EX-10.1 3 g77929exv10w1.txt COMMITMENT LETTER FROM MERRILL LYNCH MORTGAGE [ON MERRILL LYNCH LETTERHEAD] July 12, 2002 Lodgian Inc. 3445 Peachtree Road, NE Suite 700 Atlanta, Georgia 30326 Attention: David Hawthorne Re: Commitment to provide first mortgage financing in the aggregate amount of $286,200,000 (the "LOAN") to a special purpose entity (the "BORROWER"), to be owned and controlled by Lodgian Inc. (the "COMPANY") following its reorganization ------------------------------------------------------------- Ladies and Gentlemen: On December 20, 2001, the Company filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the "BANKRUPTCY Code") in the United States Bankruptcy Court for the Southern District of New York (the "BANKRUPTCY COURT") and has since continued in the operation of its business and the management of its properties as a debtor-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. The Company has informed us that it is currently exploring exit financing alternatives as part of a proposed Plan of Reorganization (the "PROPOSED PLAN") that it anticipates filing with the Bankruptcy Court in July, 2002. The Proposed Plan will contemplate, among other things, refinancing (i) an existing $195,600,000 first mortgage loan made by a bank syndicate led by Morgan Stanley and Lehman Brothers and secured by mortgage liens on 50 hotels (the "MSLB HOTELS") and (ii) two mortgage loans in the aggregate principal amount of $60,600,000 held by Rockbridge Capital, Inc. and secured by mortgage liens on six hotels (the "ROCKBRIDGE HOTELS"; the MSLB Hotels and the Rockbridge Hotels, collectively, the "PORTFOLIO HOTELS"). Merrill Lynch Mortgage Capital Inc. and/or its affiliates ("MERRILL LYNCH" or the "LENDER") are pleased to commit to provide the Loan on the terms and subject to the conditions set forth herein and in the Summary of Principal Terms (the "SPT") attached hereto. The obligation of the Lender to make the Loan is subject to, among the other conditions set forth herein and in the SPT, the following: (i) the preparation, execution and delivery of a loan agreement (the "LOAN AGREEMENT") and other loan documents (collectively, together with the Loan Agreement, the "LOAN DOCUMENTS") reasonably acceptable to the Lender and incorporating substantially the terms and conditions set forth herein and in the SPT; (ii) actual EBITDA of the Portfolio Hotels, measured on a cumulative basis for the period from July 1, 2002 through the Closing (as defined in the SPT) shall not be less than 90% of EBITDA of the Portfolio Hotels for the same period, as set forth in the Company's budget (the "BUDGET"), a copy of which is attached hereto as Schedule 1, and all calculations of EBITDA shall employ the same methodology as is employed in the Budget; (iii) the Lender's reasonable determination that there has been no material adverse change since the date of this commitment letter in the United States hospitality sector due to acts of terrorism, declaration by the United States of war or national emergency or the outbreak or escalation of other hostilities involving the United States in the United States or abroad; (iv) as of Closing (a) Portfolio Hotels assigned not less than 75% of the aggregate of the percentages (the "ASSIGNED PERCENTAGES") of the total value of the Portfolio Hotels assigned to the individual Portfolio Hotels, as set forth on Schedule 2, must be operated under franchise agreements with Six Continents and Marriott, and (b) Portfolio Hotels assigned not more than 10% of the aggregate of the Assigned Percentages are operated without franchise agreements with nationally-recognized hotel franchises; (v) as of Closing, the total number of hotel rooms in the Portfolio Hotels having failing scores under franchise agreements, other than failing scores under agreements with Six Continents resulting from failing guest service scores under Six Continents' revised scoring system ("EXCLUDED FAILING SCORES"), shall not exceed the sum of (a) the number of hotel rooms having failing scores, other than Excluded Failing Scores, as of the date of this commitment letter and (b) 10% of the total number of hotel rooms in the Portfolio Hotels; and (vi) not more than 10% (by appraised value) of the rooms constituting the Portfolio Hotels are unavailable due to casualty. The Company shall continue to actively assist the Lender in connection with the underwriting of the Loan, and, in connection therewith, shall provide and cause its advisors to provide the Lender upon request with all information reasonably requested and otherwise to assist the Lender in its underwriting efforts, including making available officers and advisors of the Company from time to time to attend and make presentations regarding the Proposed Plan and the business and prospects of the Company and the Portfolio Hotels, as appropriate, at a meeting or meetings with the Lender. From the date of this commitment letter until the earlier of (i) its termination and (ii) the 70th day after the Company's timely acceptance of this commitment letter, the Company shall refrain from engaging or soliciting any prospective lender to provide financing with respect to any of the Portfolio Hotels. In addition, if the Company determines to engage a financial advisor, in addition to its currently engaged advisors and the current scope of their engagement, with respect to the sale, financing or refinancing of all or any portion of the Company, its operations or assets, the Company shall, to the extent practicable, afford appropriate affiliