document of such purported grantor/Debtor, and (b) absent the express written consent of the Committee and the Debtors, no General AP Lien shall secure the diminution in value, if any, of a Prepetition Mortgage Lender's interest in the property owned by any High Leverage Debtor from and after the commencement of such Debtor's case. 10. Absent the consent of a particular Prepetition Mortgage Lender with respect to cash in which it asserts an interest, no Debtor shall be entitled to use cash collateral except in accordance with the foregoing provisions. - 10 - 11. The Debtors shall be permitted to consolidate their cash in a bank account maintained in the name of "Lodgian, Inc." (the "Concentration Account"), provided, however, that the Debtors shall maintain detailed accounting records which shall enable the Court and parties in interest to ascertain what each Debtor's account balance is, and provided further, that each Debtor's net cash balance in such bank account shall be deemed to be held by such Debtors subject to any and all liens, claims and encumbrances thereon, as if such Debtor had at all times segregated, and had not commingled, its cash in the Concentration Account. 12. Not later than five (5) days after the date of this Order, the Debtors shall serve a copy of this Order, by regular mail, postage prepaid, upon (i) the US Trustee, (ii) the Committee's counsel, (iii) each Prepetition Mortgage Lender, (iv) any party which has filed a notice of appearance in the Debtors' cases, and (v) Davis Polk & Wardwell, counsel to MSSF. 13. Notwithstanding any other provision of this Order to the contrary, (a) any cash collateral held by, or for the benefit of, CCA shall continue to be collected by, or on behalf of, CCA and remitted to the Debtors in accordance with the prepetition agreements between CCA and its Debtor borrowers (collectively, the "CCA Borrowers"); (b) no lien shall be granted or otherwise created pursuant to this Order in favor of any party on any property owned by the CCA Borrowers; and (c) the entry of this Order is without prejudice to the respective rights of the Debtors and CCA with respect to the Motion, notwithstanding the entry of this Order. - 11 - 14. To the extent any Objection (other than the objection filed by CCA) has not been withdrawn, it is hereby overruled and denied. DATED: New York, New York FEBRUARY 14, 2002 /S/ JUDGE BURTON R. LIFLAND ------------------------------ United States Bankruptcy Judge - 12 - EX-10.38 9 g75096ex10-38.txt FINAL ORDER AUTHORIZING DEBTORS Exhibit 10.38 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re ) ) LODGIAN, INC., et al., ) Chapter 11 ) Debtors. ) Case No. 01-16345 (BRL) ) ) Jointly Administered ) FINAL ORDER (I) AUTHORIZING DEBTORS (A) TO OBTAIN POST-PETITION FINANCING PURSUANT TO 11 U.S.C. "105, 361, 362, 364(C)(1), 364(C)(2), 364(C)(3) AND 364(D)(1) AND (B) TO UTILIZE CASH COLLATERAL PURSUANT TO 11 U.S.C. '363 AND (II) GRANTING ADEQUATE PROTECTION TO PRE-PETITION SECURED PARTIES PURSUANT TO 11 U.S.C. " 361, 362 AND 363 Upon the motion (the "MOTION"), dated December 20, 2001, of Lodgian, Inc. ("LODGIAN" or the "BORROWER") and the other above-captioned debtors and debtors-in-possession (the "GUARANTORS," collectively with the Borrower, the "DEBTORS"), pursuant to sections 105, 361, 362, 363(c)(2), 364(c)(1), 364(c)(2), 364(c)(3) and 364(d)(1) of the United States Bankruptcy Code, 11 U.S.C. "101, et seq. (the "BANKRUPTCY CODE"), and Rules 2002, 4001 and 9014 of the Federal Rules of Bankruptcy Procedure (the "BANKRUPTCY Rules"), seeking, among other things: (1) authorization for the Borrower to obtain post-petition financing (the "FINANCING"), and for the Guarantors to guaranty the payment by the Borrower of its obligations thereunder, up to a maximum aggregate principal amount of $25,000,000 (the actual available principal amount at any time being subject to conditions precedent as set forth in the DIP Credit Agreement, as defined 2 herein), from Morgan Stanley Senior Funding, Inc. ("MSSF"), as acting administrative agent and collateral agent (the "AGENT") for itself and a syndicate of financial institutions (together with the Agent, the "DIP LENDERS") to be arranged by MSSF and Lehman Brothers Inc.; (2) the granting of adequate protection to the lenders and administrative agent under the Credit Agreement dated July 23, 1999 (as amended, the "PRE-PETITION AGREEMENT") among Lodgian Financing Corp., Lodgian, Inc., Impac Hotel Group, LLC, Servico, Inc., the Other Affiliate Guarantors party thereto, the lenders party thereto (the "PRE-PETITION LENDERS"), MSSF, as Administrative Agent (the "PRE-PETITION AGENT"), Collateral Agent, Co-Lead Arranger, Joint Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent, whose liens and security interests are being primed by the Financing; (3) authorization for the use by the Debtors of cash collateral (as such term is defined in the Bankruptcy Code) in which the Pre-Petition Lenders, have an interest, and the granting of adequate protection to the Pre-Petition Lenders with respect to such use of their cash collateral; (4) pursuant to Bankruptcy Rule 4001, that an interim hearing (the "INTERIM HEARING") on the Motion be held for this Court to consider entry of the proposed interim order annexed to the Motion (the "INTERIM ORDER"): (a) authorizing the Borrower, on an interim basis, to forthwith borrow or obtain letters of credit from the DIP Lenders under the Documents (as defined below) up to an aggregate principal amount of $10,000,000, (b) authorizing the use by 3 the Debtors of cash collateral, and (c) granting the adequate protection hereinafter described; and (5) that the Court schedule a final hearing (the "FINAL HEARING") to be held within 30 days of the entry of the Interim Order to consider entry of a final order authorizing the balance of the borrowings and letter of credit issuances under the Documents on a final basis, as set forth in the Motion and the Documents filed with this Court and as disclosed on the record at the Interim hearing; The Interim Hearing on the Motion having been held by this Court on December 21, 2001 at which the Court (a) issued and entered an interim order (i) authorizing the Borrower to borrow or obtain letters of credit, pursuant to the Financing, and authorizing the Guarantors to guarantee such borrowings, up to an aggregate of $10,000,000 of the Financing from the DIP Lenders as provided for in the Interim Order, (ii) authorizing the use by the Debtors of cash collateral and (iii) granting adequate protection to the Pre-Petition Lenders and (b) scheduled the Final Hearing to consider entry of an order authorizing the balance of the Financing, all as set forth in the Motion, the Interim Order and the loan documentation filed with this Court. Due and appropriate notice of the Motion, the relief requested therein and the Final Hearing having been served by the Debtors upon the twenty largest unsecured creditors of the Debtors, all mortgage lenders to the Debtors and the United States Trustee for the Southern District of New York; and Upon the record made by the Debtors at the Interim Hearing and the Final Hearing, and after due deliberation and consideration and sufficient cause appearing therefor; 4 IT IS HEREBY FOUND, DETERMINED, ORDERED AND ADJUDGED, that: 1. Jurisdiction. This Court has core jurisdiction over the cases of the Debtors (the "CASES") and the parties and property affected hereby pursuant to 28 U.S.C. "157(b) and 1334. 2. Notice. Under the circumstances, the notice given by the Debtors of the Motion, the Interim Hearing and the Final Hearing constitutes due and sufficient notice thereof. 3. Debtors' Stipulations. Without prejudice to the rights of any other party (but subject to the limitations thereon contained in paragraph 15 below), the Debtors stipulate and agree that: (a) (i) in accordance with the terms of the Pre-Petition Agreement and as of the date hereof and as of the filing of the Debtors' chapter 11 petitions herein (the "PETITION DATE"), the Borrower was truly and justly indebted and liable to the Pre-Petition Lenders, without defense, counterclaim or offset of any kind, in the approximate principal amount of $195,625,000, together with interest thereon and fees, expenses and other obligations incurred in connection therewith as provided in the Pre-Petition Agreement (collectively, the "PRE-PETITION DEBT") and (ii) no portion of the Pre-Petition Debt is subject to avoidance or subordination pursuant to the Bankruptcy Code or applicable nonbankruptcy law and (iii) the Debtors do not have, and hereby forever release, any claims, counterclaims, causes of action, defenses or offset rights, whether arising under the Bankruptcy Code or otherwise, against the Pre-Petition Lenders, the Pre-Petition Agent and their respective affiliates, Agent, officers, directors, employees and attorneys with respect to the Pre-Petition Agreement; 5 (b) the liens and security interests granted to the Pre-Petition Agent pursuant to the Pre-Petition Agreement and pursuant to all mortgages, deeds of trust and other security documents executed by any of the Debtors in favor of the Pre-Petition Lenders in connection with the Pre-Petition Agreement, are (i) valid, perfected, enforceable, first-priority liens and security interests in the personal and real property described in such agreement, mortgages, deeds of trust and security documents (the "PRE-PETITION COLLATERAL"), (ii) not subject to avoidance or subordination pursuant to the Bankruptcy Code or applicable nonbankruptcy law, and (iii) subject only to (x) the priming liens and security interests granted to the Agent and the DIP Lenders pursuant to this Order and the DIP Credit Agreement (the "DIP PRIMING LIENS"), (y) the Carve-Out (as defined below) to which the DIP Priming Liens are subject, and (z) liens permitted under the Pre-Petition Agreement to the extent such permitted liens are permitted thereunder to be senior to or pari passu with the liens of the Pre-Petition Lenders on the Pre-Petition Collateral; and (c) the aggregate value of the Pre-Petition Collateral for the loans and other amounts outstanding under the Pre-Petition Agreement substantially exceeds the aggregate amount of the pre-petition debt outstanding under such agreement. 4. Findings Regarding the Financing. Good cause has been shown for entry of this Order. (a) The Debtors have a need to obtain post-petition financing as provided for in the Documents (the "FINANCING") in order to permit, among other things, the orderly continuation of the operation of their businesses, to maintain business relationships with vendors and suppliers, to make capital expenditures and to satisfy other working capital needs. The ability of the Debtors to obtain sufficient 6 working capital and liquidity through the use of the cash collateral, incurrence of new indebtedness for borrowed money and other financial accommodations is vital to the preservation and maintenance of the going concern values of the Debtors and a successful reorganization of the Debtors. (b) The Debtors are unable to obtain adequate unsecured credit allowable under section 503(b)(1) of the Bankruptcy Code as an administrative expense, and a credit facility in the amount and on the terms provided by the Financing is unavailable to the Debtors without the Debtors granting to the Agent and the DIP Lenders (subject to the Carve-Out, as defined below) the Superpriority Claims and the DIP Liens (each as defined below). (c) The terms of the Financing are fair and reasonable, reflect the Debtors' exercise of prudent business judgment consistent with their fiduciary duty and are supported by reasonably equivalent value and fair consideration. (d) The Financing has been negotiated in good faith and at arm's-length between the Debtors and the Agent, and any credit extended, letters of credit issued for the account of and loans made to the Debtors by the DIP Lenders pursuant to the Revolving Credit and Guaranty Agreement in substantially the form attached as Exhibit A to the Motion (the "DIP CREDIT AGREEMENT"), and any credit extended in respect of overdrafts referred to in the DIP Credit Agreement, shall be deemed to have been extended by the DIP Lenders in good faith, as that term is used in section 364(e) of the Bankruptcy Code. (e) The Debtors have requested entry of this Order pursuant to Bankruptcy Rules 4001(b)(2) and 4001(c)(2). Absent entry of this Order, the Debtors' estates will be immediately and irreparably harmed. Consummation of the Financing in 7 accordance with this Order and the Documents is therefore in the best interest of the Debtors' estates. 5. Authorization of the Financing and the Documents. (a) The Borrower is hereby authorized to borrow or obtain letters of credit pursuant to the DIP Credit Agreement, and the Guarantors are hereby authorized to guaranty such borrowings, up to a maximum aggregate principal amount of $25,000,000 (inclusive of amounts authorized under the Interim Order), in accordance with the terms of the DIP Credit Agreement which shall be used, among other things, for the purpose of providing working capital for the Borrower and certain of the Guarantors. In addition, the Debtors are hereby authorized to incur overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house fund transfers provided to or for the benefit of the Debtors by MSSF or any of its affiliates (in addition to the amount of borrowings and letters of credit obtained pursuant to the DIP Credit Agreement). (b) In furtherance of the foregoing, each Debtor is authorized and directed to do and perform all acts, to make, execute and deliver all instruments and documents (including, without limitation, the execution of security agreements, mortgages and financing statements), and to pay all fees, that may be reasonably required or necessary for the Debtors' performance of the Financing, including, without limitation: (i) the execution, delivery and performance of the Loan Documents (as defined in the DIP Credit Agreement) and any exhibits attached thereto, including, without limitation, the DIP Credit Agreement, the Security and Pledge Agreement (as defined in the DIP Credit Agreement) substantially in the 8 forms attached to the Motion, and the mortgages contemplated thereby (collectively, and together with the letter agreement referred to in clause (iv) below, the "DOCUMENTS"), (ii) causing the Guarantors to execute, deliver and perform the Documents, (iii) the execution and delivery of one or more amendments to the DIP Credit Agreement for, among other things, the purpose of adding additional financial institutions as DIP Lenders and reallocating the commitments for the Financing among the DIP Lenders in each case in such form as the Debtors, the Agent and the DIP Lenders may agree (it being understood that no further approval of the Court shall be required for amendments to the DIP Credit Agreement that do not shorten the maturity of the extensions of credit thereunder, increase either the commitments or the rate of interest payable thereunder or materially adversely affect the interests of the Debtors or their creditors), provided that prior to entering into any such amendment the Debtors shall notify the Official Committee of Unsecured Creditors of its intent to do so (which notice shall include the form of such proposed amendment), (iv) the non-refundable payment to the Agent or the DIP Lenders, as the case may be, of the fees referred to in the DIP Credit Agreement (and in the separate letter agreement dated December 20, 2001 between the Borrower and the Agent referred to in the DIP Credit Agreement) and such Letter of Credit Fees, Commitment Fees and reasonable costs and expenses as may be due from time to time, including, without limitation, fees and disbursements of the 9 professionals retained as provided for in the Documents, all as such terms are defined in the Documents, and (v) performance of all other acts required under or in connection with the Documents. (c) Upon execution and delivery of the Documents, the Documents shall constitute valid and binding obligations of the Debtors, enforceable against each Debtor party thereto in accordance with their terms. No obligation, payment or transfer under the Documents shall be stayed, restrained, voidable, or recoverable under the Bankruptcy Code or under any applicable law, or subject to any defense, reduction, offset or counterclaim. 6. Superpriority Claims. (a) Pursuant to section 364(c)(1) of the Bankruptcy Code, all of the Debtors' obligations, indebtedness and liabilities arising under or in respect of the Financing and the Documents (including, without limitation, in respect of overdrafts referred to in Section 6.03(iv) of the DIP Credit Agreement) (the "DIP OBLIGATIONS") shall constitute obligations of the Debtors with priority over any and all administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code, and over any and all administrative expenses or other claims under sections 105, 326, 328, 506(c) or 507(a) of the Bankruptcy Code (the "SUPERPRIORITY CLAIMS"), subject only upon the occurrence and during the continuance of an Event of Default (as defined in the DIP Credit Agreement) (an "EVENT OF DEFAULT") or event which, upon notice or lapse of time or both, would constitute an Event of Default (a "DEFAULT") to the payment of the Carve Out (as hereinafter defined). Nothing herein is intended to affect the priority set forth under section 726(b) of the Bankruptcy Code. 10 (b) For purposes hereof, the "CARVE OUT" means, (i) all fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States Trustee under Section 1930(a) of title 28 of the United States Code and (ii) an amount not exceeding $1,500,000 in the aggregate, which amount may be used after the occurrence of an Event of Default (as defined in the DIP Credit Agreement) or Default and for so long as such Default or Event of Default continues uncured and unwaived, to pay fees or expenses incurred by the Debtors and any statutory committees appointed in the Cases (each, a "COMMITTEE") in respect of (A) allowances of compensation for services rendered or reimbursement or expenses awarded by the Bankruptcy Court to the Debtors' or any Committee's professionals and (B) the reimbursement of expenses allowed by the Bankruptcy Court incurred by Committee members in the performance of their duties (but excluding fees and expenses of third-party professionals employed by such members); provided, however, that such dollar limitation on fees and disbursements shall not be reduced by the amount of any compensation and reimbursement of expenses paid prior to the occurrence of an Event of Default in respect of which the Carve-Out is invoked or any fees, expenses, indemnities or other amounts paid to the Agent, the DIP Lenders and their respective attorneys and Agent under the DIP Credit Agreement or otherwise; and provided, further, that nothing herein shall be construed to impair the ability of any party to object to any of the fees, expenses, reimbursement or compensation described in clauses (A) and (B) above. 7. DIP Liens. As security for the DIP Obligations, effective upon the date of this Order and without the necessity of the execution by the Debtors, the Agent or the DIP Lenders, of mortgages, security agreements or otherwise, the following security interests and liens are hereby granted to the Agent and the DIP Lenders (all property 11 identified in clauses (a), (b), (c) and (d) below being collectively referred to as the "COLLATERAL," and such security interests and liens being collectively referred to as the "DIP LIENS"), subject (i) to the rights of certain utilities with respect to up to $1,000,000 in cash set aside for the benefit such utilities pursuant to an order of this Court (the "UTILITY RESERVE") and (ii) only in the event of the occurrence of a Default or an Event of Default to the payment of the Carve-Out (except in the case of amounts identified in clause (a) below), which shall not be subject to the Carve-Out or the Utility Reserve): (a) First Priority Lien on Cash Balances. Pursuant to section 364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby granted a perfected first priority security interest in and lien upon all cash and cash equivalents in the Letter of Credit Account under the DIP Credit Agreement of the Debtors (whether maintained with the Agent or otherwise) and any investment of the funds contained therein. (b) Lien Priming Pre-Petition Lenders' Liens. Pursuant to section 364(d)(1) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby granted a perfected first priority senior priming security interest in and lien upon all pre- and post-petition property of the Debtors (including, without limitation, cash collateral, inventory, accounts receivable, other rights to payment, contracts, property, plant, equipment, general intangibles, documents, instruments, interests in leaseholds, real property, patents, copyrights, trademarks, trade names, other intellectual property, capital stock of subsidiaries, and the proceeds of all the foregoing, but subject, in the case of a debtor's interest in a hotel franchise or hotel franchise agreement, to the provisions of any agreement between the applicable franchisor and the Agent), whether now existing or hereafter acquired, that is subject to (a) the existing liens presently 12 securing the Debtors' indebtedness (including in respect of issued but undrawn letters of credit) to the Pre-Petition Lenders and (b) the liens securing the Debtors' indebtedness to other pre-petition lenders which, pursuant to a separate order of this Court, are to be primed by the DIP Liens (with respect to such indebtedness only, the "OTHER PRIMED LENDERS" and, together with the Pre-Petition Lenders, the "PRIMED LENDERS"). Such security interests and liens shall be senior in all respects to the interests in such property of the Primed Lenders arising from present and future liens of the Primed Lenders (including, without limitation, adequate protection liens granted hereunder) but shall not be senior to the interests of other parties arising out of liens, if any, in such property existing immediately prior to the Petition Date, or to interests in such property arising out of liens to which the liens of the Primed Lenders become subject subsequent to the Petition Date as permitted by section 546(b) of the Bankruptcy Code (collectively "QUALIFIED PRE-PETITION LIENS") provided that the lien of the Agent and the DIP Lenders shall be senior to the existing liens of any Other Primed Lender only to the extent of the Attributable Debt Amount (as defined in the DIP Credit Agreement) of such Other Primed Lender and otherwise (i) in the case of Low Leverage Debtors, immediately senior to the General AP Liens (as defined in the Motion) and (ii) in the case of High Leverage Debtors, immediately junior to the General AP Liens. (c) Junior Lien on Unencumbered Properties. Pursuant to section 364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby granted a perfected security interest in and lien and upon all other pre- and post-petition property of the Debtors, whether existing on the Petition Date or thereafter acquired, that, on or as of the Petition Date is not subject to valid, perfected and non-avoidable liens (collectively, "UNENCUMBERED PROPERTY"), including, without limitation, cash, 13 inventory, accounts receivable, other rights to payment whether arising before or after the Petition Date, contracts, property, plant, equipment, general intangibles, documents, instruments, interests in leaseholds, real property, patents, copyrights, trademarks, trade names, other intellectual property, capital stock of subsidiaries, and the proceeds of all the foregoing, but subject, in the case of a Debtor's interest in a hotel franchise or hotel franchise agreement, to the provisions of any agreement between the applicable franchisor and the Agent. Unencumbered Property shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code (collectively, "AVOIDANCE ACTIONS"). Such security interests and liens shall be junior only to (i) security interests and liens granted as adequate protection to the Pre-Petition Agent and Pre-Petition Lenders under paragraph 11(a) of this Order and to the Other Primed Lenders in a separate order of this court entered as of the same date as this order (the "PRIMED LENDER AP LIENS"), (ii) the Specific IC Liens, as defined in the Motion (the "SPECIFIC IC LIENS"), and (iii) the General AP Liens, as defined in the Motion (the "GENERAL AP LIENS"). (d) Lien Junior to Certain Other Liens. Pursuant to section 364(c)(3) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby granted a perfected security interest in and lien upon all pre- and post-petition property of the Debtors (other than the property described in clause (b) of this paragraph 7, as to which the liens and security interests in favor of the Agent will be as described in such clause), whether now existing or hereafter acquired, that is subject to Qualified Pre-Petition Liens, Primed Lender AP Liens, Specific IC Liens (in the case of Low Leverage Debtors) Specific AP Liens and General AP Liens. 14 (e) Liens Senior to Certain Other Liens. The DIP Liens and the Adequate Protection Liens (as defined below) shall not be subject or subordinate to (i) any lien or security interest that is avoided and preserved for the benefit of the Debtors and their estates under section 551 of the Bankruptcy Code or (ii) any liens arising after the Petition Date including, without limitation, any liens or security interests granted in favor of any federal, state, municipal, or other governmental unit, commission, board or court for any liability of the Debtors. 8. Protection of DIP Lenders' Rights. (a) So long as there are any borrowings or letters of credit outstanding, or the DIP Lenders have any Commitment (as defined in the DIP Credit Agreement) under the DIP Credit Agreement, the Pre-Petition Lenders shall take no action to foreclose upon the liens granted to the Pre-Petition Lenders pursuant to the Pre-Petition Agreements and this Order or otherwise exercise remedies against the Collateral, in each case to the extent not authorized by an order of this Court. (b) Automatic Stay and Certain Remedies. Subject only to the provisions of the DIP Credit Agreement, the automatic stay provisions of section 362 of the Bankruptcy Code are vacated and modified to the extent necessary to permit the Agent and the DIP Lenders to exercise, upon the occurrence and during the continuance of an Event of Default and the giving of the five business days' prior written notice provided for in the DIP Credit Agreement, all rights and remedies against the Collateral provided for in the Documents (including, without limitation, the right to setoff monies of the Debtors in accounts maintained with the Agent or any DIP Lender) and, in connection with the exercise of remedies with respect to a hotel property that is subject to a franchise agreement, to permit the applicable franchisor to terminate such franchise 15 agreement at the request of the Agent. The Debtors hereby waive their right to seek relief, including, without limitation, under section 105 of the Bankruptcy Code, to the extent such relief would in any way impair or restrict the rights and remedies of the Agent set forth in this Order or the Documents. In no event shall the Agent or the Pre-Petition Agent be subject to the equitable doctrine of "marshaling" or any similar doctrine with respect to the Collateral. (c) In connection with the pursuit of its remedies against the Collateral as provided for in the Documents and in paragraph 8(b) of this Order, the DIP Agent is hereby authorized, in the name of and as attorney-in-fact for the mortgagee thereunder, to foreclose any mortgage on any real property securing the Borrower's and Guarantors' obligations under the Pre-Petition Agreement. (d) Except as otherwise provided in the DIP Credit Agreement, the Debtors' right to use Cash Collateral, as provided in paragraph 10 below, shall terminate automatically on the Termination Date (as defined in the DIP Credit Agreement); provided that the foregoing shall not limit the Debtors' rights to seek an order of this Court further authorizing the Debtors' use of cash collateral. 9. The Cash Collateral. To the extent that, as of the Petition Date, any funds were on deposit with the Pre-Petition Lenders, such funds were subject to rights of set-off. By virtue of such set-off rights, such funds are subject to a lien in favor of such Pre-Petition Lenders pursuant to sections 506(a) and 553 of the Bankruptcy Code. The Pre-Petition Lenders are obligated, to the extent provided for in the Pre-Petition Agreements, to share the benefit of such liens with the other Pre-Petition Lenders party to such Pre-Petition Agreements based upon their respective pro rata shares of the obligations under such Pre-Petition Agreements. Any proceeds of the Pre-Petition 16 Collateral (including any fees, charges, accounts or other payments for the use of occupancy of rooms and other public facilities in hotels, motels or other lodging facilities and including funds on deposit at the Pre-Petition Lenders or at any other institution as of the Petition Date) are cash collateral of the Pre-Petition Lenders within the meaning of section 363(a) of the Bankruptcy Code. All funds subject to such setoff rights and all such proceeds of Pre-Petition Collateral are referred to herein as "CASH COLLATERAL." 10. Use of Cash Collateral. Except as otherwise set forth herein and in the DIP Credit Agreement, the Debtors are hereby authorized to use all Cash Collateral of the Pre-Petition Lenders, provided that the Pre-Petition Lenders are granted adequate protection as hereinafter set forth. In furtherance of and subject to the foregoing, the Pre-Petition Lenders are directed promptly to turn over to the Debtors all Cash Collateral within the meaning of section 363(a) of the Bankruptcy Code received or held by them. 11. Adequate Protection for Pre-Petition Lenders. The Pre-Petition Lenders are entitled, pursuant to sections 361, 363(e) and 364(d)(1) of the Bankruptcy Code, to adequate protection of their interest in the Pre-Petition Collateral, including the Cash Collateral, for any diminution in value of the Pre-Petition Lenders' interests in the Pre-Petition Collateral, including, without limitation, any such diminution resulting from the use by the Debtors of Cash Collateral and any other Pre-Petition Collateral, the priming of the Pre-Petition Agent's security interests and liens in the Pre-Petition Collateral by the Agent and the DIP Lenders pursuant to the Documents and this Order and the imposition of the automatic stay pursuant to section 362 of the Bankruptcy Code. As 17 adequate protection, the Pre-Petition Agent and the Pre-Petition Lenders are hereby granted the following (collectively, the "PRE-PETITION LENDERS ADEQUATE PROTECTION"): (a) Adequate Protection Liens. The Pre-Petition Agent and the Pre-Petition Lenders are hereby granted (effective upon the date of this Order and without the necessity of the execution by the Debtors of mortgages, security agreements, pledge agreements, financing statements or other agreements) a replacement security interest in and lien upon all the Collateral, subject and subordinate only to (i) the security interests and liens granted to the Agent for the benefit of the DIP Lenders under paragraph 7(b) of this Order and pursuant to the Documents and any liens (other than the lien granted pursuant to this paragraph 11(a)) on the Collateral to which such liens so granted to the Agent are junior, (ii) the Specific AP Liens, (iii) the applicable provisions of the Carve-Out and (iv) the Utility Reserve (the "PRE-PETITION LENDERS ADEQUATE PROTECTION LIENS"). (b) Section 507(b) Claim. The Pre-Petition Agent and the Pre-Petition Lenders are hereby granted, subject, in the event of the occurrence of a Default or an Event of Default, to the payment of the Carve-Out, a superpriority claim as provided for in section 507(b) of the Bankruptcy Code, immediately junior to the claims under section 364(c)(1) of the Bankruptcy Code held by the Agent and the DIP Lenders. (c) Interest, Fees and Expenses. The Pre-Petition Agent and the Pre-Petition Lenders shall receive from the Debtors (i) immediate cash payment of all accrued and unpaid letter of credit fees and interest on the Pre-Petition Debt at the non-default rate provided for in the Pre-Petition Agreement, and all other accrued and unpaid fees and disbursements (including, but not limited to, fees owed to the Pre-Petition Agent) incurred prior to the Petition Date owing under the Pre-Petition 18 Agreement, (ii) current cash payments of all fees and expenses payable to the Pre-Petition Agent and otherwise under the Pre-Petition Agreement, including but not limited to, the reasonable fees and disbursements of counsel, financial and other consultants for the Pre-Petition Agent and (iii) on the first business day of each month, all accrued but unpaid letter of credit and other fees, and interest on the Pre-Petition Debt at the contract rate (including LIBOR pricing options) under the Pre-Petition Agreement. The foregoing shall not limit the right of the Pre-Petition Agent and the Pre-Petition Lenders to seek allowance of claims in respect of interest at the default rate to the extent provided in the Pre-Petition Credit Agreement. (d) Preservation and Monitoring of Collateral. Subject to the provisions of the DIP Credit Agreement, the Debtors are hereby authorized and directed to take all steps reasonably necessary to protect and maintain the value of the Collateral (other than the High Leverage Hotel Properties), including, without limitation, making such capital expenditures and performing such maintenance as may be necessary for purposes of maintaining such value. The Pre-Petition Lenders shall be permitted to continue to retain expert consultants and financial advisors at the expense of the Debtors, which consultants and advisors shall be given reasonable access for purposes of monitoring the value of the Collateral and the compliance by the Debtors with the provisions of this paragraph. (e) Payment from Proceeds of Collateral. The Debtors are authorized and directed to pay to the Pre-Petition Agent, for the benefit of the Pre-Petition Lenders, the portion of the Net Proceeds (as defined in the DIP Credit Agreement as in effect on the Closing Date) resulting from any sale or other disposition of other property outside the ordinary course of business as permitted by the DIP Credit Agreement, in each case 19 limited to the Net Proceeds that are not required to be paid in respect of Obligations as defined in the DIP Credit Agreement (such payments to the Pre-Petition Agent, for the benefit of the Pre-Petition Lenders, to be made each time that cumulative Net Cash Proceeds that are so payable, but have not yet been paid, reach $100,000). (f) Limitation of Charging Expenses Against Collateral. Except to the extent of the Carve-Out, no fees, expenses, reimbursement or compensation described in clauses (A) or (B) of paragraph 6(b) (including any that may result from liquidation in bankruptcy or other proceedings under the Bankruptcy Code), to the extent such expenses are incurred prior to repayment in full of all DIP Obligations, shall be charged against or recovered from the Collateral, pursuant to section 506(c) of the Bankruptcy Code or any similar principal of law, without prior written consent of the Agent, and no such consent shall be implied from any other action, inaction, or acquiescence by the Agent. 12. Reservation of Certain Rights of Pre-Petition Lenders and Other Parties. (a) Under the circumstances and given that the above-described adequate protection is consistent with the Bankruptcy Code (including section 5.06(b) thereof), the Court finds that, notwithstanding any other provision hereof, the adequate protection provided herein is reasonable and sufficient to protect the interests of the Pre-Petition Lenders. However, the Pre-Petition Agent and the Pre-Petition Lenders may request further or different adequate protection, and the Debtors or any other party may contest any such request. (b) The provisions of paragraph 11(c) are without prejudice to the rights of parties other than the Debtors to seek an order causing cash payments made pursuant to paragraph 11(c) to be applied to the principal of the Pre-Petition Debt rather than as set 20 forth in paragraph 11(c) on the basis that interest on the Pre-Petition Debt would not be allowable under Section 506(b) of the Bankruptcy Code. 13. Perfection of DIP Liens and Adequate Protection Liens. The Agent, the DIP Lenders and the Pre-Petition Lenders that have been granted security interests and liens hereunder shall not be required to file or record financing statements, mortgages, notices of lien or similar instruments in any jurisdiction or take any other action in order to validate and perfect the security interests and liens granted to them pursuant to this Order. If the Agent on behalf of the DIP Lenders or the Pre-Petition Agent on behalf of the Pre-Petition Lenders shall, in its sole discretion, choose to file such financing statements, mortgages, notices of lien or similar instruments or otherwise confirm perfection of such security interests and liens, the liens and security interests granted herein shall be deemed perfected at the time and on the date of entry of this Order. The Pre-Petition Lenders shall not file such financing statements, mortgages, notices of lien or similar instruments, or otherwise confirm perfection of such security interests and liens, unless the Agent on behalf of the DIP Lenders shall theretofore have done so. Upon the request of the Agent, each of the Pre-Petition Lenders and the Pre-Petition Agent, without any further consent of any party, is authorized to take, execute and deliver such instruments (in each case without representation or warranty of any kind) to enable the Agent to further perfect, preserve and enforce the security interests and liens granted to the Agent for the benefit of the DIP Lenders by the Documents and this Order. 14. Preservation of Rights Granted Under the Order. (a) No claim having a priority superior to or pari passu with that granted by this Order to the Agent and the DIP Lenders or, except as provided by the cash 21 collateral orders being issued on the date hereof and other cash collateral orders that are approved by the Agent, to the Pre-Petition Agent and the Pre-Petition Lenders, respectively, shall be granted while any portion of the Financing (or any refinancing thereof) or the commitment thereunder, or any adequate protection obligation granted hereunder remains outstanding, and the security interests and liens granted to the Agent on behalf of the DIP Lenders hereunder and to the Pre-Petition Agent on behalf of the Pre-Petition Lenders shall not be (i) subject or junior to any lien or security interest that is avoided and preserved for the benefit of the Debtors' estates under section 551 of the Bankruptcy Code or (ii) subordinated to or made pari passu with any other lien or security interest under section 364(d) of the Bankruptcy Code or otherwise; provided that the Primed Lender AP Liens granted to the Other Primed Lenders may rank pari passu with the Pre-Petition Lenders' Adequate Protection Liens. (b) Unless all obligations and indebtedness owing to the Agent and the DIP Lenders under the DIP Credit Agreement shall theretofore have been paid in full (and, with respect to outstanding Letters of Credit issued pursuant to the DIP Credit Agreement, cash collateralized in accordance with the provisions of the DIP Credit Agreement), the Debtors shall not seek, and it shall constitute an Event of Default if any of the Debtors seek, or if there is entered, an order dismissing any of the Cases. If an order dismissing any of the Cases under section 1112 of the Bankruptcy Code or otherwise is at any time entered, such order shall provide (in accordance with sections 105 and 349 of the Bankruptcy Code) that (i) the superpriority claims, priming liens and security interests and replacement security interests granted to the Agent and the DIP Lenders and the Pre-Petition Lenders, as the case may be, pursuant to this Order shall continue in full force and effect and shall maintain their priorities as provided in this 22 Order until all DIP Obligations shall have been paid and satisfied in full (and that such superpriority claims, priming liens and replacement liens, shall, notwithstanding such dismissal, remain binding on all parties in interest) and (ii) this Court shall retain jurisdiction, notwithstanding such dismissal, for the purposes of enforcing the claims, liens and security interests referred to in (i) above. (c) If any or all of the provisions of this Order are hereafter reversed, modified, vacated or stayed, such reversal, stay, modification or vacation shall not affect (i) the validity of any DIP Obligations prior to written notice to the Agent of the effective date of such reversal, stay, modification or vacation or (ii) the validity and enforceability of any lien or priority authorized or created hereby or pursuant to the DIP Credit Agreement with respect to any such DIP Obligation. Notwithstanding any such reversal, stay, modification or vacation, any use of Cash Collateral or any DIP Obligation incurred by the Debtors to the Agent or DIP Lenders prior to the actual receipt of written notice by Pre-Petition Agent and the Agent of the effective date of such reversal, stay, modification or vacation shall be governed in all respects by the original provisions of this Order, and the Agent and the DIP Lenders and the Pre-Petition Lenders shall be entitled to all the rights, remedies, privileges and benefits granted in this Order and/or pursuant to the DIP Credit Agreement with respect to all uses of Cash Collateral and DIP Obligations. (d) The obligations of the Debtors under this Order and the Documents shall not be discharged by the entry of an order confirming a plan of reorganization in any of the Cases and, pursuant to section 1141(d)(4) of the Bankruptcy Code, the Debtors have waived such discharge. 23 15. Effect of Stipulations on Third Parties. The findings and admissions contained in this Order, including, without limitation, the findings and admissions contained in paragraph 3 of this Order, shall be binding upon all parties in interest, including any Committee, unless (a) a party in interest has timely filed an adversary proceeding or contested matter (subject to the limitations contained herein, including, inter alia, in paragraph 16) by no later than April 15, 2002 (or such later date as has been agreed to, in writing, by the relevant Pre-Petition Agent in its sole discretion or ordered by this Court after notice and a hearing), (i) challenging the validity, enforceability, priority or extent of the Pre-Petition Debt or the Pre-Petition Agent's or the Pre-Petition Lenders' liens on the Pre-Petition Collateral, or (ii) otherwise asserting any claims or causes of action against the Pre-Petition Agent or the Pre-Petition Lenders, and (b) the Court rules in favor of the plaintiff in any such timely filed adversary proceeding or contested matter. If no such adversary proceeding or contested matter is timely filed as of such date, (x) the Pre-Petition Debt and all related obligations of the Debtors (the "PRE-PETITION OBLIGATIONS") shall constitute allowed claims, not subject to counterclaim, offset, subordination, defense or avoidance, for all purposes in the Cases and any subsequent chapter 7 cases, (y) the Pre-Petition Agent's and the Pre-Petition Lenders' liens on the Pre-Petition Collateral shall be deemed to have been, as of the Petition Date, legal, valid, binding, perfected, not subject to recharacterization, subordination or avoidance and (z) the Pre-Petition Obligations, the Pre-Petition Agent's and the Pre-Petition Lenders' liens on the Pre-Petition Collateral and the Pre-Petition Agent and the Pre-Petition Lenders shall not be subject to any other or further challenge by any party in interest seeking to exercise the rights of the Debtors' estate, including, without limitation, any successor thereto. If any such 24 adversary proceeding or contested matter is timely filed as of such date, the findings and admissions contained in paragraph 3 shall nonetheless remain binding and preclusive (as provided in the second sentence of this paragraph) except to the extent that such findings and admissions were expressly challenged in such adversary proceeding or contested matter. If (but only to the extent that and for so long as) the holder of any Pre-Petition Indebtedness (as defined in the DIP Credit Agreement) of any Guarantor has the benefit of an express restriction or prohibition contained in the certificate of incorporation or similar constitutive document of the Guarantor that prevents the creation of any obligation or the security interest or lien provided for herein (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then, such obligation or security interest and lien shall become effective and enforceable (and the assets of such Guarantor shall become part of the Collateral) only (i) with the consent of such creditor or (ii) upon the payment in full of such Pre-Petition Indebtedness. Nothing herein shall limit the right or ability of the DIP Lenders or the Debtors to challenge the legal effectiveness of any such restriction or prohibition. 16. Limitation on Use of Financing Proceeds and Collateral. Notwithstanding anything herein to the contrary, no borrowings, letters of credit, Cash Collateral, Collateral or the Carve-Out (collectively, the "DESIGNATED ASSETS") may be used to (a) object, contest or raise any defense to or investigate, the validity, perfection, priority, extent or enforceability of any amount due under the Documents, the liens granted under this Order, the Pre-Petition Debt or the liens securing the Pre-Petition Debt, (b) assert any claims, counterclaims, defenses or causes of action against the Agent, the DIP Lenders, the Pre-Petition Lenders or the Pre-Petition Agent or any of 25 their respective affiliates, (c) prevent, hinder or otherwise delay the Agent's or the Pre-Petition Agent's assertion, enforcement or realization on the Cash Collateral or the Collateral in accordance with the Documents or this Order or (d) seek to modify any of the rights granted to the Agent, the DIP Lenders, the Pre-Petition Lenders or the Pre-Petition Agent hereunder or under the Documents, in each of the foregoing cases without such parties' prior written consent; provided that up to $150,000 (plus reasonable disbursements and out-of-pocket expenses, including UCC searches and real estate title reports) of the Designated Assets may be used by an official committee of creditors appointed in the Cases to analyze the matters referred to in clause (a) of the first sentence of paragraph 15 (subject to Court approval of any related professional fees and the rights of the Pre-Petition Lenders to object to such fees) and to analyze and respond to any proposed exercise of remedies under the DIP Credit Agreement as to which notice is given pursuant to paragraph 8(b). 17. Order Governs. In the event of any inconsistency between the provisions of this Order and of the Documents, the provisions of this Order shall govern. 18. Successors and Assigns. The Documents and the provisions of this Order shall be binding upon the Agent, the DIP Lenders, the Pre-Petition Agent, the Pre-Petition Lenders and the Debtors and their respective successors and assigns (including any chapter 7 or chapter 11 trustee hereinafter appointed or elected for the estate of any of the Debtors) and inure to the benefit of the Agent, the DIP Lenders, the Pre-Petition Agent, the Pre-Petition Lenders and the Debtors and (except with respect to any trustee hereinafter appointed or elected for the estate of any of the Debtors) their respective successors and assigns. 26 DATED: FEBRUARY 14, 2002 New York, New York /s/ JUDGE BURTON R. LIFLAND ------------------------------ UNITED STATES BANKRUPTCY JUDGE EX-10.39 10 g75096ex10-39.txt STIPULATION AMONG THE DEBTORS AND JP MORGAN EXHIBIT 10.39 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re Case No. 01-16345 (BRL) LODGIAN, INC. et al., (Jointly Administered) Chapter 11 STIPULATION AND ORDER AMONG THE DEBTORS AND JPMORGAN CHASE BANK, AS SUCCESSOR INDENTURE TRUSTEE, PROVIDING FOR (I) LIMITED USE OF CASH COLLATERAL AND ADEQUATE PROTECTION AND (II) RELATED RELIEF RECITALS FACTUAL BACKGROUND A. On December 20, 2001 (the "Filing Date"), Lodgian, Inc. ("Lodgian") and the other above-captioned debtors and debtors-in-possession (collectively, the "Debtors") filed with this Court voluntary petitions for relief commencing cases (the "Cases") under Chapter 11 of Title 11, United States Code (the "Bankruptcy Code").(1) B. Since the Filing Date, the Debtors have remained in possession of their businesses and properties pursuant to sections 1107 and 1108 of the Bankruptcy Code. C. On January 8, 2002, the Office of the United States Trustee appointed a seven (7) member official committee of unsecured creditors (the "Committee"). - ---------- (1) All of the Debtors filed their Chapter 11 petitions on the Filing Date, except Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville Hospitality, L.P. and Sioux City Hospitality, L.P. These four entities filed their Chapter 11 petitions on December 21, 2001. D. On the Filing Date, the Debtors filed several motions including a motion pursuant to Sections 105, 362, 363, 364, 503(b) and 507 of the Bankruptcy Code for orders, inter alia, authorizing the Debtors to (A) obtain postpetition financing on a super-priority secured basis, and (B) use cash collateral and providing adequate protection in connection therewith (the "DIP/Cash Collateral Motion"). (2) E. On December 21, 2001, the Court entered an interim order authorizing the Debtors to use cash collateral of the Pre Petition Mortgage Lenders pending a final hearing (the "Interim Cash Collateral Order"), which hearing is scheduled to occur on February 14, 2002 (the "Final Hearing"). F. On December 21, 2001, the Court also entered an interim order authorizing Lodgian to borrow up to a maximum aggregate principal amount of $10,000,000 in accordance with the terms of the DIP Credit Agreement pending the Final Hearing (the "Interim DIP Order"). G. It is anticipated that following the Final Hearing the Court will enter a final cash collateral order (the "Final Cash Collateral Order") and a final order authorizing Lodgian to borrow up to a maximum aggregate principal amount of $25,000,000 in accordance with the terms of the DIP Credit Agreement pending the Final Hearing (the "Final DIP Order"). H. In accordance with the Final DIP Order, among other things, (i) all of the Debtors other than Lodgian will be authorized to guarantee the amounts borrowed by Lodgian under the DIP Credit Agreement upon the conditions set forth therein; (ii) pursuant to section 364(c)(1) of the Bankruptcy Code, all of the Debtors' obligations under the DIP Credit - ---------- (2) Unless otherwise defined herein, all capitalized terms used herein shall have the same meanings assigned to them in the Final DIP Order or the Final Cash Collateral Order, as applicable. 2 Agreement shall be authorized to constitute obligations with priority over any and all administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code, and over any and all administrative expenses or other claims under sections 105, 326, 328, 506(c) or 507 of the Bankruptcy Code, subject in limited circumstances to the Carveout; (iii) pursuant to section 364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders were granted a perfected first priority security interest in and lien upon all cash and cash equivalents in the Letter of Credit Account under the DIP Credit Agreement and any investment of the funds therein to the Agent and the DIP Lenders; (iv) pursuant to section 364(d)(1) of the Bankruptcy Code, the Debtors will be authorized to grant a perfected priming security interest in and lien to the Agent and the DIP Lenders on all prepetition and postpetition property of the Debtors that is subject to the existing liens presently securing the Debtors' indebtedness to the Pre-Petition Lenders, but not senior to the interests of any of the liens existing immediately prior to the Filing Date, or to interests in such property arising out of liens to which the liens of the Pre-Petition Lenders become subject subsequent to the Filing Date as permitted by section 546(b) of the Bankruptcy Code; and (v) pursuant to section 364(c)(2) of the Bankruptcy Code, the Debtors will be authorized to grant a perfected security interest in and lien to the Agent and the DIP Lenders on all other pre- and post-petition property of the Debtors that, on or as of the Filing Date, was not subject to valid, perfected and non-avoidable liens. THE INDENTURES I. Prior to the Filing Date, certain of the Debtors entered into certain transactions pursuant to which JPMorgan Chase Bank serves as Successor Indenture Trustee ("JPMC" or the "Trustee"). 3 J. A Trust Indenture, dated as of January 1, 1997, was entered into between the City of Manhattan, Kansas, a municipal corporation organized under the laws of the State of Kansas (the "City of Manhattan"), and Texas Commerce Bank National Association, a national banking association organized under the laws of the United States, as Indenture Trustee (the "Manhattan Indenture"). K. The City of Manhattan issued Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Senior Series 1997A (the "Manhattan Senior Bonds") and Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Subordinate Series 1997B (the "Manhattan Subordinate Bonds," and together with the Manhattan Senior Bonds, the "Manhattan Bonds") for the purpose of providing funds to refinance the purchase and improvement of a certain hotel facility (the "Manhattan Project") owned by Manhattan Hospitality Associates, L.P. ("Manhattan Hospitality"). L. Pursuant to the Manhattan Indenture, the City of Manhattan entered into an Amended and Restated Lease Agreement, dated as of January 1, 1997 (the "Manhattan Lease Agreement") with Manhattan Hospitality pursuant to which a prior Lease by and between the City of Manhattan and Kan/Del Hotel Investment Partners, L.P. dated as of August 1, 1986 was amended and restated and pursuant to which the City of Manhattan leased the Manhattan hotel facility to Manhattan Hospitality (the "Manhattan Property"). M. Pursuant to the Manhattan Indenture, the City of Manhattan became obligated to make rental payments sufficient to pay the principal and interest on the Manhattan Bonds. N. A Trust Indenture, dated as of January 1, 1997 was entered into between the City of Lawrence, Kansas, a municipal corporation organized under the laws of the State of 4 Kansas (the "City of Lawrence"), and Texas Commerce Bank National Association, a national banking association organized under the laws of the United States, as Indenture Trustee (the "Lawrence Indenture"). O. The City of Lawrence issued Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Senior Series 1997A (the "Lawrence Senior Bonds") and Commercial Development Revenue Refunding Bonds (Holiday Inn Project) Subordinate Series 1997B (the "Lawrence Subordinate Bonds" and, together with the Lawrence Senior Bonds, the "Lawrence Bonds") for the purpose of providing funds to refinance the purchase and improvement of a certain hotel facility (the "Lawrence Project"). Hereinafter, the individual holders of the Manhattan Bonds and the Lawrence Bonds will be referred to collectively as the "Bondholders". P. Pursuant to the Lawrence Indenture, the City of Lawrence entered into an Amended and Restated Lease Agreement, dated as of January 1, 1997 (the "Lawrence Lease Agreement") with Lawrence Hospitality Associates, L.P. ("Lawrence Hospitality" and together with Manhattan Hospitality, the "Specified Debtors") pursuant to which a prior Lease by and between the City of Lawrence and Kan/Del Hotel Investment Partners, L.P. dated as of August 1, 1986 was amended and restated and pursuant to which the City of Lawrence leased a certain hotel facility to Lawrence Hospitality (the "Lawrence Property" and, together with the Manhattan Property, the "Hotel Properties"). Hereinafter, the documents referred to in paragraphs J-P will be referred to collectively as the "Loan Documents". Q. Pursuant to the Lawrence Indenture, the City of Lawrence became obligated to make rental payments sufficient to pay the principal and interest on the Lawrence Bonds. 5 R. The general partners of Lawrence Hospitality and Manhattan Hospitality are related parties and, as such, pledged and assigned to the Trustee the revenues of the Manhattan Project and the Lawrence Project on a pari passu basis for the equal and ratable security of both the Manhattan Bonds and the Lawrence Bonds. S. The Manhattan Bonds are further secured by i) a pledge and assignment to the Trustee of certain rights of the City of Manhattan under the Manhattan Lease Agreement; ii) that certain Amended and Restated Leasehold Mortgage Security Agreement and Assignment of Rents dated as of September 27, 1995, as assigned to the Trustee pursuant to the Assignment of Loan Documents executed by Column Financial, Inc. in favor of the Trustee for the Manhattan Bonds which granted a lien on and a security interest in all of Manhattan Hospitality's right, title and interest in and to the Manhattan Project to the Trustee; iii) an Amended and Restated Promissory Note Fund (as defined in the Manhattan Indenture); iv) the Second Promissory Note Fund (as defined in the Manhattan Indenture); v) the Second Leasehold Mortgage Fund (as defined in the Manhattan Indenture); vi) the Manhattan Project Fund (as defined in the Manhattan Indenture); and vii) the Manhattan Reserve Fund (as defined in the Manhattan Indenture). T. The Lawrence Bonds are further secured by a pledge and assignment to the Trustee of certain rights of the City of Lawrence under the Lawrence Lease Agreement i) a pledge and assignment to the Trustee of certain rights of the City of Lawrence under the Lawrence Lease Agreement; ii) that certain Amended and Restated Leasehold Mortgage Security Agreement and Assignment of Rents dated as of September 27, 1995, as assigned to the Trustee pursuant to the Assignment of Loan Documents executed by Column Financial, Inc. in favor of the Trustee for the Lawrence Bonds which granted a lien on and a security interest in all of 6 Lawrence Hospitality's right, title and interest in and to the Lawrence Project to the Trustee; iii) an Amended and Restated Promissory Note Fund (as defined in the Lawrence Indenture); iv) the Second Promissory Note Fund (as defined in the Lawrence Indenture); v) the Second Leasehold Mortgage Fund (as defined in the Lawrence Indenture); vi) the Lawrence Project Fund (as defined in the Lawrence Indenture); vii) the Lawrence Reserve Fund (as defined in the Lawrence Indenture); and viii) all funds, money and securities held by the Lawrence Trustee pursuant to the Lawrence Indenture and all after-acquired tangible and intangible property. U. The Debtors have informed JPMC that the Hotel Properties require substantial capital expenditures (the "Capital Expenditures") in order to preserve the value of the Hotel Properties, which Capital Expenditures must be undertaken during the calendar year 2002. Such Capital Expenditures include expenditures necessary to maintain its existing Franchise Flags (as defined in Paragraph 5(e)). V. The Specified Debtors' repayment of the Manhattan Bonds and the Lawrence Bonds is secured by, among other things, a first priority lien in and to the Specified Debtors' Hotel Properties, as well as all of the rents, profits, proceeds and revenues derived from such hotels (the "Specified Debtors' Cash Collateral" and, collectively, with the Specified Debtors' Hotel Properties, the "Specified Debtors' Collateral"). W. Prior to the Filing Date, the Specified Debtors had not defaulted in the payment of any amounts due to the respective Indenture Trustees under the Indentures. X. On January 2, 2002, the Specified Debtors failed to pay respective interest payments in the amounts of i) $33,089.96 which was then due and payable with respect to the Manhattan Indenture and ii) $32,791.96 which was then due and payable with respect to the Lawrence Indenture. 7 Y. The Specified Debtors were, as of the Filing Date, and still are indebted, under the Manhattan Indenture, in the aggregate principal amount of approximately $5,925,000, together with unpaid interest, and costs and expenses including, without limitation, attorneys' fees and costs, which, subject to Bankruptcy Code section 506(b), continue to accrue (collectively, the "Manhattan Debt"). Z. The Specified Debtors were, as of the Filing Date, and still are indebted, under the Lawrence Indenture, in the aggregate principal amount of approximately $5,925,000, together with unpaid interest, and costs and expenses including, without limitation, attorneys' fees and costs, which, subject to Bankruptcy Code section 506(b), continue to accrue (collectively, the "Lawrence Debt" and together with the Manhattan Debt, the "Bond Debt"). AA. A need exists for the Specified Debtors to use cash collateral in order to assure the continued operation of their businesses. Without such funds, the Specified Debtors will be unable to pay, among other things, their operating and payroll expenses, capital expenditures and general overhead. BB. JPMC is willing to consent to the Debtors' limited use of the Specified Debtors' Collateral including, but not limited to, the Specified Debtors' Cash Collateral, and to the imposition of certain liens on the Specified Debtors' Collateral but only upon the specific terms and conditions set forth herein and to the extent of and for necessary expenses. CC. In view of JPMC's reliance upon the provisions of this Stipulation and Order in consenting to the DIP Priming Liens and the use of the Specified Debtors' Cash Collateral on the terms set forth herein and the loaning of such Specified Debtors' Cash Collateral to certain of the Debtors, all as more particularly set forth in the Final Cash Collateral 8 Order, the Final DIP Order and this Stipulation and Order, JPMC is a party that has "extended credit in good faith" with the meaning of section 364(e) of the Bankruptcy Code. STIPULATION NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the adequacy of which is acknowledged, the Debtors and JPMC hereby stipulate and agree as follows: 1. Incorporation of Recitals: It is hereby represented by the parties that the Recitals of this Stipulation and Order are incorporated herein by reference and shall be deemed to be true and correct representations of the parties with respect to the statements herein as such statements apply to each or all of the parties. Each of the parties to this Stipulation and Order represent that they have the sole right and authority to execute this Stipulation and act in accordance with its terms. JPMC is authorized to act on behalf of the Bondholders in connection with this Stipulation. The Specified Debtors expressly represent that, to the extent their constituent documents required the affirmative vote or consent of an independent director or manager or similar person as a prerequisite to seeking voluntary relief under the Bankruptcy Code, that such vote or consent was duly obtained prior to the filing of the voluntary petitions by such Specified Debtors. 2. Value of Specified Debtors' Collateral: As of the Filing Date, the value of the Specified Debtors' Collateral exceeded the amount of the Bond Debt; thus, the Bondholders are oversecured for all purposes in these chapter 11 cases. 3. Use of Cash Collateral: Except as set forth herein, the Debtors are authorized to use the Specified Debtors' Cash Collateral through December 21, 2002 for the limited purposes specifically set forth in the Final Cash Collateral Order. Notwithstanding the 9 foregoing, no Specified Debtors' Cash Collateral held or deposited in any reserve or escrow accounts for taxes, capital expenditures, furniture, fixtures and equipment or similar items shall be used for any purpose other than the purpose for which such accounts (collectively, the "Reserves") are dedicated with respect to the Specified Debtors' Hotel Properties in accordance with paragraph 5(e) of this Stipulation and Order. Except as expressly permitted by this Stipulation and Order, the Debtors are prohibited from use of any of the Specified Debtors' Cash Collateral for any other purpose whatsoever. Without limiting the generality of the foregoing, JPMC does not consent to the use of any of the Specified Debtors' Collateral (including, but not limited to the Specified Debtors' Cash Collateral) to (i) prepare, prosecute or seek approval of any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate any of the Specified Debtors with any of the other Debtors; (ii) investigate, assert, commence, prosecute or otherwise take any action with respect to any claim or alleged claim against JPMC including but not limited to, claims arising under sections 542 through and including 553 of the Bankruptcy Code, provided however, that the Committee may utilize up to $10,000.00 (ten thousand dollars) of the Specified Debtors' Cash Collateral to investigate the Bond Debt, the liens and security interests of JPMC for the benefit of the Bondholders securing the Bond Debt, and any potential claim for relief or cause of action with respect to the Bond Debt; (iii) challenge the amount, validity, priority or enforceability of the Bond Debt or the security interests and liens of JPMC for the benefit of the Bondholders in the Specified Debtors' Collateral or assert any defense, claim, counterclaim or offset with respect to the Bond Debt or the security interests and liens of JPMC for the benefit of the Bondholders; (iv) challenge in any manner whatsoever the Bond Debt and any other rights, claims and entitlements of JPMC for the benefit of the Bondholders under any of the Loan Documents; (v) change, 10 amend or modify in any manner whatsoever any of the Loan Documents; or (vi) seek the modification, amendment or vacature of this Stipulation. 4. Consent to DIP Priming Lien on Specified Debtors' Hotel Properties: Subject to and in accordance with the terms of this Stipulation, JPMC, on behalf of the Bondholders, consents to a limited DIP Priming Lien (the "DIP Priming Lien") to be imposed upon the Specified Debtors' Collateral. The amount of the DIP Priming Lien shall be limited to the extent of the Specified Debtors' Attributable DIP Amount (as defined in the DIP Credit Agreement) that is actually advanced to Lodgian under the DIP Credit Agreement prior to a Termination Event (as hereinafter defined), and, in no such event, shall the DIP Priming Lien exceed the aggregate amount of $302,000 with respect to the Manhattan Property and $317,000 with respect to the Lawrence Property, which shall be allocated to the Specified Debtors' Collateral in accordance with schedule 3.15 to the DIP Credit Agreement. To the extent that the consent of the Bondholders is required for the Specified Debtors to incur the obligations or grant the liens contemplated hereunder or in connection with the DIP Financing or the Final Cash Collateral Order (whether under the terms of their respective certificates of incorporation, other constituent documents or other instruments or agreements), such consent is hereby given, and to the extent the consent of the City of Lawrence or the City of Manhattan is required for the Specified Debtors to modify or amend their corporate charters, by-laws or other constituent documents so as to permit the incurrence of obligations or granting of liens contemplated hereunder or in connection with the DIP Financing, JPMC shall use its best efforts promptly to obtain such consents; provided however, that nothing herein shall limit the right or ability of JPMC or the Debtors to challenge any prohibition upon the incurrence of obligations or the granting of liens pursuant to such documents. 11 5. Adequate Protection: Notwithstanding anything to the contrary contained in section 552(a) of the Bankruptcy Code, in addition to any other grant of adequate protection to JPMC for the benefit of the Bondholders under any other Order of this Court, as adequate protection for, and to secure payment of, the aggregate diminution in the value of the Specified Debtors' Collateral (including without limitation, the Specified Debtors' Cash Collateral) from the Filing Date and as security for and an inducement to JPMC for the benefit of the Bondholders to permit the Debtors' use of the Specified Debtors' Cash Collateral and to consent to the imposition of the DIP Priming Lien, the Debtors hereby grant to JPMC for the benefit of the Bondholders the following additional adequate protection.(3) (a) a replacement lien (the "Specific AP Lien") on all of the prepetition and postpetition property of the Specified Debtors (including without limitation, all postpetition hotel revenue and other charges), which lien shall be junior only to (i) the DIP Priming Lien, (ii) Qualified Prepetition Liens, and (iii) the Carveout; provided however, in the case of (i) and (iii) together, only to the maximum total extent of the Attributable DIP Percentage, as limited to $302,000 with respect to the Manhattan Property and $317,000 with respect to the Lawrence Property; (b)(1) pursuant to sections 363(c) and (e) and 361 of the Bankruptcy Code, all of the Debtors hereby grant to JPMC for the benefit of the Bondholders a perfected security interest in and lien upon (the "Primed Lender AP Lien") all prepetition and postpetition property of the Debtors (including, without limitation, cash collateral, inventory, accounts receivable, other rights to payment, contracts, property, plant, equipment, general - ---------- (3) To the extent that any grant of adequate protection provided herein is inconsistent with a grant of adequate protection to JPMC pursuant to a separate order of this Court, the terms of this Stipulation and Order shall control the grant of adequate protection to JPMC. 12 intangibles, documents, instruments, interests in leaseholds, real property, patents, copyrights, trademarks, trade names, other intellectual property capital stock of subsidiaries, and the proceeds of all the foregoing (other than the Utility Reserve Account (as defined in the Final Cash Collateral Order)), whether now existing or hereafter acquired, which lien and security interest is pari passu with all other Primed Lender AP Liens, except as with respect to the Subordinated Lien Amount (as defined below) and subject only to (i) the DIP Priming Lien (but only to the extent of the Attributable DIP Percentage); (ii) Qualified Prepetition Liens; (iii) a Specific AP Lien with respect to any of the Debtors' properties; and (iv) the Carveout (but only to the extent of the Attributable DIP Percentage); provided however, that JPMC shall subordinate the Subordinated Lien Amount of JPMC's Primed Lender AP Lien to payment in full of all Primed Lender AP Liens not subordinated of each other Primed Lender; provided further that, if (but only to the extent that and for so long as) a holder of any Prepetition Mortgage has the benefit of an express restriction or prohibition contained in the certification of incorporation or similar constitutive document of the Debtor owning such property that prevents the creation of the security interest and lien provided by this paragraph 5(b) (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then such Primed Lender AP Lien shall become effective and enforceable only (i) with consent of such creditor or (ii) upon the payment in full of the claim secured by such Prepetition Mortgage; provided however, that (a) the property subject to the liens granted to JPMC for the benefit of the Bondholders as set forth in this Stipulation and Order shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code and (b) nothing herein shall limit the right or ability of JPMC 13 or the Debtors to challenge the legal effectiveness of any restriction or prohibition upon the creation or effectiveness of any liens or security interests granted for the benefit of JPMC contained in any document. For purposes of this order, the Subordinated Lien Amount shall mean an amount equal to thirty percent (30%) of the total claim of JPMC at the relevant time. The Subordinated Lien Amount of JPMC shall rank pari passu with the Subordinated Lien Amount of any other Primed Lender that has also agreed to subordinate its Primed Lender AP Lien; (b)(2) a replacement lien (the "General AP Lien") on all of the prepetition and postpetition property (including without limitation, all postpetition hotel revenue and other charges) (other than the Utility Reserve Account) owned by the Debtors, which lien shall be pari-passu with other General AP Liens granted to other lenders of such property, but subject to the Carveout, but only if a DIP Priming Lien has been granted with respect to such property (and, in any event, only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement)) and the following liens: (i) any DIP Priming Lien on such property, but only to the extent of the Specified Debtors' Attributable DIP Amount (as defined in the DIP Credit Agreement) that is actually advanced and, in no such event, to exceed $302,000 with respect to the Manhattan Property and $317,000 with respect to the Lawrence Property, (ii) any Qualified Prepetition Liens on such property and any section 506(c) charges assessed against such liens, (iii) any Specific AP Lien on such property, (iv) any Primed Lender AP Lien (as defined in the Motion), (v) any Specific I/C Lien on such property, and (vi) any liens granted to the DIP Lenders under section 364(c) of the Bankruptcy Code on such property, but only if such property is owned by a Low Leverage Debtor; provided, however, if (but only to the extent that and for so long as) the holder of any Prepetition 14 Mortgage (as defined in the Final Cash Collateral Order) has the benefit of an express restriction or prohibition contained in the certificate of incorporation or similar constitutive document of the Debtor owning such property that prevents the creation of the security interest and lien provided by this paragraph 5(b) (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then, such General AP Lien shall become effective and enforceable only (i) with the consent of such creditor or (ii) upon the payment in full of the claim secured by such Prepetition Mortgage; provided however, that nothing herein shall limit the right or ability of JPMC or the Debtors to challenge the legal effectiveness of any restriction or prohibition upon the creation or effectiveness of any liens or security interests granted for the benefit of JPMC. (c) Except as otherwise provided in paragraph 5(b), the security interests and replacement liens granted to JPMC for the benefit of the Bondholders as set forth herein, shall be deemed validly and properly perfected and enforceable against all other persons or entities upon the entry of this Stipulation by the Court without the necessity of filing, recording or serving any financing statements, deeds, mortgages, or other documents which may otherwise be required under federal or state law in any jurisdiction or the taking of any other action to validate or perfect the security interests and liens granted to JPMC herein; (d) the Debtors shall make all (i) monthly interest payments to JPMC due under the Loan Documents (which payments shall include any interest payable from and after the Filing Date and constitute a permitted use of the Specified Debtors' Collateral) at the non-default rates specified in the Loan Documents during the term of this Stipulation and (ii) payments necessary to timely and fully fund all escrows and other reserves required under the Loan Documents; 15 (e) the Debtors shall timely perform and complete all actions necessary or appropriate to protect the Specified Debtors' Collateral against diminution in value, including but not limited to Capital Expenditures necessary to maintain the Specified Debtors' right to use franchise names and trademarks ("Franchise Flags") under existing franchise or operating agreements ("Franchise Agreements") for the applicable hotels, to comply with the Specified Debtors' obligations under the existing Franchise Agreements and any rules or regulations imposed upon the Specified Debtors thereunder and to comply with any Property Improvement Programs ("PIPs") as may be agreed to by the franchisor (the "Franchisor"), or (ii) replace, without interruption, the Specified Debtors' right to use Franchise Flags under existing Franchise Agreements for the applicable hotels with comparable replacement Franchise Agreements and Franchise Flags, with the prior written consent of JPMC or consistent with the provisions of paragraph 5(i) of this Stipulation and Order and shall comply with the Specified Debtors' obligations with respect to such matters under the Loan Documents; (f) the Debtors shall (i) provide to JPMC in a timely fashion a detailed budget or budgets with respect to such Capital Expenditures, which budget or budgets shall be subject to JPMC's reasonable approval; (ii) remove or bond any postpetition lien or claim based upon the furnishing of labor or materials in connection with such Capital Expenditures; (iii) obtain all necessary licenses, permits and approvals in connection with such Capital Expenditures; (iv) comply with any law, ordinance, rule or regulation, or building line or restriction applicable to the Specified Debtors' Hotel Properties; (v) provide JPMC with written reports, on or before the fifth day of each month, describing the status of the Capital Expenditures; and (vi) permit JPMC or any consultant retained 16 by or on behalf of JPMC to inspect the Specified Debtors' Hotel Properties during normal business hours; and (g) the Debtors shall timely furnish to JPMC (i) all such reports and other information required to be provided to JPMC under the Loan Documents and (ii) a monthly statement of operating results and sources and uses of cash with respect to the Specified Debtors' Hotel Properties, no later than thirty (30) days after the end of each calendar month. (h) the Specified Debtors shall comply with all postpetition obligations under the Franchise Agreements and all rules and regulations imposed upon the Specified Debtors by the Franchisors in connection therewith; (i) the Specified Debtors shall comply with their obligations in respect of the Franchise Agreements and the Franchise Flags under the Loan Documents; (j) other than in connection with the entry by the Specified Debtors into a new Franchise Agreement in accordance with the terms of this Stipulation and Order, the Specified Debtors will not reject any Franchise Agreement pursuant to section 365(a) of the Bankruptcy Code; (k) the Specified Debtors shall use their best efforts to obtain with respect to existing Franchise Agreements, and will obtain, with respect to any renewal or extension of an existing Franchise Agreement or the entry into any new Franchise Agreement, comfort letters or tripartite agreements acknowledging the liens and the right of JPMC to continue such Franchise Agreements in the event that JPMC or their nominee or designee takes title to any Hotel Property; and (l) the Debtors shall pay the reasonable attorneys' fees and disbursements incurred by JPMC in connection with the Cases on and after the Filing Date within ten 17 business days after presentment by JPMC of an invoice to the Debtors, which invoice may be redacted to preserve any privilege associated therewith. 6. Termination of Use of Cash Collateral and of Consent to Further DIP Priming Lien: Notwithstanding anything to the contrary contained herein, the Debtors' right to use the Specified Debtors' Cash Collateral, and the Bondholders' consent to imposition of the DIP Priming Lien with respect to any advances made by the DIP Lenders after the occurrence of any Termination Event (as hereinafter defined), shall expire on the earliest to occur of (the first such occurrence being hereinafter referred to as the "Termination Event"): (i) December 21, 2002; (ii) the entry by this Court or any other court of an order reversing, amending, supplementing, staying, vacating or otherwise modifying the terms of this Stipulation; (iii) the dismissal of any of the Debtors' bankruptcy cases or the conversion of any of the Debtors' bankruptcy cases to a case under Chapter 7 of the Bankruptcy Code; (iv) the entry by this Court of an order granting relief from the automatic stay imposed by section 362 of the Bankruptcy Code to any entity other than JPMC, with respect to the Specified Debtors (other than relief from the stay in favor of a lessor of, or a secured creditor with a lien against, personal property having a value not exceeding $25,000 (twenty-five thousand dollars)); (v) the filing by the Debtors of any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate the Specified Debtors with any of the other Debtors; (vi) the filing by the Debtors of any motion, application, adversary proceeding or plan of reorganization or liquidation seeking to (a) challenge in any manner whatsoever the Bond Debt and any other rights, claims and entitlements under any of the Loan Documents or under this Stipulation, (b) change, amend or modify in any manner whatsoever any of the Loan Documents, or (c) seek the modification, amendment or vacature of this Stipulation without JPMC's express written prior 18 consent; (vii) the appointment of a trustee or examiner or other representative with expanded powers for any of the Debtors; (viii) the occurrence of the effective date or consummation of a plan of reorganization for any of the Debtors; (ix) the termination or rejection of any Franchise Agreement for any of the Specified Debtors' Hotel Properties except as permitted in paragraph 5(i); (x) the existence of any material postpetition default under any Franchise Agreement for any of the Specified Debtors' Hotel Properties and, with respect thereto, the expiration of (a) any applicable cure period under the Loan Documents or (b) five calendar days, whichever is longer, from notice to the Debtors of the occurrence of a Termination Event ; (xi) the breach of any of the Debtors' obligations under the Stipulation and, in the case of obligations under paragraph 5(d), (e), (f) & (g), the failure to cure such breach within five business days of notice thereof; (xii) an Event of Default under the DIP Credit Agreement (as defined in the DIP Credit Agreement); (xiii) a sale of any of the Specified Debtors' Collateral pursuant to section 363(b) of the Bankruptcy Code and (xiv) the Debtors' exclusive right to file a plan or solicit acceptances thereof is terminated. On and after the Termination Event, the Debtors shall immediately cease using any of the Specified Debtors' Cash Collateral; provided however, that the Debtors reserve the right to seek authorization to use such Specified Debtors' Cash Collateral pursuant to section 363(c) of the Bankruptcy Code, and JPMC reserves the right to oppose such relief. 7. Acknowledgment of Bond Debt and Prepetition Liens: The Debtors acknowledge and agree that the Bond Debt is valid and due and owing and that the separate liens and security interests encumbering the Specified Debtors' Collateral securing the Bond Debt are each valid, enforceable and perfected senior liens. This paragraph 7 shall be binding and effective upon all persons and entities, including but not limited to, the Debtors and the Committee; provided however, that the Committee shall have until April 15, 2002 (the 19 "Challenging Period") to commence an adversary proceeding (a) against JPMC with respect to the Bond Debt or the liens and security interests of the Bondholders securing the Bond Debt or (b) otherwise asserting any claims for relief or causes of action against either of JPMC or any released party, with respect to the Bond Debt or otherwise. In the event no such adversary proceeding is commenced by the Committee within the Challenge Period, the Committee shall be deemed to have acknowledged and agreed that the Bond Debt is valid and that the liens and security interests securing the Bond Debt are valid, enforceable and perfected senior liens. 8. Release of Bondholders and JPMC: The Debtors acknowledge and agree that they do not possess and may not assert any claim, counterclaim, setoff or defense of any kind or nature which would in any way affect the enforceability, priority, amount and validity, of the claims and liens granted to JPMC, under this Stipulation or under the Loan Documents, including but not limited to the Bond Debt, and (ii) the Debtors hereby release, discharge, and acquit the Bondholders, JPMC and each of JPMC's officers, directors, shareholders, agents, professionals, representatives, employees, subsidiaries, and affiliates, and each of the successors, assigns, heirs, and representatives of each (collectively with the Bondholders and JPMC, the "Released Parties") from any and all claims, rights, demands, injuries, debts, damages, liabilities, omissions, contracts, agreements, actions, and causes of action, whether at law or in equity, and whether based on contract, tort, or otherwise, known or unknown, suspected or unsuspected, of every kind and nature, which the Debtors or their successors, assigns, heirs, and representatives at any time had, now have, or hereafter can or may have against any of the Released Parties arising prior to the entry of this Stipulation. 20 9. Information to Lender: In addition to the information required to be provided to JPMC in paragraph 5(e) & (g) of this Stipulation, the Debtors are authorized and directed to provide to JPMC any and all documentation, reports, schedules, assignments, financial statements, insurance policies and endorsements, access, inspection, audit, inquiry and other rights which JPMC may reasonably request with respect to the Specified Debtors. 10. Modification of Automatic Stay: The Debtors are hereby authorized and directed to perform all acts, and execute and comply with the terms of such other documents, instruments, and agreements as JPMC may reasonably require as evidence of and for the protection of the Bondholders, or which may be otherwise deemed necessary by JPMC, to effectuate the terms and conditions of this Stipulation. The automatic stay imposed by section 362 of the Bankruptcy Code is hereby modified and vacated in all respects necessary in order to enable the Debtors to perform all of its obligations hereunder. 11. Priority of Liens and Claims: Except as specifically set forth in this Stipulation and Order, the liens granted to JPMC for the benefit of the Bondholders and the claims hereby allowed under this Stipulation to JPMC for the benefit of the Bondholders for any diminution in the value of the Specified Debtors' Collateral (including, but not limited to the Specified Debtors' Cash Collateral) shall have priority in right of payment over any and all other claims, debts, obligations, liabilities and indebtedness of the Debtors of any kind, now in existence or hereinafter incurred by the Debtors and over all administrative expenses or priority claims of the kind specified in, or ordered pursuant to, sections 105, 326, 330, 331, 503(b), 506(c) (except as otherwise expressly permitted by paragraph 12 of the Stipulation), or 507(b) of the Bankruptcy Code. No other claim or lien having a priority superior or pari passu with the 21 claims and liens granted to JPMC, pursuant to the terms of this Stipulation shall be granted in any of the Debtors' cases while any portion of JPMC's claims, including the Bond Debt and all other claims arising after the Filing Date, remain outstanding. Notwithstanding the foregoing, the superpriority claim of JPMC allowed pursuant to this paragraph shall be pari passu with like superpriority claims granted to other Primed Lenders and shall be junior and subordinate to the Carveout, but only to the extent of the Attributable DIP Amount with respect to each of the Debtors. 12. No Surcharge: Except with respect to the Carveout (and, in any event, only to the extent of the Attributable DIP Percentage) and except as otherwise expressly provided in the last two sentences of this paragraph 12, no costs or expenses of administration which have been or may be incurred in any of these cases, any conversion of any of the Debtors' cases pursuant to section 1112 of the Bankruptcy Code, or in any future proceedings or cases related hereto (i) shall be charged against JPMC its claims, or the Specified Debtors' Collateral under section 506(c) of the Bankruptcy Code or otherwise, without the prior written consent of JPMC and no such consent shall be implied from any other action, inaction or acquiescence; or (ii) shall be senior to or on a parity with the liens and security interests granted pursuant to this Stipulation. Notwithstanding the foregoing, the Debtors may file an application or motion seeking to surcharge the Specified Debtors' Collateral pursuant to section 506(c) of the Bankruptcy Code for the reasonable, necessary costs and expenses of preserving, or disposing of, the Specified Debtors' Collateral, to the extent of any benefit to JPMC, (or any other subsequent holder of the Loan Documents) and to the extent of (a) the aggregate net cash funding provided to the Specified Debtors from and after the Filing Date less the sum of (b) (i) the outstanding amount of the DIP Priming Lien and (ii) the aggregate reorganization costs and expenses paid by 22 the Specified Debtors (except to the extent that such reorganization costs and expenses directly benefited the estates of the Specified Debtors). JPMC fully reserves the right to object to any such application or motion under section 506(c) of the Bankruptcy Code, and no action or inaction shall be deemed to constitute consent to such relief or a waiver of any rights of JPMC with respect thereto. 13. Section 364(e) Protection: In view of JPMC's, reliance upon the provisions of the Stipulation in consenting to the DIP Priming Liens and the use of the Specified Debtors' Cash Collateral on the terms set forth herein and the loaning of such Cash Collateral to certain of the Debtors, all as more particularly set forth in the Final Cash Collateral Order, the Final DIP Order and the Stipulation, the protections afforded to JPMC by the Stipulation and the liens and security interests granted thereby to JPMC shall be subject to section 364(e) of the Bankruptcy Code. 14. Binding Effect: The provisions of this Stipulation shall inure to the benefit of the Debtors, JPMC, and the Bondholders and shall be binding upon the Debtors and their successors and assigns, including any trustee or other fiduciary hereafter appointed as a legal representative of any of the Debtors or with respect to property of the estate of any such Debtor, whether under Chapter 11 of the Bankruptcy Code or in any subsequent Chapter 7 case, and upon the United States Trustee and all creditors and parties in interest in these bankruptcy cases. 15. No Waiver: Nothing in this Stipulation shall prejudice the rights of JPMC or the Bondholders under the Bankruptcy Code and applicable non-bankruptcy law, including, without limitation, their rights to (i) seek further adequate protection, (ii) request conversion or 23 dismissal of any of the Debtors' bankruptcy cases; (iii) seek relief from the automatic stay under section 362(d) of the Bankruptcy Code; (iii) request appointment of a trustee or examiner in any of the Debtors' bankruptcy cases; (iv) propose or solicit acceptances of a plan of reorganization or liquidation for any of the Debtors; (v) object to or otherwise oppose any relief sought by any entity or party in these cases, including without limitation, to object to any application filed by any professional in these cases seeking compensation and reimbursement of expenses under sections 330 or 331 of the Bankruptcy Code; (vi) object to or otherwise oppose any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate the Specified Debtors with any of the other Debtors; or (vii) assert that the Debtors are obligated to pay to JPMC the default rate of interest and any other charges, penalties and costs required to be paid under the Loan Documents for the period commencing on the Filing Date and continuing until all such amounts due under the Loan Documents and hereunder are paid in full. This Stipulation and the transactions contemplated hereby shall be without prejudice to any and all rights, remedies, claims and causes of action which JPMC has or may have against any party who may be liable with any of the Debtors for the Bond Debt and otherwise under the Loan Documents or any part thereof. Except with respect to paragraph 2 of this Stipulation and Order, the execution of this Stipulation, and nothing contained herein, shall be deemed to be an admission, or constitute evidence, in connection with any matter or proceeding other than the enforcement of the terms of this Stipulation, including but not limited to (i) any subsequent motion or application for use of cash collateral or for approval of debtor in possession financing; (ii) any motion, application or plan of reorganization or liquidation seeking to substantively consolidate one or more of the Specified Debtors with any other person; and (iii) any motion or application filed by or on behalf of JPMC seeking to modify the automatic stay, dismissal of the Cases or termination of exclusivity. Except as otherwise expressly provided in the Stipulation, 24 the parties hereto expressly reserve all of their rights and remedies under the Bankruptcy Code and applicable non-bankruptcy law. 16. Waiver by the Debtors: Each of the parties hereto hereby irrevocably waives any right to seek any modifications or extensions of this Stipulation without the prior written consent of the other party thereto. 17. No Construction Against Draftsman: The provisions of this Stipulation shall be deemed to have been jointly drafted by the Debtors and JPMC and shall not be construed against a party because of its role in drafting this Stipulation. 18. Execution in Counterparts: This Stipulation may be executed in one or more counterparts, all of which shall be deemed to be a single original. 19. No Waiver of Rights: In the event that any of the Debtors' cases are dismissed, neither the entry of this Stipulation nor the dismissal of such case(s) shall affect the rights of JPMC, the Bondholders, or the Debtors under this Stipulation, and all the rights and remedies of JPMC and the Bondholders hereunder or at law or in equity shall remain in full force and effect as if such case had not been filed. 20. Most Favored Nation: In the event that any creditor is granted adequate protection of its interests in a manner that is in addition to or is superior in any respect to the adequate protection set forth in paragraph 5 of the Stipulation, JPMC for the benefit of the Bondholders shall be entitled to such additional adequate protection, which shall be evidenced by an order jointly presented to the Court by the Debtors and JPMC (the "Supplemental Order") for consideration after notice and a hearing. In the event the Debtors and JPMC are unable to 25 promptly agree on the terms of such Supplemental Order, either party shall be entitled to file a motion seeking the entry of an order granting to JPMC for the benefit of the Bondholders such additional adequate protection. 21. Notices: Any notice required or permitted under this Stipulation and Order or the Loan Documents shall be delivered by facsimile, overnight mail or certified or registered mail as follows: If to the Debtors: Lodgian, Inc. 3445 Peachtree Road Suite 700 Atlanta, GA 30326 Phone: (404) 365-3823 Fax: (404) 364-6144 Attention: Chief Financial Officer 26 With a copy to: Gregory M. Petrick, Esq. Barry N. Seidel, Esq. Cadwalader, Wickersham & Taft Attorneys for the Debtors 100 Maiden Lane New York, New York 10038 Phone: 212-504-6000 Fax: 212-504-6666 If to JPMC: J. Chris Matthews Vice President, JPMorgan Chase Bank 600 Travis, 53 Floor Houston, Texas 77002 Phone: 713-216-4728 Fax: 713-216-7447 With a copy to: Mark R. Somerstein, Esq. Sheila E. Carson, Esq. Attorneys for JPMorgan Chase Bank, as Successor Indenture Trustee Kelley Drye & Warren LLP 101 Park Avenue New York, New York 10178 Phone: 212-7800 Fax: 212-808-7897 27 All notices shall be deemed given upon transmission, if sent by facsimile; upon the first business day after mailing, if sent by overnight mail; and upon the third business day after mailing, if sent by certified or registered mail. Dated: New York, New York February 14, 2002 CADWALADER, WICKERSHAM & TAFT KELLEY, DRYE & WARREN LLP By: /s/ Gregory M. Petrick By: /s/ Mark R. Somerstein ------------------------------ ------------------------------ Gregory M. Petrick (GP-2175) Mark R. Somerstein (MS-9721) 100 Maiden Lane 101 Park Avenue New York, NY 10038 New York, NY 10178 (212) 504-6000 (212) 808-7800 SO ORDERED THIS 14th DAY OF FEBRUARY, 2002 /s/ Burton R. Lifland ------------------------------ United States Bankruptcy Judge 28 EX-10.40 11 g75096ex10-40.txt STIPULATION AND ORDER AMONG DEBTORS AND CRIMI MAE EXHIBIT 10.40 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - -----------------------------------X In re : Case No. 01-16345 (BRL) LODGIAN, INC., et al., : (Jointly Administered) Debtors. : Chapter 11 - -----------------------------------X STIPULATION AND ORDER AMONG THE DEBTORS AND CRIIMI MAE SERVICES L.P. AS SPECIAL SERVICER, PROVIDING FOR (i) LIMITED USE OF CASH COLLATERAL AND ADEQUATE PROTECTION AND (ii) RELATED RELIEF (LOW LEVERAGE DEBTORS) RECITALS FACTUAL BACKGROUND A. On December 20, 2001 (the "Filing Date"), Lodgian, Inc. ("Lodgian") and the other above-captioned debtors and debtors-in-possession (collectively, the "Debtors") filed with this Court voluntary petitions for relief commencing cases (the "Cases") under Chapter 11 of Title 11, United States Code (the "Bankruptcy Code").(1) B. Since the Filing Date, the Debtors have remained in possession of their businesses and properties pursuant to sections 1107 and 1108 of the Bankruptcy Code. C. On January 8, 2002, the Office of the United States Trustee appointed a seven (7) member official committee of unsecured creditors (the "Committee"). D. On the Filing Date, the Debtors filed several motions including a motion pursuant to Sections 105, 362, 363, 364, 503(b) and 507 of the Bankruptcy Code for orders, inter - ---------- (1) All of the Debtors filed their Chapter 11 petitions on the Filing Date, except Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville Hospitality, L.P. and Sioux City Hospitality, L.P. These four entities filed their Chapter 11 petitions on December 21, 2001. alia, authorizing the Debtors to (A) obtain postpetition financing on a super-priority secured basis, and (B) use cash collateral and providing adequate protection in connection therewith (the "DIP/Cash Collateral Motion"). (2) E. On December 21, 2001, the Court entered an interim order authorizing the Debtors to use cash collateral of the Pre Petition Mortgage Lenders pending a final hearing (the "Interim Cash Collateral Order"), which hearing is scheduled to occur on February 13, 2002 (the "Final Hearing"). F. On December 21, 2001, the Court also entered an interim order authorizing Lodgian to borrow up to a maximum aggregate principal amount of $10,000,000 in accordance with the terms of the DIP Credit Agreement pending the Final Hearing (the "Interim DIP Order"). G. It is anticipated that following the Final Hearing the Court will enter a final cash collateral order (the "Final Cash Collateral Order") and a final order authorizing Lodgian to borrow up to a maximum aggregate principal amount of $25,000,000 in accordance with the terms of the DIP Credit Agreement pending the Final Hearing (the "Final DIP Order"). H. In accordance with the Final DIP Order, among other things, (i) all of the Debtors other than Lodgian will be authorized to guarantee the amounts borrowed by Lodgian under the DIP Credit Agreement upon the conditions set forth therein; (ii) pursuant to section 364(c)(1) of the Bankruptcy Code, all of the Debtors' obligations under the DIP Credit Agreement shall be authorized to constitute obligations with priority over any and all administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code, and over any and all administrative expenses or other claims under sections 105, 326, 328, - ---------- (2) Unless otherwise defined herein, all capitalized terms used herein shall have the same meanings assigned to them in the DIP/Cash Collateral Motion. 2 506(c) or 507 of the Bankruptcy Code, subject in limited circumstances to the Carveout; (iii) pursuant to section 364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders were granted a perfected first priority security interest in and lien upon all cash and cash equivalents in the Letter of Credit Account under the DIP Credit Agreement and any investment of the funds therein to the Agent and the DIP Lenders; (iv) pursuant to section 364(d)(1) of the Bankruptcy Code, the Debtors will be authorized to grant a perfected priming security interest in and lien to the Agent and the DIP Lenders on all pre- and postpetition property of the Debtors that is subject to the existing liens presently securing the Debtors' indebtedness to the Pre Petition Lenders, but not senior to the interests of any of the liens existing immediately prior to the Filing Date, or to interests in such property arising out of liens to which the liens of the Pre Petition Lenders become subject subsequent to the Filing Date as permitted by section 546(b) of the Bankruptcy Code; and (v) pursuant to section 364(c)(2) of the Bankruptcy Code, the Debtors will be authorized to grant a perfected security interest in and lien to the Agent and the DIP Lenders on all other pre- and postpetition property of the Debtors that, on or as of the Filing Date, was not subject to valid, perfected and non-avoidable liens. THE TRUSTS' LOANS I. Prior to the Filing Date, Lehman Brothers Holdings Inc., First Union National Bank of North Carolina, Loan Services, Inc. and GMAC Commercial Mortgage Corporation (collectively, the "Originating Lenders") entered into a series of loan transactions (collectively, the "Loans") with certain of the Debtors which are summarized as follows: (i) An agreement, dated as of June 30, 1997, among Lehman Brothers Holdings Inc. ("Lehman Brothers"), as lender, and Melbourne Hospitality Associates Limited 3 Partnership, as borrower, pursuant to which Lehman Brothers loaned the borrower the principal sum of $5,600,000 (the "Melbourne Loan Agreement"); (ii) An agreement, dated as of June 30, 1997, among Lehman Brothers, as lender, and Fort Wayne Hospitality Associates II, Limited Partnership, as borrower, pursuant to which Lehman Brothers loaned the borrower the principal sum of $1,900,000 (the "Fort Wayne Loan Agreement"); (iii) (c) An agreement, dated as of October 21, 1996, among Lehman Brothers, as lender, and Worcester Hospitality Associates Limited Partnership, as borrower, pursuant to which Lehman Brothers loaned the borrower the principal sum of $7,700,000 (the "Worcester Loan Agreement"); (iv) An agreement, dated as of April 11, 1997, among Lehman Brothers, as lender, and Servico Frisco, Inc., as borrower, pursuant to which Lehman Brothers loaned the borrower the principal sum of $5,150,000 (the "Servico Frisco Loan Agreement"); (v) An agreement, dated as of October 21, 1996, among Lehman Brothers, as lender, and Apico Inns of Pittsburgh, Inc., as borrower, pursuant to which Lehman Brothers loaned the borrower the principal sum of $5,100,000 (the "Apico Loan Agreement"); (vi) An agreement, dated as of March 18, 1997, among First Union National Bank of North Carolina ("First Union") as lender, and Atlanta Boston Lodging LLC, as borrower, pursuant to which First Union loaned the borrower the principal sum of $3,600,000 (the "Atlanta Boston Loan Agreement"); (vii) An agreement, dated as of January 17, 1996, between Loan Services, Inc. ("Loan Services"), as lender, and 1075 Hospitality, L.P.; Brecksville Hospitality, L.P.; and Sioux City Hospitality, L.P., as borrowers, pursuant to which Loan Services loaned the borrower the principal sum of $12,910,000 (the "1075 Loan Agreement"); 4 (viii) An agreement, dated as of May 7, 1996, between GMAC Commercial Mortgage Corporation ("GMAC"), as lender, and Servico Lansing, Inc., as borrower, pursuant to which GMAC loaned the borrower the principal sum of $5,687,000 (the "Servico Lansing Loan Agreement"); and (ix) An agreement, dated as of July 18, 1996, between GMAC, as lender, and Servico Omaha Central, Inc.; Servico Omaha, Inc.; Servico Wichita, Inc.; Servico Council Bluffs, Inc.; and Servico West Des Moines, Inc., as borrowers, pursuant to which GMAC loaned the borrowers the principal sum of $16,840,000 (the "Omaha Loan Agreement", and together with the Melbourne Loan Agreement, Fort Wayne Loan Agreement, Worcester Loan Agreement, Servico Frisco Loan Agreement, Apico Loan Agreement, Atlanta Boston Loan Agreement, 1075 Loan Agreement, and Servico Lansing Loan Agreement, the "Loan Agreements"). Borrowers Melbourne Hospitality Associates, L.P., Fort Wayne Hospitality Associates L.P., Servico Lansing, Inc., Worcestor Hospitality Associates, Servico Frisco, Inc., Aprico Inns of Pittsburgh, Inc. and Atlanta Boston Lodging LLC are hereinafter collectively referred to as the "Specified Debtors". J. In addition to the Loan Agreements, all of the Loans to the Specified Debtors (the "Specified Loans") are further evidenced by, among other things, duly executed promissory notes (collectively, the "Notes"), first priority mortgages, security agreements and assignment of leases and rents (collectively, the "Mortgages and Assignments of Rents", and together with the Notes, Loan Agreements with the Specified Debtors and all other documents executed in connection therewith, the "Loan Documents") in and to each Hotel Property owned by the Specified Debtors (collectively, the "Specified Debtors' Hotel Properties"). K. The Debtors have informed CMSLP that the Specified Debtors' Hotel Properties require substantial capital expenditures (the "Capital Expenditures") in order to 5 preserve the value of the Hotel Properties, which Capital Expenditures must be completed during the calendar year 2002. Such Capital Expenditures include, but are not limited to, property improvement programs ("PIPs") agreed to by the Debtors and one or more of the Specified Debtors' franchisors. L. The Specified Debtors' repayment of the Specified Loans is secured by, among other things, a first priority lien in and to the Specified Debtors' Hotel Properties, as well as all of the rents, profits, proceeds and revenues derived from such hotels (the "Specified Debtors' Cash Collateral"; collectively, with the Specified Debtors' Hotel Properties, the "Specified Debtors' Collateral"). M. Subsequent to, or simultaneously with, the closing of the Loans, the Loan Documents were deposited into three (3) separate trusts as part of securitization transactions for the benefit of the Registered Holders of the First Union-Lehman Brothers Commercial Mortgage Trust II, Commercial Mortgage Pass-Through Certificates, Series 1997-C2 ("Trust I"), the Registered Holders of the LB Commercial Conduit Mortgage Trust II, Multiclass Pass-Through Certificates, Series 1996-C2 ("Trust II"), the Registered Holders of First Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 1997-C1 ("Trust III", and together with Trust I and Trust II, the "Trusts"). CRIIMI MAE Services L.P. ("CMSLP") is the special servicer to LaSalle Bank National Association, a National Banking Association formerly known as LaSalle National Bank, as Trustee of Trusts 1 and 2, and to State Street Bank and Trust Company, as Trustee for Trust 3. N. The Trusts currently hold the mortgage debt encumbering the Specified Debtors' Hotel Properties and are, therefore, required to be repaid the Specified Loans from the Specified Debtors in accordance with the terms and conditions of the Loan Documents, as well as the other documents executed in connection with the securitization of the Loans. 6 O. Prior to the Filing Date, the Specified Debtors had not defaulted in the payment of any amounts due to the Trusts under the Loan Documents. P. The Specified Debtors were, as of the Filing Date, and still are indebted to Trust 1 pursuant to the terms and conditions of the Loan Documents, in the aggregate principal amount of approximately $7,060,340 (seven million, sixty thousand, three hundred and forty dollars), together with accrued unpaid interest, which continues to accrue, and costs and expenses including, without limitation, attorneys' fees and costs, which continue to accrue (collectively, the "Trust 1 Debt"). Q. The Specified Debtors were, as of the Filing Date, and still are indebted to Trust 2 pursuant to the terms and conditions of the Loan Documents, in the aggregate principal amount of approximately $5,305,229 (five million, three hundred and five thousand, two hundred and twenty nine dollars), together with accrued and unpaid interest, which continues to accrue, and costs and expenses including, without limitation, attorneys' fees and costs, which continue to accrue (collectively, the "Trust 2 Debt"). R. The Specified Debtors were, as of the Filing Date, and still are indebted to Trust 3 pursuant to the terms and conditions of the Loan Documents, in the aggregate principal amount of approximately $20,275,424 (twenty million, two hundred seventy five thousand, four hundred and twenty four dollars), together with accrued and unpaid interest, which continues to accrue, and costs and expenses including, without limitation, attorneys' fees and costs, which continue to accrue (collectively, the "Trust 3 Debt", and together with the Trust 1 Debt and Trust 2 Debt, the "Trust Debt"). S. A need exists for the Specified Debtors to use cash collateral in order to assure the continued operation of their businesses. Without such use of cash collateral, the 7 Specified Debtors will be unable to pay, among other things, their operating and payroll expenses, capital expenditures and general overhead. T. The Trusts are willing to consent to the Debtors' limited use of the Specified Debtors' Collateral including, but not limited to the Specified Debtors' Cash Collateral and to the imposition of certain liens on the Specified Debtors' Collateral but only upon the specific terms and conditions set forth herein and to the extent of and for necessary expenses. U. In view of the Trusts' reliance upon the provisions of the Stipulation in consenting to the DIP Priming Liens and the use of the Specified Debtors' Cash Collateral on the terms set forth herein and the loaning of such Specified Debtors' Cash Collateral to certain of the Debtors, all as more particularly set forth in the Final Cash Collateral Order, the Final DIP Order and the Stipulation, the Trusts are parties that have "extended credit in good faith" within the meaning of section 364(e) of the Bankruptcy Code. STIPULATION NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the adequacy of which is acknowledged, the Debtors and CMSLP, as special servicer and on behalf of the Trusts as their attorney in fact, hereby stipulate and agree as follows: 1. Incorporation of Recitals: It is hereby represented by the parties that the Recitals in Paragraph A through U of this Stipulation are incorporated herein by reference and shall be deemed to be true and correct representations of the parties with respect to the statements therein as such statements apply to each or all of the parties. Each of the parties to this Stipulation represent that they have the sole right and authority to execute this Stipulation and act in accordance with its terms. CMSLP expressly represents that it is authorized to act on 8 behalf of the Trusts. The Specified Debtors expressly represent that, to the extent their constituent documents required the affirmative vote or consent of an independent director or manager or similar person as a prerequisite to seeking voluntary relief under the Bankruptcy Code, that such vote or consent was duly obtained prior to the filing of the voluntary petitions by such Specified Debtors. 2. Value of Specified Debtors' Collateral: As of the Filing Date, the value of the Specified Debtors' Collateral exceeds the amount of the Trust Debt. 3. Use of Cash Collateral: Except as set forth herein, the Debtors are authorized to use the Cash Collateral of the Trusts through December 21, 2002 for the limited purposes specifically set forth in the Final Cash Collateral Order. Notwithstanding the foregoing, no Specified Debtors' Cash Collateral held or deposited in any reserve or escrow accounts for taxes, capital expenditures, furniture, fixtures and equipment or similar items shall be used for any purpose other than the purpose for which such accounts (collectively, the "Reserves") are dedicated with respect to the Specified Debtors' Hotel Properties in accordance with paragraph 5(e) of the Stipulation. Except as expressly permitted by this Stipulation and Order, the Debtors are prohibited from use of any of the Specified Debtors' Cash Collateral for any other purpose whatsoever. Without limiting the generality of the foregoing, the Trusts do not consent to the use of any of the Specified Debtors' Collateral (including, but not limited to the Specified Debtors' Cash Collateral) to (i) prepare, prosecute or seek approval of any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate any of the Specified Debtors with any of the other Debtors; (ii) investigate, assert, commence, prosecute or otherwise take any action with respect to any claim or alleged claim against the Trusts, including but not limited to, claims arising under sections 542 through and including 553 of the Bankruptcy Code, provided, however, that the Committee may utilize up to 9 $21,000.00 (twenty one thousand dollars) of the Specified Debtors' Cash Collateral to investigate the Trusts' Debt, the liens and security interests of the Trusts securing the Trust Debt and any potential claim for relief or cause of action with respect to the Trust Debt; (iii) challenge the amount, validity, priority or enforceability of the Trust Debt or the security interests and liens of the Trusts in the Specified Debtors' Collateral or assert any defense, claim, counterclaim or offset with respect to the Trust Debt or the security interests and liens of the Trusts; (iv) challenge in any manner whatsoever the Trusts' Debt and any other rights, claims and entitlements of the Trusts under any of the Loan Documents; (v) change, amend or modify in any manner whatsoever any of the Loan Documents; or (vi) seek the modification, amendment or vacature of this Stipulation. 4. Consent to DIP Priming Lien on Specified Debtors' Hotel Properties: Subject to and in accordance with the terms of this Stipulation, CMSLP, on behalf of the Trusts, consents to a limited DIP Priming Lien (the "DIP Priming Lien") to be imposed upon the Specified Debtors' Collateral. The amount of the DIP Priming Lien on the Specified Debtors' Collateral shall be limited to the extent of the Specified Debtors' Attributed DIP Amount (as defined in the DIP Credit Agreement) that is actually advanced to Lodgian under the DIP Credit Agreement prior to a Termination Event (as hereinafter defined), and, in no such event, shall the DIP Priming Lien on the Specified Debtors' Collateral exceed the aggregate amount of $2,892,800 (two million, eight hundred ninety two thousand and eight hundred dollars), which shall be allocated to the Specified Debtors' Collateral in accordance with schedule 3.15 to the DIP Credit Agreement. To the extent that the consent of the Trusts is required for the Specified Debtors to incur the obligations or grant the liens contemplated hereunder or in connection with the DIP Financing or the Final Cash Collateral Order (whether under the terms of their respective 10 certificates of incorporation, other constituent documents or other instruments or agreements), such consent is hereby given. 5. Adequate Protection: Notwithstanding anything to the contrary contained in section 552(a) of the Bankruptcy Code, as adequate protection for, and to secure payment of, in an amount equal to the aggregate diminution in the value of the Specified Debtors' Collateral (including, the Specified Debtors' Cash Collateral) from the Filing Date, as security for and an inducement to the Trusts to permit the Debtors' use of the Specified Debtors' Cash Collateral and to consent to the imposition of the DIP Priming Lien, the Debtors hereby grant to the Trusts the following adequate protection: (a) a replacement lien (the "Specific AP Lien") on all of the prepetition and postpetition property (including without limitation, all postpetition hotel revenue and other charges) of the Specified Debtors, which lien shall be junior only to (i) the DIP Priming Lien, and (ii) the Carveout, but only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement) (as so limited, $173,568.22 (one hundred seventy three thousand, five hundred sixty eight dollars and twenty two cents)); (b) (1) a replacement lien (the "Primed Lender AP Lien") on all of the prepetition and postpetition property (including without limitation, all postpetition hotel revenue and other charges) owned by the Debtors (other than the Utility Reserve Account (as defined in the Final Cash Collateral Order)), which lien shall be pari-passu with other Primed Lender AP Liens granted to other lenders of such property, but subject to the Carveout, but only if a DIP Priming Lien has been granted with respect to such property (and, in any event, only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement)) and the following liens: (w) any DIP Priming Lien on such property, but only to the extent of the such Debtors' Attributed DIP Amount (as defined 11 in the DIP Credit Agreement) that is actually advanced, (x) any Qualified Prepetition Liens on such property and any section 506(c) charges assessed against such liens and (y) any Specific AP Lien on such property; provided, however, if (but only to the extent that and for so long as) the holder of any Prepetition Mortgage (as defined in the Final Cash Collateral Order) has the benefit of an express restriction or prohibition contained in the certificate of incorporation or similar constitutive document of the Debtor owning such property that prevents the creation of the security interest and lien provided by this paragraph 5(b) (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then, such General AP Lien shall become effective and enforceable only (i) with the consent of such creditor or (ii) upon the payment in full of the claim secured by such Qualified Prepetition Lien; provided, however, the property subject to the liens granted to the Trusts as set forth in the Stipulation shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code; (b) (2) a replacement lien (the "General AP Lien") on all of the prepetition and postpetition property (including without limitation, all postpetition hotel revenue and other charges) owned by the Debtors (other than the Utility Reserve Account), which lien shall be pari-passu with other General AP Liens granted to other lenders of such property, but subject to the Carveout, but only if a DIP Priming Lien has been granted with respect to such property (and, in any event, only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement)) and the following liens: (i) any DIP Priming Lien on such property, but only to the extent of the such Debtors' Attributed DIP Amount (as defined in the DIP Credit Agreement) that is actually advanced, and (ii) any Qualified Prepetition Liens on such property and any section 506(c) charges assessed against such 12 liens, (iii) any Specific AP Lien on such property, (iv), any Primed Lender AP Lien (as defined in the Motion) on such property, (v) any Specific I/C Lien on such property, and (vi) any liens granted to the DIP Lenders under 364(c) of the Bankruptcy Code on such property, but only if such property is owned by a Low Leverage Debtor; provided, however, if (but only to the extent that and for so long as) the holder of any Prepetition Mortgage (as defined in the Final Cash Collateral Order) has the benefit of an express restriction or prohibition contained in the certificate of incorporation or similar constitutive document of the Debtor owning such property that prevents the creation of the security interest and lien provided by this paragraph 5(b) (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then, such General AP Lien shall become effective and enforceable only (i) with the consent of such creditor or (ii) upon the payment in full of the claim secured by such Qualified Prepetition Lien; provided, however, the property subject to the liens granted to the Trusts as set forth in the Stipulation shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code; (c) except as other provided in paragraph 5(b), the security interests and replacement liens granted to the Trusts as set forth herein, shall be deemed validly and properly perfected and enforceable against all other persons or entities upon the entry of this Stipulation by the Court without the necessity of filing, recording or serving any financing statements, deeds, mortgages, or other documents which may otherwise be required under federal or state law in any jurisdiction or the taking of any other action to validate or perfect the security interests and liens granted to Trusts herein; 13 (d) the Debtors shall make all (i) monthly interest payments to the Trusts due under the Specified Loans (which payments shall include any interest payable from and after the Filing Date and constitute a permitted use of the Specified Debtors' Collateral) at the non-default rates specified in the Loan Documents during the term of this Stipulation and (ii) payments necessary to timely and fully fund all Reserves required under the Loan Documents; (e) the Debtors shall timely perform and complete all actions necessary or appropriate to protect the Specified Trust Debtors' Collateral against diminution in value, including but not limited to Capital Expenditures necessary to (i) maintain the Trust Debtors' right to use franchise names and trademarks ("Franchise Flags") under existing franchise or operating agreements ("Franchise Agreements") for the applicable hotels, to comply with the Trust Debtors' obligations under the existing Franchise Agreements and any rules or regulations imposed upon the Trust Debtors thereunder and to comply with any PIPs as may be agreed to by the franchisor (the "Franchisor"), or (ii) replace, without interruption, the Trust Debtors' right to use Franchise Flags under existing Franchise Agreements for the applicable hotels with comparable replacement Franchise Agreements and Franchise Flags, consistent with the provisions of paragraph 5(i) of the Stipulation and comply with the Specified Debtors' obligations with respect to such matters under the Loan Documents; (f) the Debtors shall (i) provide CMSLP in a timely fashion with a detailed budget or budgets with respect to such Capital Expenditures, which budget or budgets shall be subject to CMSLP's reasonable approval; (ii) remove or bond any postpetition lien or claim based upon the furnishing of labor or materials in connection with such Capital Expenditures; (iii) obtain all necessary licenses, permits and approvals in 14 connection with such Capital Expenditures; (iv) comply with any law, ordinance, rule or regulation, or building line or restriction applicable to the Specified Debtors' Hotel Properties; (v) provide CMSLP with written reports, on or before the fifth day of each month, describing the status of the Capital Expenditures; and (vi) permit CMSLP or any consultant retained by or on behalf of CMSLP to inspect the Specified Debtors' Hotel Properties during normal business hours; and (g) the Debtors shall timely furnish to CMSLP, on behalf of the Trusts, (i) all such reports and other information required to be provided to the Trusts under the Loan Documents and (ii) a monthly statement of operating results and sources and uses of cash with respect to the Specified Debtors' Hotel Properties, no later than thirty (30) days after the end of each calendar month. (h) the Specified Debtors shall comply with all postpetition obligations under the Franchise Agreements and all rules and regulations imposed upon the Specified Debtors by the Franchisors in connection therewith; (i) the Specified Debtors shall comply with their obligations in respect of the Franchise Agreements and the Franchise Flags under the Loan Documents; (j) other than in connection with the entry by the Specified Debtors into a new Franchise Agreement, the Specified Debtors will not reject any Franchise Agreement pursuant to section 365(a) of the Bankruptcy Code; (k) the Specified Debtors shall use their best efforts to obtain with respect to existing Franchise Agreements, and will obtain, with respect to any renewal or extension of an existing Franchise Agreement or the entry into any new Franchise Agreement, comfort letters or tripartite agreements acknowledging the Trusts' liens and the right of 15 the Trusts to continue such Franchise Agreements in the event that the Trusts or their nominee or designee takes title to any Hotel Property; (l) the Debtors shall pay the reasonable attorneys' fees and disbursements incurred by CMSLP in connection with the Cases on and after the Filing Date within ten business days after presentment by CMSLP of an invoice to the Debtors; and (m) CMSLP may, but shall not be required to, utilize the appropriate Reserves to pay prepetition real estate taxes in respect of the Specified Debtors' Collateral to the extent that there are sufficient Reserves to do so. 6. Termination of Use of Cash Collateral and of Consent to Further DIP Priming Lien: Notwithstanding anything to the contrary contained herein, the Debtors' right to use and the use of the Specified Debtors' Cash Collateral and the Trusts' consent to imposition of the DIP Priming Lien with respect to any advances made by the DIP Lenders after the occurrence of any Termination Event (as hereinafter defined), shall expire on the earliest to occur of (the first such occurrence being hereinafter referred to as the "Termination Event"): (i) December 21, 2002; (ii) the entry by this Court or any other court of an order reversing, amending, supplementing, staying, vacating or otherwise modifying the terms of this Stipulation; (iii) the dismissal of any of the Debtors' bankruptcy cases or the conversion of any of the Debtors' bankruptcy cases to a case under Chapter 7 of the Bankruptcy Code; (iv) the entry by this Court of an order granting relief from the automatic stay imposed by section 362 of the Bankruptcy Code to any entity other than the Trusts with respect to the Specified Debtors (other than relief from the stay in favor of a lessor of, or a secured creditor with a lien against, personal property having a value not exceeding $25,000 (twenty-five thousand dollars)); (v) the filing by the Debtors of any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate the Specified Debtors with any of the other Debtors; (vi) the 16 filing by the Debtors of any motion, application, adversary proceeding or plan of reorganization or liquidation seeking to (a) challenge in any manner whatsoever the Trusts' Debt and any other rights, claims and entitlements under any of the Loan Documents or under this Stipulation, (b) change, amend or modify in any manner whatsoever any of the Loan Documents, or (c) seek the modification, amendment or vacature of this Stipulation without the Trusts' express written prior consent; (vii) the appointment of a trustee or examiner or other representative with expanded powers for any of the Debtors; (viii) the occurrence of the effective date or consummation of a plan of reorganization for any of the Debtors; (ix) the termination or rejection of any Franchise Agreement for any of the Specified Debtors' Hotel Properties except as permitted in paragraph 5(i); (x) the existence of any material postpetition default under any Franchise Agreement for any of the Specified Debtors' Hotel Properties and, with respect thereto, the expiration of (a) any applicable cure period under the Loan Documents or (b) five calendar days, whichever is longer, from notice to the Debtors of the occurrence of a Termination Event; (xi) the breach of any of the Debtors' obligations under the Stipulation and, in the case of obligations under paragraph 5(d), (e), (f) & (g), the failure to cure such breach within five business days of notice thereof; (xii) an Event of Default under the DIP Credit Agreement (as defined in the DIP Credit Agreement); (xiii) a sale of any of the Collateral pursuant to section 363(b) of the Bankruptcy Code; (xiv) the Debtors' exclusive right to file a plan or solicit acceptances thereof is terminated; (xv) an Event of Default (as defined in the Loan Documents) with respect to any borrower that is not a Specified Debtor under the applicable Loan Documents; and (xvi) if, after the date of this Stipulation, any Specified Debtor shall commence or become the subject of a bankruptcy case, and such Debtor shall not agree to be bound by the terms of this Stipulation within ten days of the entry of an order for relief in its case. On and after the Termination Event, the Debtors shall immediately cease using any of the Specified Debtors' Cash Collateral; provided, however, that 17 the Debtors reserve the right to seek authorization to use such Specified Debtors' Cash Collateral pursuant to section 363(c) of the Bankruptcy Code and CMSLP reserves the right to oppose such relief. 7. Acknowledgment of Trust Debt and Prepetition Liens: The Debtors acknowledge and agree that the Trust Debt is valid and due and owing and that the separate liens and security interests encumbering the Specified Debtors' Collateral securing the Trust Debt are each valid, enforceable and perfected senior liens. This paragraph 7 shall be binding and effective upon all persons and entities, including but not limited to, the Debtors and the Committee; provided, however, that the Committee shall have until April 15, 2002, to commence an adversary proceeding (a) against the Trusts with respect to the Trusts' Debt or the liens and security interests of the Trusts securing the Trust Debt or (b) otherwise asserting any claims for relief or causes of action against the Trusts or any Released Party with respect to the Trust Debt (the "Challenge Period"). In the event no such adversary proceeding is commenced by the Committee within the Challenge Period, the Committee shall be deemed to have acknowledged and agreed that the Trusts' Debt is valid and that the liens and security interest of the Trusts securing the Trusts' Debt are valid, enforceable and perfected senior liens. 8. Release of Trusts: The Debtors acknowledge and agree that they do not possess and may not assert any claim, counterclaim, setoff or defense of any kind or nature which would in any way affect the enforceability, priority, amount and validity, of the claims and liens granted to Trusts under this Stipulation or under the Loan Documents, including but not limited to the Trusts' Debt, and (ii) the Debtors hereby release, discharge, and acquit CMSLP and the Trusts, and each of CMSLP's and the Trusts' officers, directors, shareholders, agents, professionals, representatives, employees, subsidiaries, and affiliates, and each of the successors, assigns, heirs, and representatives of each (collectively with the Trusts and CMSLP, the 18 "Released Parties") from any and all claims, rights, demands, injuries, debts, damages, liabilities, omissions, contracts, agreements, actions, and causes of action, whether at law or in equity, and whether based on contract, tort, or otherwise, known or unknown, suspected or unsuspected, of every kind and nature, which the Debtors or their successors, assigns, heirs, and representatives at any time had, now have, or hereafter can or may have against any of the Released Parties arising prior to the entry of this Stipulation with respect to the Trusts' Debt. 9. Information to Lender: In addition to the information required to be provided to CMSLP in paragraph 5(e) & (g) of this Stipulation, the Debtors are authorized and directed to provide to CMSLP any and all documentation, reports, schedules, assignments, financial statements, insurance policies and endorsements, access, inspection, audit, inquiry and other rights which CMSLP may reasonably request with respect to the Specified Debtors. 10. Modification of Automatic Stay: The Debtors are hereby authorized and directed to perform all acts, and execute and comply with the terms of such other documents, instruments, and agreements as the Trusts may reasonably require as evidence of and for the protection of the Trusts, or which may be otherwise deemed necessary by the Trusts to effectuate the terms and conditions of this Stipulation. The automatic stay imposed by section 362 of the Bankruptcy Code is hereby modified and vacated in all respects necessary in order to enable the Debtors to perform all of its obligations hereunder. 11. Priority of the Trusts Liens and Claims: Except as specifically set forth in this Stipulation, the Trusts' liens and claims granted under this Stipulation shall have priority in right of payment over any and all other claims, debts, obligations, liabilities and indebtedness of the Debtors of any kind, now in existence or hereinafter incurred by the Debtors and over all administrative expenses or priority claims of the kind specified in, or ordered pursuant to, sections 105, 326, 330, 331, 503(b), 506(c) (except as otherwise expressly permitted by 19 paragraph 12 of the Stipulation), or 507(b) of the Bankruptcy Code. No other claim or lien having a priority superior or pari passu with the claims and liens granted to the Trusts pursuant to the terms of this Stipulation shall be granted in any of the Debtors' cases while any portion of the Trusts claims, including the Trusts' Debt and all other claims arising after the Filing Date, remain outstanding. 12. No Surcharge: Except with respect to the Carveout (and, in any event, only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement)) and except as otherwise expressly provided in the last two sentences of this paragraph 12, no costs or expenses of administration which have been or may be incurred in any of these cases, any conversion of any of the Debtors' cases pursuant to section 1112 of the Bankruptcy Code, or in any future proceedings or cases related hereto (i) shall be charged against the Trusts, their claims, or the Specified Debtors' Collateral under section 506(c) of the Bankruptcy Code or otherwise, without the prior written consent of the Trusts, and no such consent shall be implied from any other action, inaction or acquiescence by the Trusts; or (ii) shall be senior to or on a parity with the liens and security interests granted to the Trusts pursuant to this Stipulation. Notwithstanding the foregoing, the Debtors may file an application or motion seeking to surcharge the Specified Debtors' Collateral pursuant to section 506(c) of the Bankruptcy Code for the reasonable, necessary costs and expenses of preserving, or disposing of, the Specified Debtors' Collateral, to the extent of any benefit to the Trusts (or any other subsequent holder of the Loan Documents) and to the extent of (a) the aggregate net cash funding provided to the Specified Debtors from and after the Filing Date less the sum of (b) (i) the outstanding amount of the DIP Priming Lien and (ii) the aggregate reorganization costs and expenses paid by the Specified Debtors (except to the extent that such reorganization costs and expenses directly benefited the estates of the Specified Debtors. CMSLP, on behalf of the Trusts, fully reserves 20 the right to object to any such application or motion under section 506(c) of the Bankruptcy Code, and no action or inaction shall be deemed to constitute consent to such relief or a waiver of any rights of CMSLP or the Trusts with respect thereto. 13. Section 364(e) Protection: In view of the Trusts' reliance upon the provisions of the Stipulation in consenting to the DIP Priming Liens and the use of the Trusts' Cash Collateral on the terms set forth herein and the loaning of such Cash Collateral to certain of the Debtors, all as more particularly set forth in the Final Cash Collateral Order, the Final DIP Order and the Stipulation, the protections afforded to the Trusts by the Stipulation and the liens and security interests granted thereby to the Trusts shall be subject to section 364(e) of the Bankruptcy Code. 14. Binding Effect: The provisions of this Stipulation shall inure to the benefit of Debtors and the Trusts and shall be binding upon the Debtors and their successors and assigns, including any trustee or other fiduciary hereafter appointed as a legal representative of any of the Debtors or with respect to property of the estate of any such Debtor, whether under Chapter 11 of the Bankruptcy Code or in any subsequent Chapter 7 case, and upon the United States Trustee and all creditors and parties in interest in these bankruptcy cases. 15. No Waiver: Nothing in this Stipulation shall prejudice the Trusts' rights under the Bankruptcy Code and applicable non-bankruptcy law, including, without limitation, the Trusts' rights to (i) seek further adequate protection, (ii) request conversion or dismissal of any of the Debtors' bankruptcy cases; (iii) seek relief from the automatic stay under section 362(d) of the Bankruptcy Code; (iii) request appointment of a trustee or examiner in any of the Debtors' bankruptcy cases; (iv) propose or solicit acceptances of a plan of reorganization or liquidation for any of the Debtors; (v) object to or otherwise oppose any relief sought by any entity or party in these cases, including without limitation, to object to any application filed by 21 any professional in these cases seeking compensation and reimbursement of expenses under sections 330 or 331 of the Bankruptcy Code; (vi) object to or otherwise oppose any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate the Specified Debtors with any of the other Debtors; or (vii) assert that the Debtors are obligated to pay the Trusts the default rate of interest and any other charges, penalties and costs required to be paid under the Loan Documents for the period commencing on the Filing Date and continuing until all such amounts due to the Trusts under the Loan Documents and hereunder are paid in full. This Stipulation and the transactions contemplated hereby shall be without prejudice to any and all rights, remedies, claims and causes of action which the Trusts have or may have against any party who may be liable with any of the Debtors for the Trusts' Debt and otherwise under the Loan Documents or any part thereof. The execution of this Stipulation, and nothing contained therein, shall be deemed to be an admission, or constitute evidence, in connection with any matter or proceeding other than the enforcement of the terms of this Stipulation, including but not limited to (i) any subsequent motion or application for use of Cash Collateral or for approval of debtor in possession financing; (ii) any motion, application or plan of reorganization or liquidation seeking to substantively consolidate one or more of the Specified Debtors with any other person; and (iii) any motion or application filed by or on behalf of the Trusts seeking to modify the automatic stay, dismissal of the Cases or termination of exclusivity. Except as otherwise expressly provided in the Stipulation, the parties hereto expressly reserve all of their rights and remedies under the Bankruptcy Code and applicable non-bankruptcy law. 16. Waiver by the Debtors: Each of the parties hereto hereby irrevocably waives any right to seek any modifications or extensions of this Stipulation without the prior written consent of the other party thereto. 22 17. No Construction Against Draftsman: The provisions of this Stipulation shall be deemed to have been jointly drafted by the Debtors and the Trusts and shall not be construed against a party because of its role in drafting this Stipulation. 18. Execution in Counterparts: This Stipulation may be executed in one or more counterparts, all of which shall be deemed to be a single original. 19. No Waiver of Rights: In the event that any of the Debtors' cases are dismissed, neither the entry of this Stipulation nor the dismissal of such case(s) shall affect the rights of the Trusts or the Debtors under this Stipulation, and all the rights and remedies of the Trusts hereunder or at law or in equity shall remain in full force and effect as if such case had not been filed. 20. Most Favored Nation: In the event that any creditor is granted adequate protection of its interests in a manner that is in addition to or is superior in any respect to the adequate protection set forth in paragraph 5 of the Stipulation, the Trusts shall be entitled to such additional adequate protection, which shall be evidenced by an order jointly presented to the Court by the Debtors and CMSLP (the "Supplemental Order") for consideration after notice and a hearing. In the event the Debtors and CMSLP are unable to promptly agree on the terms of such Supplemental Order, either party shall be entitled to file a motion seeking the entry of an order granting to the Trusts such additional adequate protection. 21. Notices: Any notice required or permitted under the Stipulation or the Loan Documents shall be delivered by facsimile, overnight mail or certified or registered mail as follows: 23 If to the Debtors: Lodgian, Inc. 3445 Peachtree Road Suite 700 Atlanta, GA 30326 Phone: (404) 365-3823 Fax: (404) 364-6144 Attention: Chief Financial Officer With a copy to: Gregory M. Petrick, Esq. Barry N. Seidel, Esq. Cadwalader, Wickersham & Taft Attorneys for the Debtors 100 Maiden Lane New York, New York 10038 Phone: 212-504-6000 Fax: 212-504-6666 If to CMSLP: David Goozman Amy Hoffman, Esq. CRIIMI MAE SERVICES L.P. 11200 Rockville Pike Rockville, MD 20852 Phone: (301) 468-3133 Fax: (301) 231-0325 With a copy to: Lawrence P. Gottesman, Esq. Brown Raysman Millstein Felder & Steiner, LLP 900 Third Avenue New York, NY 10022 Phone: (212) 895-2060 Fax: (212) 895-2900 All notices shall be deemed given upon transmission, if sent by facsimile; upon the first business day after mailing, if sent by overnight mail; and upon the third business day after mailing, if sent by certified or registered mail. 24 Dated: New York, New York February 23, 2002 CADWALADER, WICKERSHAM & BROWN RAYSMAN MILLSTEIN TAFT FELDER & STEINER LLP By: s/ By:s/ - ---------------------------------- -------------------------------------- Gregory M. Petrick (GP-2175) Lawrience P. Gottesman, Esq. (LG-7061) 100 Maiden Lane Gerard S. Catalanello, Esq. (GC-0945) New York, New York 10038 Arianna Frankl (AF-7764) (212) 504-6000 900 Third Avenue New York, New York 10022 CURTIS, MALLET-PREVOST, COLT & (212) 895-2000 MOSLE LLP Steven J. Reisman, Esq. ( ) 101 Park Avenue New York, New York 10178-0061 (212) 696-6065 Attorneys for the Debtors and Attorneys for Criimi Mae Services Debtors-in-Possession Limited Partnership, as special servicer for LaSalle Bank N.A., f/k/a LaSalle National Bank, as Trustee for the Registered Holders of the First Union-Lehman Brothers Commercial Mortgage Trust II, Commercial Mortgage Pass-Through Certificates, Series 1997-C2, LaSalle Bank, N.A., as Trustee for the Registered Holders of the LB Commercial Conduit Mortgage Trust II, Multiclass Pass-Through Certificates, Series 1996-C2, and State Street Bank and Trust Company, as Trustee for the Registered Holders of First Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 1997-C1 SO ORDERED THIS _14th_ DAY OF FEBRUARY, 2002 /s/Burton R. Lifland ------------------------------ United States Bankruptcy Judge 25 EX-10.41 12 g75096ex10-41.txt STIPULATION AND ORDER AMONG LENNAR PARTNERS EXHIBIT 10.41 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re Case No. 01-16345 (BRL) LODGIAN, INC., et al., (Jointly Administered) Debtors. Chapter 11 STIPULATION AND ORDER AMONG THE DEBTORS AND LENNAR PARTNERS, INC., AS SPECIAL SERVICER, PROVIDING FOR (I) LIMITED USE OF CASH COLLATERAL AND ADEQUATE PROTECTION AND (II) RELATED RELIEF RECITALS FACTUAL BACKGROUND A. On December 20, 2001 (the "Filing Date"), Lodgian, Inc. ("Lodgian") and the other above-captioned debtors and debtors-in-possession (collectively, the "Debtors") filed with this Court voluntary petitions for relief commencing cases (the "Cases") under Chapter 11 of Title 11, United States Code (the "Bankruptcy Code").(1) B. Since the Filing Date, the Debtors have remained in possession of their businesses and properties pursuant to sections 1107 and 1108 of the Bankruptcy Code. C. On January 8, 2002, the Office of the United States Trustee appointed a seven (7) member official committee of unsecured creditors (the "Committee"). D. On the Filing Date, the Debtors filed several motions including a motion pursuant to Sections 105, 362, 363, 364, 503(b) and 507 of the Bankruptcy Code for orders, inter - ---------- (1) All of the Debtors filed their Chapter 11 petitions on the Filing Date, except Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville Hospitality, L.P. and Sioux City Hospitality, L.P. These four entities filed their Chapter 11 petitions on December 21, 2001. alia, authorizing the Debtors to (A) obtain postpetition financing on a super-priority secured basis, and (B) use cash collateral and providing adequate protection in connection therewith (the "DIP/Cash Collateral Motion"). (2) E. On December 21, 2001, the Court entered an interim order authorizing the Debtors to use cash collateral of the Pre Petition Mortgage Lenders pending a final hearing (the "Interim Cash Collateral Order"), which hearing is scheduled to occur on February 13, 2002 (the "Final Hearing"). F. On December 21, 2001, the Court also entered an interim order authorizing Lodgian to borrow up to a maximum aggregate principal amount of $10,000,000 in accordance with the terms of the DIP Credit Agreement pending the Final Hearing (the "Interim DIP Order"). G. It is anticipated that following the Final Hearing the Court will enter a final cash collateral order (the "Final Cash Collateral Order") and a final order authorizing Lodgian to borrow up to a maximum aggregate principal amount of $25,000,000 in accordance with the terms of the DIP Credit Agreement pending the Final Hearing (the "Final DIP Order"). H. In accordance with the Final DIP Order, among other things, (i) all of the Debtors other than Lodgian will be authorized to guarantee the amounts borrowed by Lodgian under the DIP Credit Agreement upon the conditions set forth therein; (ii) pursuant to section 364(c)(1) of the Bankruptcy Code, all of the Debtors' obligations under the DIP Credit Agreement shall be authorized to constitute obligations with priority over any and all administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code, and over any and all administrative expenses or other claims under sections 105, 326, 328, - ---------- (2) Unless otherwise defined herein, all capitalized terms used herein shall have the same meanings assigned to them in the DIP/Cash Collateral Motion. 2 506(c) or 507 of the Bankruptcy Code, subject in limited circumstances to the Carveout; (iii) pursuant to section 364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders were granted a perfected first priority security interest in and lien upon all cash and cash equivalents in the Letter of Credit Account under the DIP Credit Agreement and any investment of the funds therein to the Agent and the DIP Lenders; (iv) pursuant to section 364(d)(1) of the Bankruptcy Code, the Debtors will be authorized to grant a perfected priming security interest in and lien to the Agent and the DIP Lenders on all pre- and postpetition property of the Debtors that is subject to the existing liens presently securing the Debtors' indebtedness to the Pre Petition Lenders, but not senior to the interests of any of the liens existing immediately prior to the Filing Date, or to interests in such property arising out of liens to which the liens of the Pre Petition Lenders become subject subsequent to the Filing Date as permitted by section 546(b) of the Bankruptcy Code; and (v) pursuant to section 364(c)(2) of the Bankruptcy Code, the Debtors will be authorized to grant a perfected security interest in and lien to the Agent and the DIP Lenders on all other pre- and postpetition property of the Debtors that, on or as of the Filing Date, was not subject to valid, perfected and non-avoidable liens. THE TRUSTS' LOANS I. Prior to the Filing Date, DLJ Mortgage Capital, Inc. ("DLJ") and its wholly owned subsidiary, Column Financial, Inc. ("Column") entered into a series of separate loan transactions (collectively, the "Loans") with certain of the Debtors which are summarized as follows: (i) A loan agreement, dated as of January 31, 1995, among Column, as lender, and Hilton Head Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., Servico Fort Wayne, Inc., Washington Hotel 3 Enterprises, Inc., Moon Airport Motel, Inc., New Orleans Airport Motel Assocs., Ltd. (a non-debtor), and Wilpen, Inc.(a non-debtor), as borrowers, pursuant to which Column loaned the borrowers the principal sum of $60,500,000 (the "First January 31st Loan Agreement"); (ii) A loan agreement, dated as of June 29, 1995, between Column, as lender, and East Washington Hospitality Limited Partnership, as borrower, pursuant to which Column loaned the borrower the principal sum of $11,000,000 (the "June 29th Loan Agreement"); and (iii) A loan agreement, dated as of January 31, 1995, between Column, as lender, and McKnight Motel, Inc., as borrower, pursuant to which Column loaned the borrower the principal sum of $3,900,000 (the "Second January 31st Loan Agreement", and together with the June 29th Loan Agreement and the First January 31st Loan Agreement, the "Loan Agreements"). J. The borrowers described above in paragraph G(i)-(iii) above to the extent such borrowers have filed or hereafter file petitions for relief under the Bankruptcy Code (other than Wilpen, Inc.), are hereinafter collectively referred to as the "Specified Debtors."(3) K. In addition to the Loan Agreements, all of the Loans are further evidenced by, among other things, duly executed promissory notes (collectively, the "Notes"), first priority mortgages, security agreements and assignment of leases and rents (collectively, the "Mortgages and Assignments of Rents", and together with the Notes, Loan Agreements and all other documents executed in connection therewith, the "Loan Documents") in and to each Hotel Property owned by the Specified Debtors (collectively, the "Specified Debtors' Hotel Properties"). - ---------- (3) Of the Specified Debtors, Wilpen, Inc. and New Orleans Airport Motel Associates did not file Chapter 11 petitions with this or any other court. 4 L. The Debtors have informed Lennar that the Specified Debtors' Hotel Properties require substantial capital expenditures (the "Capital Expenditures") in order to preserve the value of the Hotel Properties, which Capital Expenditures must be completed during the calendar year 2002. Such Capital Expenditures include, but are not limited to, property improvement programs ("PIPs") agreed to by the Debtors and one or more of the Specified Debtors' franchisors. M. The Specified Debtors' repayment of the Loans is secured by, among other things, a first priority lien in and to the Specified Debtors' Hotel Properties, as well as all of the rents, profits, proceeds and revenues derived from such hotels (the "Specified Debtors' Cash Collateral"; collectively, with the Specified Debtors' Hotel Properties, the "Specified Debtors' Collateral"). N. Subsequent to, or simultaneously with, the closing of the Loans, the Loan Documents were deposited into two (2) separate trusts as part of securitization transactions for the benefit of the Registered Holders of the DLJ Mortgage Acceptance Corporation, Commercial Pass-Through Certificates, Series 1995-CF2 ("Trust 1"), and American Southwest Financial Securities Corporation Commercial Mortgage Pass-Through Certificates, Series 1995-C1 ("Trust 2", and together with Trust 1, the "Trusts"). O. Lennar Partners, Inc. ("Lennar"), is the special servicer to The Chase Manhattan Bank, formerly known as Chemical Bank, as Trustee of Trust 1, and to LaSalle Bank National Association, a National Banking Association formerly known as LaSalle National Bank, as Trustee of Trust 2. P. The Trusts currently hold the mortgage debt encumbering the Specified Debtors' Hotel Properties and are, therefore, required to be repaid the Loans from the Specified 5 Debtors in accordance with the terms and conditions of the Loan Documents, as well as the other documents executed in connection with the securitization of the Loans. Q. Prior to the Filing Date, the Specified Debtors had not defaulted in the payment of any amounts due to the Trusts under the Loan Documents. R. The Specified Debtors were, as of the Filing Date, and still are indebted to Trust 1 pursuant to the terms and conditions of the Loan Documents, in the aggregate principal amount of approximately $39,023,538 (thirty nine million, twenty three thousand, five hundred and thirty eight dollars), together with accrued unpaid interest, which continues to accrue, and costs and expenses including, without limitation, attorneys' fees and costs, which continue to accrue (collectively, the "Trust 1 Debt"). S. The Specified Debtors were, as of the Filing Date, and still are indebted to Trust 2, among other things, pursuant to the terms and conditions of the Loan Documents, in the aggregate principal amount of approximately $3,348,838 (three million, three hundred forty eight thousand, eight hundred and thirty eight dollars), together with accrued and unpaid interest, which continues to accrue, and costs and expenses including, without limitation, attorneys' fees and costs, which continue to accrue (collectively, the "Trust 2 Debt", and together with the Trust 1 Debt, the "Trust Debt"). T. A need exists for the Specified Debtors to use cash collateral in order to assure the continued operation of their businesses. Without such use of cash collateral, the Specified Debtors will be unable to pay, among other things, their operating and payroll expenses, capital expenditures and general overhead. U. The Trusts are willing to consent to the Debtors' limited use of the Specified Debtors' Collateral including, but not limited to the Specified Debtors' Cash Collateral 6 and to the imposition of certain liens on the Specified Debtors' Collateral but only upon the specific terms and conditions set forth herein and to the extent of and for necessary expenses. V. In view of the Trusts' reliance upon the provisions of the Stipulation in consenting to the DIP Priming Liens and the use of the Specified Debtors' Cash Collateral on the terms set forth herein and the loaning of such Specified Debtors' Cash Collateral to certain of the Debtors, all as more particularly set forth in the Final Cash Collateral Order, the Final DIP Order and the Stipulation, the Trusts are parties that have "extended credit in good faith" within the meaning of section 364(e) of the Bankruptcy Code. STIPULATION NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the adequacy of which is acknowledged, the Debtors and Lennar, as special servicer and on behalf of the Trusts as their attorney in fact, hereby stipulate and agree as follows: 1. Incorporation of Recitals: It is hereby represented by the parties that the Recitals in Paragraph A through V of this Stipulation are incorporated herein by reference and shall be deemed to be true and correct representations of the parties with respect to the statements therein as such statements apply to each or all of the parties. Each of the parties to this Stipulation represent that they have the sole right and authority to execute this Stipulation and act in accordance with its terms. Lennar expressly represents that it is authorized to act on behalf of the Trusts. The Specified Debtors expressly represent that, to the extent their constituent documents required the affirmative vote or consent of an independent director or manager or similar person as a prerequisite to seeking voluntary relief under the Bankruptcy 7 Code, that such vote or consent was duly obtained prior to the filing of the voluntary petitions by such Specified Debtors. 2. Value of Specified Debtors' Collateral: As of the Filing Date, the value of the Specified Debtors' Collateral exceeds the amount of the Trust Debt. 3. Use of Cash Collateral: Except as set forth herein, the Debtors are authorized to use the Cash Collateral of the Trusts through December 21, 2002 for the limited purposes specifically set forth in the Final Cash Collateral Order. Notwithstanding the foregoing, no Specified Debtors' Cash Collateral held or deposited in any reserve or escrow accounts for taxes, capital expenditures, furniture, fixtures and equipment or similar items shall be used for any purpose other than the purpose for which such accounts (collectively, the "Reserves") are dedicated with respect to the Specified Debtors' Hotel Properties in accordance with paragraph 5(e) of the Stipulation. Except as expressly permitted by this Stipulation and Order, the Debtors are prohibited from use of any of the Specified Debtors' Cash Collateral for any other purpose whatsoever. Without limiting the generality of the foregoing, the Trusts do not consent to the use of any of the Specified Debtors' Collateral (including, but not limited to the Specified Debtors' Cash Collateral) to (i) prepare, prosecute or seek approval of any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate any of the Specified Debtors with any of the other Debtors; (ii) investigate, assert, commence, prosecute or otherwise take any action with respect to any claim or alleged claim against the Trusts, including but not limited to, claims arising under sections 542 through and including 553 of the Bankruptcy Code, provided, however, that the Committee may utilize up to $30,000.00 (thirty thousand dollars) of the Specified Debtors' Cash Collateral to investigate the Trusts' Debt, the liens and security interests of the Trusts securing the Trust Debt and any potential claim for relief or cause of action with respect to the Trust Debt; (iii) challenge the 8 amount, validity, priority or enforceability of the Trust Debt or the security interests and liens of the Trusts in the Specified Debtors' Collateral or assert any defense, claim, counterclaim or offset with respect to the Trust Debt or the security interests and liens of the Trusts; (iv) challenge in any manner whatsoever the Trusts' Debt and any other rights, claims and entitlements of the Trusts under any of the Loan Documents; (v) change, amend or modify in any manner whatsoever any of the Loan Documents; or (vi) seek the modification, amendment or vacature of this Stipulation. 4. Consent to DIP Priming Lien on Specified Debtors' Hotel Properties: Subject to and in accordance with the terms of this Stipulation, Lennar, on behalf of the Trusts, consents to a limited DIP Priming Lien (the "DIP Priming Lien") to be imposed upon the Specified Debtors' Collateral. The amount of the DIP Priming Lien on the Specified Debtors' Collateral shall be limited to the extent of the Specified Debtors' Attributed DIP Amount (as defined in the DIP Credit Agreement) that is actually advanced to Lodgian under the DIP Credit Agreement prior to a Termination Event (as hereinafter defined), and, in no such event, shall the DIP Priming Lien on the Specified Debtors' Collateral exceed the aggregate amount of $3,484,670 (three million, four hundred eighty four thousand, six hundred and seventy dollars), which shall be allocated to the Specified Debtors' Collateral in accordance with schedule 3.15 to the DIP Credit Agreement. To the extent that the consent of the Trusts is required for the Specified Debtors to incur the obligations or grant the liens contemplated hereunder or in connection with the DIP Financing or the Final Cash Collateral Order (whether under the terms of their respective certificates of incorporation, other constituent documents or other instruments or agreements), such consent is hereby given. 5. Adequate Protection: Notwithstanding anything to the contrary contained in section 552(a) of the Bankruptcy Code, as adequate protection for, and to secure payment of, 9 in an amount equal to the aggregate diminution in the value of the Specified Debtors' Collateral (including, the Specified Debtors' Cash Collateral) from the Filing Date, as security for and an inducement to the Trusts to permit the Debtors' use of the Specified Debtors' Cash Collateral and to consent to the imposition of the DIP Priming Lien, the Debtors hereby grant to the Trusts the following adequate protection: (a) a replacement lien (the "Specific AP Lien") on all of the prepetition and postpetition property (including without limitation, all postpetition hotel revenue and other charges) of the Specified Debtors, which lien shall be junior only to (i) the DIP Priming Lien, and (ii) the Carveout, but only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement) (as so limited, $209,079.91 (two hundred and nine thousand, seventy nine dollars and ninety one cents)); (b) (1) a replacement lien (the "Prime Lender AP Lien") on all of the prepetition and postpetition property (including without limitation, all postpetition hotel revenue and other charges) owned by the Debtors (other than the Utility Reserve Account (as defined in the Final Cash Collateral Order)), which lien shall be pari-passu with other Prime Lender AP Liens granted to other lenders of such property, but subject to the Carveout, but only if a DIP Priming Lien has been granted with respect to such property (and, in any event, only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement)) and the following liens: (w) any DIP Priming Lien on such property, but only to the extent of the such Debtors' Attributed DIP Amount (as defined in the DIP Credit Agreement) that is actually advanced, (x) any Qualified Prepetition Liens on such property and any section 506(c) charges assessed against such liens and (y) any Specific AP Lien on such property; provided, however, if (but only to the extent that and for so long as) the holder of any Prepetition Mortgage (as defined in the Final Cash 10 Collateral Order) has the benefit of an express restriction or prohibition contained in the certificate of incorporation or similar constitutive document of the Debtor owning such property that prevents the creation of the security interest and lien provided by this paragraph 5(b) (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then, such General AP Lien shall become effective and enforceable only (i) with the consent of such creditor or (ii) upon the payment in full of the claim secured by such Qualified Prepetition Lien; provided, however, the property subject to the liens granted to the Trusts as set forth in the Stipulation shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code; (b) (2) a replacement lien (the "General AP Lien") on all of the prepetition and postpetition property (including without limitation, all postpetition hotel revenue and other charges) owned by the Debtors (other than the Utility Reserve Account), which lien shall be pari-passu with other General AP Liens granted to other lenders of such property, but subject to the Carveout, but only if a DIP Priming Lien has been granted with respect to such property (and, in any event, only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement)) and the following liens: (i) any DIP Priming Lien on such property, but only to the extent of the such Debtors' Attributed DIP Amount (as defined in the DIP Credit Agreement) that is actually advanced, and (ii) any Qualified Prepetition Liens on such property and any section 506(c) charges assessed against such liens, (iii) any Specific AP Lien on such property, (iv), any Primed Lender AP Lien (as defined in the Motion) on such property, (v) any Specific I/C Lien on such property, and (vi) any liens granted to the DIP Lenders under 364(c) of the Bankruptcy Code on such property, but only if such property is owned by a Low Leverage Debtor; provided, 11 however, if (but only to the extent that and for so long as) the holder of any Prepetition Mortgage (as defined in the Final Cash Collateral Order) has the benefit of an express restriction or prohibition contained in the certificate of incorporation or similar constitutive document of the Debtor owning such property that prevents the creation of the security interest and lien provided by this paragraph 5(b) (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then, such General AP Lien shall become effective and enforceable only (i) with the consent of such creditor or (ii) upon the payment in full of the claim secured by such Qualified Prepetition Lien; provided, however, the property subject to the liens granted to the Trusts as set forth in the Stipulation shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code; (c) except as other provided in paragraph 5(b), the security interests and replacement liens granted to the Trusts as set forth herein, shall be deemed validly and properly perfected and enforceable against all other persons or entities upon the entry of this Stipulation by the Court without the necessity of filing, recording or serving any financing statements, deeds, mortgages, or other documents which may otherwise be required under federal or state law in any jurisdiction or the taking of any other action to validate or perfect the security interests and liens granted to Trusts herein; (d) the Debtors shall make all (i) monthly interest payments to the Trusts due under the Loans (which payments shall include any interest payable from and after the Filing Date and constitute a permitted use of the Specified Debtors' Collateral) at the non-default rates specified in the Loan Documents during the term of this Stipulation and 12 (ii) payments necessary to timely and fully fund all Reserves required under the Loan Documents; (e) the Debtors shall timely perform and complete all actions necessary or appropriate to protect the Specified Trust Debtors' Collateral against diminution in value, including but not limited to Capital Expenditures necessary to (i) maintain the Trust Debtors' right to use franchise names and trademarks ("Franchise Flags") under existing franchise or operating agreements ("Franchise Agreements") for the applicable hotels, to comply with the Trust Debtors' obligations under the existing Franchise Agreements and any rules or regulations imposed upon the Trust Debtors thereunder and to comply with any PIPs as may be agreed to by the franchisor (the "Franchisor"), or (ii) replace, without interruption, the Trust Debtors' right to use Franchise Flags under existing Franchise Agreements for the applicable hotels with comparable replacement Franchise Agreements and Franchise Flags, consistent with the provisions of paragraph 5(i) of the Stipulation and comply with the Specified Debtors' obligations with respect to such matters under the Loan Documents; (f) the Debtors shall (i) provide Lennar in a timely fashion with a detailed budget or budgets with respect to such Capital Expenditures, which budget or budgets shall be subject to Lennar's reasonable approval; (ii) remove or bond any postpetition lien or claim based upon the furnishing of labor or materials in connection with such Capital Expenditures; (iii) obtain all necessary licenses, permits and approvals in connection with such Capital Expenditures; (iv) comply with any law, ordinance, rule or regulation, or building line or restriction applicable to the Specified Debtors' Hotel Properties; (v) provide Lennar with written reports, on or before the fifth day of each month, describing the status of the Capital Expenditures; and (vi) permit Lennar or any consultant retained 13 by or on behalf of Lennar to inspect the Specified Debtors' Hotel Properties during normal business hours; and (g) the Debtors shall timely furnish to Lennar, on behalf of the Trusts, (i) all such reports and other information required to be provided to the Trusts under the Loan Documents and (ii) a monthly statement of operating results and sources and uses of cash with respect to the Specified Debtors' Hotel Properties, no later than thirty (30) days after the end of each calendar month. (h) the Specified Debtors shall comply with all postpetition obligations under the Franchise Agreements and all rules and regulations imposed upon the Specified Debtors by the Franchisors in connection therewith; (i) the Specified Debtors shall comply with their obligations in respect of the Franchise Agreements and the Franchise Flags under the Loan Documents; (j) other than in connection with the entry by the Specified Debtors into a new Franchise Agreement, the Specified Debtors will not reject any Franchise Agreement pursuant to section 365(a) of the Bankruptcy Code; (k) the Specified Debtors shall use their best efforts to obtain with respect to existing Franchise Agreements, and will obtain, with respect to any renewal or extension of an existing Franchise Agreement or the entry into any new Franchise Agreement, comfort letters or tripartite agreements acknowledging the Trusts' liens and the right of the Trusts to continue such Franchise Agreements in the event that the Trusts or their nominee or designee takes title to any Hotel Property; (l) the Debtors shall pay the reasonable attorneys' fees and disbursements incurred by Lennar in connection with the Cases on and after the Filing Date within ten business days after presentment by Lennar of an invoice to the Debtors; and 14 (m) Lennar may, but shall not be required to, utilize the appropriate Reserves to pay prepetition real estate taxes in respect of the Specified Debtors' Collateral to the extent that there are sufficient Reserves to do so. 6. Termination of Use of Cash Collateral and of Consent to Further DIP Priming Lien: Notwithstanding anything to the contrary contained herein, the Debtors' right to use and the use of the Specified Debtors' Cash Collateral and the Trusts' consent to imposition of the DIP Priming Lien with respect to any advances made by the DIP Lenders after the occurrence of any Termination Event (as hereinafter defined), shall expire on the earliest to occur of (the first such occurrence being hereinafter referred to as the "Termination Event"): (i) December 21, 2002; (ii) the entry by this Court or any other court of an order reversing, amending, supplementing, staying, vacating or otherwise modifying the terms of this Stipulation; (iii) the dismissal of any of the Debtors' bankruptcy cases or the conversion of any of the Debtors' bankruptcy cases to a case under Chapter 7 of the Bankruptcy Code; (iv) the entry by this Court of an order granting relief from the automatic stay imposed by section 362 of the Bankruptcy Code to any entity other than the Trusts with respect to the Specified Debtors (other than relief from the stay in favor of a lessor of, or a secured creditor with a lien against, personal property having a value not exceeding $25,000 (twenty-five thousand dollars)); (v) the filing by the Debtors of any motion, application or plan of reorganization or liquidation that would, if so approved, substantively consolidate the Specified Debtors with any of the other Debtors; (vi) the filing by the Debtors of any motion, application, adversary proceeding or plan of reorganization or liquidation seeking to (a) challenge in any manner whatsoever the Trusts' Debt and any other rights, claims and entitlements under any of the Loan Documents or under this Stipulation, (b) change, amend or modify in any manner whatsoever any of the Loan Documents, or (c) seek the modification, amendment or vacature of this Stipulation without the Trusts' express written prior 15 consent; (vii) the appointment of a trustee or examiner or other representative with expanded powers for any of the Debtors; (viii) the occurrence of the effective date or consummation of a plan of reorganization for any of the Debtors; (ix) the termination or rejection of any Franchise Agreement for any of the Specified Debtors' Hotel Properties except as permitted in paragraph 5(i); (x) the existence of any material postpetition default under any Franchise Agreement for any of the Specified Debtors' Hotel Properties and, with respect thereto, the expiration of (a) any applicable cure period under the Loan Documents or (b) five calendar days, whichever is longer, from notice to the Debtors of the occurrence of a Termination Event ; (xi) the breach of any of the Debtors' obligations under the Stipulation and, in the case of obligations under paragraph 5(d), (e), (f) & (g), the failure to cure such breach within five business days of notice thereof; (xii) an Event of Default under the DIP Credit Agreement (as defined in the DIP Credit Agreement); (xiii) a sale of any of the Collateral pursuant to section 363(b) of the Bankruptcy Code; (xiv) the Debtors' exclusive right to file a plan or solicit acceptances thereof is terminated; (xv) an Event of Default (as defined in the Loan Documents) with respect to any borrower that is not a Specified Debtor under the applicable Loan Documents; and (xvi) if, after the date of this Stipulation, any Specified Debtor shall commence or become the subject of a bankruptcy case, and such Debtor shall not agree to be bound by the terms of this Stipulation within ten days of the entry of an order for relief in its case. On and after the Termination Event, the Debtors shall immediately cease using any of the Specified Debtors' Cash Collateral; provided, however, that the Debtors reserve the right to seek authorization to use such Specified Debtors' Cash Collateral pursuant to section 363(c) of the Bankruptcy Code and Lennar reserves the right to oppose such relief. 7. Acknowledgment of Trust Debt and Prepetition Liens: The Debtors acknowledge and agree that the Trust Debt is valid and due and owing and that the separate liens 16 and security interests encumbering the Specified Debtors' Collateral securing the Trust Debt are each valid, enforceable and perfected senior liens. This paragraph 7 shall be binding and effective upon all persons and entities, including but not limited to, the Debtors and the Committee; provided, however, that the Committee shall have until April 15, 2002, to commence an adversary proceeding (a) against the Trusts with respect to the Trusts' Debt or the liens and security interests of the Trusts securing the Trust Debt or (b) otherwise asserting any claims for relief or causes of action against the Trusts or any Released Party with respect to the Trust Debt (the "Challenge Period"). In the event no such adversary proceeding is commenced by the Committee within the Challenge Period, the Committee shall be deemed to have acknowledged and agreed that the Trusts' Debt is valid and that the liens and security interest of the Trusts securing the Trusts' Debt are valid, enforceable and perfected senior liens. 8. Release of Trusts: The Debtors acknowledge and agree that they do not possess and may not assert any claim, counterclaim, setoff or defense of any kind or nature which would in any way affect the enforceability, priority, amount and validity, of the claims and liens granted to Trusts under this Stipulation or under the Loan Documents, including but not limited to the Trusts' Debt, and (ii) the Debtors hereby release, discharge, and acquit Lennar and the Trusts, and each of Lennar's and the Trusts' officers, directors, shareholders, agents, professionals, representatives, employees, subsidiaries, and affiliates, and each of the successors, assigns, heirs, and representatives of each (collectively with the Trusts and Lennar, the "Released Parties") from any and all claims, rights, demands, injuries, debts, damages, liabilities, omissions, contracts, agreements, actions, and causes of action, whether at law or in equity, and whether based on contract, tort, or otherwise, known or unknown, suspected or unsuspected, of every kind and nature, which the Debtors or their successors, assigns, heirs, and representatives 17 at any time had, now have, or hereafter can or may have against any of the Released Parties arising prior to the entry of this Stipulation with respect to the Trusts' Debt. 9. Information to Lender: In addition to the information required to be provided to Lennar in paragraph 5(e) & (g) of this Stipulation, the Debtors are authorized and directed to provide to Lennar any and all documentation, reports, schedules, assignments, financial statements, insurance policies and endorsements, access, inspection, audit, inquiry and other rights which Lennar may reasonably request with respect to the Specified Debtors. 10. Modification of Automatic Stay: The Debtors are hereby authorized and directed to perform all acts, and execute and comply with the terms of such other documents, instruments, and agreements as the Trusts may reasonably require as evidence of and for the protection of the Trusts, or which may be otherwise deemed necessary by the Trusts to effectuate the terms and conditions of this Stipulation. The automatic stay imposed by section 362 of the Bankruptcy Code is hereby modified and vacated in all respects necessary in order to enable the Debtors to perform all of its obligations hereunder. 11. Priority of the Trusts Liens and Claims: Except as specifically set forth in this Stipulation, the Trusts' liens and claims granted under this Stipulation shall have priority in right of payment over any and all other claims, debts, obligations, liabilities and indebtedness of the Debtors of any kind, now in existence or hereinafter incurred by the Debtors and over all administrative expenses or priority claims of the kind specified in, or ordered pursuant to, sections 105, 326, 330, 331, 503(b), 506(c) (except as otherwise expressly permitted by paragraph 12 of the Stipulation), or 507(b) of the Bankruptcy Code. No other claim or lien having a priority superior or pari passu with the claims and liens granted to the Trusts pursuant to the terms of this Stipulation shall be granted in any of the Debtors' cases while any portion of the 18 Trusts claims, including the Trusts' Debt and all other claims arising after the Filing Date, remain outstanding. 12. No Surcharge: Except with respect to the Carveout (and, in any event, only to the extent of the Attributable DIP Percentage (as defined in the DIP Credit Agreement)) and except as otherwise expressly provided in the last two sentences of this paragraph 12, no costs or expenses of administration which have been or may be incurred in any of these cases, any conversion of any of the Debtors' cases pursuant to section 1112 of the Bankruptcy Code, or in any future proceedings or cases related hereto (i) shall be charged against the Trusts, their claims, or the Specified Debtors' Collateral under section 506(c) of the Bankruptcy Code or otherwise, without the prior written consent of the Trusts, and no such consent shall be implied from any other action, inaction or acquiescence by the Trusts; or (ii) shall be senior to or on a parity with the liens and security interests granted to the Trusts pursuant to this Stipulation. Notwithstanding the foregoing, the Debtors may file an application or motion seeking to surcharge the Specified Debtors' Collateral pursuant to section 506(c) of the Bankruptcy Code for the reasonable, necessary costs and expenses of preserving, or disposing of, the Specified Debtors' Collateral, to the extent of any benefit to the Trusts (or any other subsequent holder of the Loan Documents) and to the extent of (a) the aggregate net cash funding provided to the Specified Debtors from and after the Filing Date less the sum of (b) (i) the outstanding amount of the DIP Priming Lien and (ii) the aggregate reorganization costs and expenses paid by the Specified Debtors (except to the extent that such reorganization costs and expenses directly benefited the estates of the Specified Debtors. Lennar, on behalf of the Trusts, fully reserves the right to object to any such application or motion under section 506(c) of the Bankruptcy Code, and no action or inaction shall be deemed to constitute consent to such relief or a waiver of any rights of Lennar or the Trusts with respect thereto. 19 13. Section 364(e) Protection: In view of the Trusts' reliance upon the provisions of the Stipulation in consenting to the DIP Priming Liens and the use of the Trusts' Cash Collateral on the terms set forth herein and the loaning of such Cash Collateral to certain of the Debtors, all as more particularly set forth in the Final Cash Collateral Order, the Final DIP Order and the Stipulation, the protections afforded to the Trusts by the Stipulation and the liens and security interests granted thereby to the Trusts shall be subject to section 364(e) of the Bankruptcy Code. 14. Binding Effect: The provisions of this Stipulation shall inure to the benefit of Debtors and the Trusts and shall be binding upon the Debtors and their successors and assigns, including any trustee or other fiduciary hereafter appointed as a legal representative of any of the Debtors or with respect to property of the estate of any such Debtor, whether under Chapter 11 of the Bankruptcy Code or in any subsequent Chapter 7 case, and upon the United States Trustee and all creditors and parties in interest in these bankruptcy cases. 15. No Waiver: Nothing in this Stipulation shall prejudice the Trusts' rights under the Bankruptcy Code and applicable non-bankruptcy law, including, without limitation, the Trusts' rights to (i) seek further adequate protection, (ii) request conversion or dismissal of any of the Debtors' bankruptcy cases; (iii) seek relief from the automatic stay under section 362(d) of the Bankruptcy Code; (iii) request appointment of a trustee or examiner in any of the Debtors' bankruptcy cases; (iv) propose or solicit acceptances of a plan of reorganization or liquidation for any of the Debtors; (v) object to or otherwise oppose any relief sought by any entity or party in these cases, including without limitation, to object to any application filed by any professional in these cases seeking compensation and reimbursement of expenses under sections 330 or 331 of the Bankruptcy Code; (vi) object to or otherwise oppose any motion, application or plan of reorganization or liquidation that would, if so approved, substantively 20 consolidate the Specified Debtors with any of the other Debtors; or (vii) assert that the Debtors are obligated to pay the Trusts the default rate of interest and any other charges, penalties and costs required to be paid under the Loan Documents for the period commencing on the Filing Date and continuing until all such amounts due to the Trusts under the Loan Documents and hereunder are paid in full. This Stipulation and the transactions contemplated hereby shall be without prejudice to any and all rights, remedies, claims and causes of action which the Trusts have or may have against any party who may be liable with any of the Debtors for the Trusts' Debt and otherwise under the Loan Documents or any part thereof. The execution of this Stipulation, and nothing contained therein, shall be deemed to be an admission, or constitute evidence, in connection with any matter or proceeding other than the enforcement of the terms of this Stipulation, including but not limited to (i) any subsequent motion or application for use of Cash Collateral or for approval of debtor in possession financing; (ii) any motion, application or plan of reorganization or liquidation seeking to substantively consolidate one or more of the Specified Debtors with any other person; and (iii) any motion or application filed by or on behalf of the Trusts seeking to modify the automatic stay, dismissal of the Cases or termination of exclusivity. Except as otherwise expressly provided in the Stipulation, the parties hereto expressly reserve all of their rights and remedies under the Bankruptcy Code and applicable non- bankruptcy law. 16. Waiver by the Debtors: Each of the parties hereto hereby irrevocably waives any right to seek any modifications or extensions of this Stipulation without the prior written consent of the other party thereto. 17. No Construction Against Draftsman: The provisions of this Stipulation shall be deemed to have been jointly drafted by the Debtors and the Trusts and shall not be construed against a party because of its role in drafting this Stipulation. 21 18. Execution in Counterparts: This Stipulation may be executed in one or more counterparts, all of which shall be deemed to be a single original. 19. No Waiver of Rights: In the event that any of the Debtors' cases are dismissed, neither the entry of this Stipulation nor the dismissal of such case(s) shall affect the rights of the Trusts or the Debtors under this Stipulation, and all the rights and remedies of the Trusts hereunder or at law or in equity shall remain in full force and effect as if such case had not been filed. 20. Most Favored Nation: In the event that any creditor is granted adequate protection of its interests in a manner that is in addition to or is superior in any respect to the adequate protection set forth in paragraph 5 of the Stipulation, the Trusts shall be entitled to such additional adequate protection, which shall be evidenced by an order jointly presented to the Court by the Debtors and Lennar (the "Supplemental Order") for consideration after notice and a hearing. In the event the Debtors and Lennar are unable to promptly agree on the terms of such Supplemental Order, either party shall be entitled to file a motion seeking the entry of an order granting to the Trusts such additional adequate protection. 21. Notices: Any notice required or permitted under the Stipulation or the Loan Documents shall be delivered by facsimile, overnight mail or certified or registered mail as follows: If to the Debtors: Lodgian, Inc. 3445 Peachtree Road Suite 700 Atlanta, GA 30326 Phone: (404) 365-3823 Fax: (404) 364-6144 Attention: Chief Financial Officer With a copy to: 22 Gregory M. Petrick, Esq. Barry N. Seidel, Esq. Cadwalader, Wickersham & Taft Attorneys for the Debtors 100 Maiden Lane New York, New York 10038 Phone: 212-504-6000 Fax: 212-504-6666 If to Lennar: Edward C. Brown Thomas Nealon, III, Esq. Lennar Partners, Inc. 760 NW 107th Avenue Suite 400 Miami, FL 33172 Phone: (305) 229-6600 Fax: (305) 226-3428 With a copy to: Lawrence P. Gottesman, Esq. Brown Raysman Millstein Felder & Steiner, LLP 900 Third Avenue New York, NY 10022 Phone: (212) 895-2060 Fax: (212) 895-2900 All notices shall be deemed given upon transmission, if sent by facsimile; upon the first business day after mailing, if sent by overnight mail; and upon the third business day after mailing, if sent by certified or registered mail. 23 Dated: New York, New York February 13, 2002 CADWALADER, WICKERSHAM & BROWN RAYSMAN MILLSTEIN TAFT FELDER & STEINER LLP By: s/ By: s/ ----------------------------- ------------------------------------ Gregory M. Petrick (GP-2175) Lawrence P. Gottesman, Esq. (LG-7061) 100 Maiden Lane Gerard S. Catalanello, Esq. (GC-0945) New York, New York 10038 Arianna Frankl (AF-7764) (212) 504-6000 900 Third Avenue New York, New York 10022 CURTIS, MALLET-PREVOST, COLT & (212) 895-2000 MOSLE LLP Steven J. Reisman, Esq. ( ) KOZYAK TROPIN & THROCKMORTON, PA., 101 Park Avenue John Kozyak, Esq. New York, New York 10178-0061 (Florida State Bar No. 200395) (212) 696-6065 2800 First Union Financial Center 200 South Biscayne Boulevard Attorneys for the Debtors and Miami, Florida 33131 Debtors-in-Possession (305) 377-0654 Attorneys for Lennar Partners, Inc., as special servicer to The Chase Manhattan Bank, formerly known as Chemical Bank, as Trustee for the Registered Holders of DLJ Mortgage Acceptance Corporation, Commercial Mortgage Pass-Through Certificates, Series 1995-CF2 and LaSalle Bank National Association, a national banking association formerly know as LaSalle National Bank, as Trustee for the benefit of Certificateholders of American Southwest Financial Securities Corporation Commercial Mortgage Pass-Through Certificates, Series 1995-C1 SO ORDERED THIS 14th DAY OF FEBRUARY, 2002 /s/Burton R. Lifland ------------------------------ United States Bankruptcy Judge 24 EX-10.42 13 g75096ex10-42.txt AGREED ORDER RE: DEBTORS MOTION OF ENTRY EXHIBIT 10.42 CADWALADER, WICKERSHAM & TAFT Attorneys for the Debtors and Debtors in Possession 100 Maiden Lane New York, New York 10038 (212) 504-6000 Gregory M. Petrick (GP-2175) Adam C. Rogoff (AR-0820) Barry N. Seidel (BS-1945) UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 IN RE LODGIAN, INC., et al., Case Nos. 01-16345 et seq. Jointly Administered Debtors. Judge Burton R. Lifland AGREED ORDER REGARDING DEBTORS' MOTION FOR ENTRY OF ORDERS (1) AUTHORIZING THE DEBTORS-IN-POSSESSION TO (A) OBTAIN POST- PETITION FINANCING, (B) GRANT LIENS AND PRIORITY ADMINISTRATIVE EXPENSE CLAIMS STATUS, (C) MODIFY THE AUTOMATIC STAY, AND (D) ENTER INTO FINANCING AGREEMENT; AND (2) APPROVING THE USE OF CASH COLLATERAL AND GRANTING ADEQUATE PROTECTION REGARDING NATIONWIDE LOANS This matter came before the Court upon the motion (the "Motion") of Lodgian, Inc. ("Lodgian") and the other above-captioned Debtors and Debtors-in-Possession (the "Guarantors," collectively with the Borrower, the "Debtors"), pursuant to Sections 105, 361, 362, 363, 364, 503(b) and 507 of Title 11 of the United States Code (the "Bankruptcy Code") and Rule 4001 of the Federal Rules of Bankruptcy Procedure ("the "Bankruptcy Rules"), (I) authorizing the Debtors to (a) obtain post-petition financing; (b) grant liens and priority administrative expense claim status; (c) modify the automatic stay; and (d) enter into the Revolving Credit and Guaranty Agreement, the form of which was annexed to the Motion as Exhibit A (the "DIP Credit Agreement"); (II) approving the use of cash collateral and granting adequate protection therefor; and (III) scheduling a final hearing on the post-petition financing and use of cash collateral. The Motion sought, among other things: (a) Authorization for the Borrower to obtain post-petition financing (the "Financing") and for the Guarantors to guaranty the payment by the Borrower of its obligations thereunder up to a maximum aggregate principal amount of $25,000,000 (the actual available principal amount at any time being subject to conditions precedent as set forth in the DIP Credit Agreement), from Morgan Stanley Senior Funding, Inc. ("MSSF"), as acting administrative agent and collateral agent (the "Agent") for itself and a syndicate of financial institutions (together with the Agent, the "DIP Lenders") to be arranged by MSSF and Lehman Brothers Inc.; (b) The granting of adequate protection to the lenders and administrative agent under the Credit Agreement dated July 23, 1999 (as amended, the "Pre-Petition Agreement") among Lodgian Financing Corp., Lodgian, Inc., Impac Hotel Group, LLC, Servico, Inc., the Other Affiliate Guarantors party thereto, the lenders party thereto (the "Pre-Petition Lenders"), MSSF, as Administrative Agent (the "Pre-Petition Agent"), Collateral Agent, Co-Lead Arranger, Joint Book Manager and Syndication Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint-Book Manager and Lehman Commercial Paper Inc., as Documentation Agent; whose liens and security interests are being primed by the Financing; and (c) Authorization for the use by the Debtors of cash collateral (as such term is defined in the Bankruptcy Code) in which the Pre-Petition Lenders have an interest, and the granting of adequate protection to the Pre-Petition Lenders with respect to such use of their cash collateral. Nationwide Life Insurance Company ("Nationwide") filed an Objection to the Motion. Nationwide and the Debtors have reached agreement on the terms of the Debtors' proposed use of Nationwide's cash collateral and the Financing related to Nationwide's secured claims. -2- Upon the record made by the parties at the hearing on the Motion, the Motion and Nationwide's objection, and after due deliberation and consideration and sufficient cause appearing therefor, IT IS HEREBY FOUND, DETERMINED, ORDERED AND ADJUDGED, THAT: 1. This Order supplements and amends this Court's earlier Orders regarding Debtor's use of cash collateral and entering into Financing, as those Orders relate to Nationwide's secured claims. Terms not defined in this Order shall have the meaning set forth in the Debtors' Motion. 2. Nationwide is the lender with respect to six (6) loans to one or more Debtors (the "Nationwide Loans"). Five of the Nationwide Loans were made in December, 1998, and have maturity dates of November 30, 2002. Those loans are secured by leasehold mortgages on: the Holiday Inn, Jekyll Island, Georgia (the "Jekyll Island Loan"); the Holiday Inn - Inner Harbor, Baltimore, Maryland (the "Inner Harbor Loan"); Holiday Inn - BWI, Linthicum Heights, Maryland (the "BWI Loan"); the Holiday Inn, Glen Burnie, Maryland (the "Glen Burnie Loan"); and the Holiday Inn, Lancaster, Pennsylvania (the "Lancaster Loan"). These five loans are collectively referred to hereinafter as the "December 1998 Loans." The hotels securing those loans are collectively referred to hereinafter as the "December 1998 Properties". The December 1998 Loans are cross-collateralized, cross-defaulted and cross-guaranteed. The borrowers under the Nationwide Loans are hereinafter referred to as the "Nationwide Borrowers." 3. Nationwide is also lender with respect to a sixth loan, dated April 26, 1999, and secured by a mortgage on the Residence Inn, Dedham, Massachusetts (the "Dedham -3- Loan"). The Dedham Loan matures on April 30, 2002. The property securing the Dedham Loan is referred to hereinafter as the "Dedham Property." 4. Without prejudice to the rights of any other party (but subject to the limitations thereon contained in paragraph 13 below), the Debtors stipulate and agree that the liens and security interests granted to Nationwide pursuant to the Nationwide Loans, and pursuant to all leasehold mortgages, mortgages and security documents executed by any of the Debtors in favor of Nationwide in connection with the Nationwide Loans are (i) valid, perfected, enforceable, first priority liens and security interests in the personal and real property described in such documents, (ii) not subject to avoidance or subordination pursuant to the Bankruptcy Code or applicable non-bankruptcy law, and (iii) are subject only to (x) the priming liens and security interests granted to the Agent and the DIP Lenders pursuant to the DIP Financing Order and the DIP Credit Agreement (the "DIP Priming Liens"), (y) the Carve-Out (as defined in the Motion) to which the DIP Priming Liens are subject, and (z) the Qualified Pre-Petition Liens (if any) related to the Nationwide Hotels. Debtors further stipulate that the aggregate value of the collateral securing the Nationwide Loans, as of December 20, 2002 (the "Petition Date"), exceeds the aggregate amount of the pre-petition debt outstanding under the Nationwide Loans. 5. Consistent with the terms of the DIP Financing Order, the DIP Credit Agreement and the Cash Collateral Order, the Debtors are hereby authorized to use all cash collateral of Nationwide (in amounts consistent with the terms of the Budget), provided that Nationwide is granted adequate protection as hereinafter set forth. The unsecured creditors' committee may use up to $20,000 (plus reasonable disbursements and out-of-pocket expenses, including UCC searches and real estate title reports) of Nationwide's cash collateral to review Nationwide's liens as contemplated by paragraph 13 of this Order. -4- 6. Nationwide is entitled, pursuant to Sections 361, 363(e) and 364(d)(1) of the Bankruptcy Code, to adequate protection of its interest in the collateral securing the Nationwide Loans (the "Nationwide Collateral"), including the cash collateral, for any diminution in value of Nationwide's interests in the Nationwide Collateral as of the Petition Date, including, without limitation, any such diminution resulting from the use by the Debtors of cash collateral, and any other Nationwide Collateral, the priming of Nationwide's security interests and liens in the Nationwide Collateral by the Agent and the DIP Lenders pursuant to the DIP Credit Agreement and the DIP Financing Order and the imposition of the automatic stay pursuant to Section 362 of the Bankruptcy Code. As adequate protection, Nationwide is hereby granted the following (in addition to any adequate protection granted to Nationwide or any Primed Lender in other Orders regarding Debtors' use of cash collateral and/or Financing and subject to the subordination provisions set forth below) (collectively, the "Nationwide Adequate Protection"): (a) Adequate Protection Liens. Nationwide is hereby granted (effective upon the date of this Order, and without the necessity of execution by the Debtors of mortgages, security agreements, pledge agreements, financing statements or other agreements) a replacement security interest in and lien upon the Nationwide Collateral, subject and subordinate only to (i) the security interest and liens granted to the Agent for the benefit of the DIP Lenders under the DIP Financing Order and pursuant to the DIP Financing Documents, and (ii) the provisions of the Carve-Out, as applicable, provided that the property subject to the security interests and replacement liens granted to Nationwide as set forth herein shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code. (b) Primed Lender AP Lien. Pursuant to section 363(c) and (e) and 361 of the Bankruptcy Code, all of the Debtors hereby grant to Nationwide a perfected security interest in and lien upon all pre- and post-petition property of the Debtors (including, without limitation, cash collateral, inventory, accounts receivable, other rights to payment, contracts, property, plant, equipment, general intangibles, documents, instruments, interests in leaseholds, real -5- property, patents, copyrights, trademarks, trade names, other intellectual property capital stock of subsidiaries, and the proceeds of all the foregoing), whether now existing or hereafter acquired, that is pari passu with the other Primed Lender AP liens, except as with respect to the Subordinated Lien Amount (as defined below) subject only to (i) the DIP Priming Lien (but only to the extent of the Attributable DIP Amount); (ii) Qualified Prepetition Liens; (iii) a Specific AP Lien with respect to any of the Debtors' properties; and (iv) the Carve-Out (but only to the extent of the Attributable DIP Amount); provided, however, that Nationwide shall subordinate the Subordinated Lien Amount of its Primed Lender AP Lien to payment in full of all unsubordinated Primed Lender AP Liens of each other Primed Lender. For purposes of this order, the Subordinated Lien Amount shall mean an amount equal to twenty-five percent (25%) of the total claim of Nationwide at the relevant time as it relates to the December 1998 Loans. The Subordinated Lien Amount of Nationwide shall rank pari passu with the Subordinated Primed Lender AP Lien of any other Primed Lender that has also agreed to subordinate its Primed Lender AP Lien. Notwithstanding any provision herein to the contrary, if (but only to the extent that and for so long as) a holder of any Prepetition Mortgage (as defined in the Final Cash Collateral Order) has the benefit of an express restriction or prohibition contained in the certification of incorporation or similar constitutive document of the Debtor owning such property that prevents the creation of the security interest and lien provided by this paragraph 6(b) (including without limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then, such Primed Lender AP Lien shall become effective and enforceable only (i) with consent of such creditor or (ii) upon the payment in full of the claim secured by such Prepetition Mortgage; and further, the property subject to the liens granted to Nationwide as set forth in this Order shall exclude the Debtors' claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code; (c) Payment of Expenses. The Debtors shall use cash collateral securing the Nationwide Loans (or the proceeds of DIP Financing or Limited Intercompany Advances to the extent necessary) to pay monthly the following expenses in the following priority: (i) the operating expenses (including as applicable real estate taxes, property and casualty insurance, equipment lease payments and ground rent payment) of each hotel securing the Nationwide Loans (the "Nationwide Hotels"); (ii) funding of a capital expenditure reserve for each Nationwide Hotel equal to four (4%) percent of total revenues for the immediately preceding month; (iii) the prorata share of each Nationwide Hotel's management cost -6- allocation (net of management fee revenue) plus the applicable restructuring cost allocation as referenced in paragraph 49(b)(iii) and (iv) of the Motion, and as used in the 2002 Budget attached, computed as follows: budgeted total revenues for each Nationwide Hotel divided by the budgeted total revenues for all Lodgian hotels, for the 12-month period ended December 31, 2002. For the December 1998 Properties, this percentage equals 8.06%. For the Dedham Property this percentage equals 0.75%; (iv) capital expenditures, to the extent actual capital expenditures exceed the amount of pre-petition capital reserve escrows plus the additional reserves set forth in (ii) above; (v) payment of monthly interest at the non-default rate set forth in the Nationwide Loan documents ($438,791.29 for the December 1998 Properties, and $42,417.42 for the Dedham Property); including immediate payment of accrued but unpaid post-petition interest. (d) After payment of such expenses, the Debtors may use any excess cash collateral from the Nationwide Hotels consistent with the budget attached to the Motion and the terms of the Cash Collateral Order. Nationwide shall also receive current cash payments of all fees and expenses payable to Nationwide under the Nationwide Loans, including but not limited to, the reasonable fees and disbursements of Nationwide's counsel in connection with these bankruptcy proceedings to the extent provided in the Nationwide Loan documents. 7. To secure the DIP Financing, Nationwide consents to a priming lien on the Nationwide Collateral, prorata with the other Primed Lenders and the General AP Liens (as defined in the Motion) provided that the General AP Liens on the Nationwide Collateral shall be junior to the liens granted to Nationwide under the Nationwide Loans. To the extent Nationwide's consent is required to permit the Nationwide Borrowers to incur the obligations or grant the liens contemplated hereunder or in connection with the DIP Financing (whether under the terms of their respective certificates of incorporation, other constituent documents or other instruments or agreements), such consent is hereby given. The prorata percentage shall be computed by dividing the EBITDA on each primed hotel by the total EBITDA for all hotels receiving a priming lien, for the 12-month period ended September 30, 2001. As set forth in Schedule 3.15 attached to the DIP Financing Order, the Priming Liens shall not exceed -7- $3,182,000 on the December 1998 Properties, and $471,000 on the Dedham Property. This prorata treatment shall be consistently applied to all Primed Lenders. 8. All existing reserves with respect to the Nationwide Hotels shall remain in place and held by Nationwide for the benefit of the Nationwide Hotels and the Nationwide Loans. At Lodgian's direction, payments out of the reserves (to the extent otherwise permitted by the Nationwide loan documents and this Agreement) shall be made directly to the payee rather than paid by Lodgian and reimbursed by Nationwide. 9. On or before April 30, 2002, Nationwide will extend the maturity date of the Dedham Loan through November 30, 2002, under the same terms and conditions as the existing Dedham Loan. Such extension is not intended to alter in any material respect the rights of the respective parties regarding Nationwide's secured claims. In the event the extension of the maturity date of the Dedham Loan as set forth herein is determined by a further Order of this Court to have such an effect, Debtors shall have the right to revoke such extension and restore the Dedham Loan to its original April 30, 2002, maturity date. Nationwide will grant the Debtors with the option to extend all of the Nationwide Loans from November 30, 2002, through December 31, 2003, under the same terms and conditions as the existing loan documents (the "Extension Option"). The Extension Option will expire on the earlier of (a) November 30, 2002 or (b) confirmation of a plan of reorganization under the Bankruptcy Code in these proceedings. Upon exercise of the Extension Option, Debtors will continue to be bound (including in any plan of reorganization) by the terms and conditions of the existing Nationwide loan documents without modification (except as otherwise expressly provided in this paragraph 9 and paragraph 10 below with respect to the extended maturity date and the prepayment option). Within thirty (30) days after confirmation of the bankruptcy plan, the Debtors will pay all outstanding -8- principal and interest, together with any fees and expenses, necessary to bring the Nationwide Loans current. 10. Nationwide's agreement to extend the maturity of the Nationwide Loans is subject to the following conditions: (a) The Nationwide Loans will continue to bear interest at their current rate through the term of any extension; (b) The December 1998 Loans will remain cross-collateralized and cross-defaulted; (c) The Nationwide Loans shall be prepayable at par at any time; (d) All existing capital and maintenance reserves will remain in place for each of the Nationwide Hotels; (e) All other terms and conditions of the Nationwide loan documents will remain in effect, except to the extent that the Bankruptcy Code may limit the enforceability of certain provisions of those documents; (f) Nationwide may terminate the Extension Option and rescind any extension of the maturity dates, and the original maturity dates shall be reinstated if any of the following events occur prior to confirmation of a plan of reorganization: (i) Debtors fail to timely pay the monthly interest payments due on the Nationwide Loans pursuant to paragraph 6(c) above; (ii) Except to the extent otherwise agreed by Nationwide, the Debtors shall fail to observe the terms of the use of cash collateral as set forth in paragraph 6 above; (iii) Debtors increase the amount of priming liens allocated to the Nationwide Hotels or otherwise change the use of Nationwide's cash collateral as agreed herein, without Nationwide's consent; or (iv) Debtors' trailing 12-month EBITDA, as that term is consistently defined by the Debtors, is less than $8.2 million for the December 1998 Properties, and less than $1,000,000 for the Dedham Property. -9- 11. Nationwide shall not be required to file or record financing statements, mortgages, notices of lien or similar instruments in any jurisdiction or take any other action in order to validate and perfect the security interests and liens granted to Nationwide pursuant to this Order. 12. If any or all of the provisions of this Order are hereafter reversed, modified, vacated or stayed, such reversal, stay, modification or vacation shall not affect the validity and enforceability of any lien or priority authorized or created hereby in favor of Nationwide. 13. The findings and admissions contained in this Order, including without limitation, the findings and admissions contained in paragraph 4 of this Order, shall be binding upon all parties in interest, including any creditors' committee appointed in this case, unless (a) such committee has timely filed an adversary proceeding or contested matter no later than April 15, 2002, (i) challenging the validity, enforceability, priority or extent of Nationwide's liens on the Nationwide Collateral, or (ii) otherwise asserting any claims or causes of action against Nationwide in connection with the Nationwide Loans; and (b) the Court rules in favor of the plaintiff in any such timely-filed adversary proceeding or contested matter. If no such adversary proceeding or contested matter is timely filed as of such date, Nationwide's liens on the Nationwide Collateral shall be deemed to have been, as of the petition date, legal, valid, binding, perfected, not subject to recharacterization, subordination or avoidance. If any such adversary proceeding or contested matter is timely filed as of such date, the findings and admissions contained in paragraph 4 shall nonetheless remain binding and preclusive, except to the extent that such findings and admissions are expressly challenged in such adversary proceeding or contested matter. -10- 14. Subject to satisfaction of the requirements under the Nationwide Loan documents and the provisions of paragraph 6(c) of this Order, Nationwide will reimburse the Debtors (from existing capital expenditure reserves) for those capital expenditures made with respect to the Nationwide Hotels. 15. The provisions of this Order shall be binding upon Nationwide and the Debtors and their respective successors and assigns (including any Chapter 7 or Chapter 11 trustee hereinafter appointed or elected for the estate of any of the Debtors) and inure to the benefit of Nationwide and the Debtors and (except with respect to any trustee hereinafter appointed or elected for the estate of any of the Debtors) their respective successors and assigns. Dated: FEBRUARY 14, 2002 New York, New York /S/ JUDGE BURTON R. LIFLAND ---------------------------------------- Burton R. Lifland, U.S. Bankruptcy Judge Agreed to: /s/ Jeffrey Baddeley - ----------------------------- Jeffrey Baddeley Baker & Hostetler LLP 3200 National City Center 3200 National City Center 1900 E. Ninth St. Cleveland, OH 44114 (216) 861-7869 Counsel for Nationwide Life Insurance Company /s/ Barry N. Seidel - ----------------------------- Adam C. Rogoff Barry N. Seidel Gregory M. Petrick Cadwalader, Wickersham & Taft 100 Maiden Lane New York, NY 10038 (212) 504-6000 Counsel for Debtors -11- EX-10.43 14 g75096ex10-43.txt AFFIDAVIT AND DISCLOSURE STATEMENT UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK Chapter 11 Case Nos. ( ) In re: (Jointly Administered) Lodgian, Inc., et al., Debtors. AFFIDAVIT AND DISCLOSURE STATEMENT OF RICHARD CARTOON LLC IN SUPPORT OF APPLICATION TO EMPLOY RICHARD CARTOON LLC AS CHIEF FINANCIAL OFFICER FOR THE DEBTORS STATE OF GEORGIA ) )ss.: COUNTY OF FULTON ) Richard Cartoon, being duly sworn, deposes and says: 1. I am currently the President of Richard Cartoon LLC ("RCLLC") and I maintain an office at 2000 RiverEdge Parkway, Atlanta GA 30328. I submit this affidavit and disclosure statement in support of the application of Lodgian, Inc. et al ("the Debtors") for an order authorizing the employment and retention of RCLLC to provide services to the Debtors customarily provided by the office of the Chief Financial Officer pursuant to the terms and conditions set forth in the agreement dated November 13, 2001 ("the Engagement Agreement"), a copy of which is attached hereto as Exhibit A.. 2. The facts set forth in my affidavit are based upon my personal knowledge, information and belief. 1 3. RCLLC is well qualified to provide services to the Debtors customarily provided by the office of the Chief Financial Officer. I am the President of RCLLC and will serve as Chief Financial Officer of the Debtors. During the period from October 1989 through September 1999, I was a partner in the restructuring group of a "Big 5" accounting firm. While partner of the Big 5 accounting firm, I acted as the chief financial advisor to Servico, Inc. ("Servico") a hotel owner and management group, throughout its Chapter 11 proceedings. Servico successfully emerged from Chapter 11 in 1992 and subsequently merged with the Impac group to form Lodgian, Inc. As a result of my involvement with the Servico Chapter 11 cases, I am familiar with the hospitality industry and with a number of the existing properties of the Debtors. I continued as a partner of the Big 5 accounting firm until September 1999. I formed my own company, RCLLC effective October 1, 1999 and continued to provide restructuring services to companies, creditors' committees and other parties-in-interest. 4. On December x, 2001 ("the Petition Date") Lodgian, Inc. and most of its subsidiaries filed for protection under Chapter 11 of the Bankruptcy Code. Prior to the Petition Date RCLLC was retained on October 11, 2001 to perform financial advisory services to Lodgian, Inc. and its subsidiaries. On November 13, 2001 the scope of the engagement was changed and RCLLC was retained to provide services to the Company customarily provided by the office of the Chief Financial Officer. I was designated by RCLLC to act as its representative to serve as the Chief Financial Officer of the Company reporting to the Chief Executive Officer subject to the terms and conditions set forth in the Engagement Agreement. 5. Prior to the Petition Date RCLLC received compensation in the aggregate amount of [$161,427] for services rendered and costs and expenses incurred in providing services by its management and associates. 2 6. On October 11, 2001 RCLLC received a $50,000 retainer from Lodgian, Inc. for services to be rendered and expenses to be incurred and this retainer was continued through and remained fully funded as of the Petition Date. 7. RCLLC has not provided services to any entities or individuals in connection with these Chapter 11 cases, other than the provision of services to the Debtors mentioned above. RCLLC does not represent any interest adverse to the Debtors and will not represent any entity, other than the Debtors, in connection with these Chapter 11 cases. To my knowledge, none of the clients of RCLLC is a creditor or party in interest in these Chapter 11 cases. 8. Accordingly, based upon the preceding, I submit that RCLLC is a "disinterested person" as defined in section 101(14) of the Bankruptcy Code and as required by section 327(a) of the Bankruptcy Code. 9. As compensation for its services, RCLLC has agreed that it will receive its customary hourly rates, which are as follows: President/Managing Director $310 Staff/Consultants $200 - $250 Support Staff $ 50 - $100
These rates are equivalent to those currently being charged by RCLLC to its other clients. In the ordinary course of business, RCLLC will revise its hourly rates on June 30 of each year. 11. In addition to compensation for professional services rendered by RCLLC, RCLLC shall seek reimbursement for reasonable and necessary expenses incurred in connection with the above- captioned cases, including, but not limited to, transportation, lodging, food, telephone, copying, messenger service and research. 3 12. RCLLC shall make proper application to the Bankruptcy Court for compensation for the services rendered to the Debtors and/or the Committee in these proceedings pursuant to sections 330 and 331 of the Bankruptcy Code, and the Administrative Order entered in these cases. 13. No agreement or understanding exists between RCLLC and any other person for the sharing of compensation to be received in connection with these cases. 14. The proposed engagement of RCLLC is not prohibited by Rule 5002 of the Bankruptcy Rules. 15. RCLLC requests that its retention as Chief Financial Officer be approved nunc pro tunc to the Petition Date. FURTHER AFFIANT SAYETH NOT. By: /s/ Richard Cartoon ------------------- Richard Cartoon SWORN TO before me, this x day of December 2001. /s/ - ---------------- Notary Public 4 EX-23.1 15 g75096ex23-1.txt CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated March 22, 2002 included in this Form 10-K, into the Company's previously filed Registration Statement on Form S-8 (File No. 333-68464). /s/ ARTHUR ANDERSEN LLP Atlanta, Georgia March 27, 2002 EX-23.2 16 g75096ex23-2.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-68464) pertaining to the Lodgian, Inc. 401(k) Plan of our report dated July 14, 2000, with respect to the consolidated statement of operations, statement of stockholders equity, and statement of cash flow of Lodgian, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1999. /s/ Ernst & Young LLP Atlanta, Georgia March 29, 2002 EX-99 17 g75096ex99.txt LETTER RELATING TO ARTHUR ANDERSEN LLP EXHIBIT 99 Securities and Exchange Commission Washington, DC Arthur Andersen LLP has represented to Lodgian, Inc. that its audit of the consolidated financial statements of Lodgian, Inc. and Subsidiaries as of December 31, 2001 and for the year then ended was subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards and that there was appropriate continuity of Andersen personnel working on the audit and availability of national office consultation. Availability of personnel at foreign affiliates of Arthur Andersen is not relevant to this audit. /s/ Richard Cartoon - ------------------- Richard Cartoon Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----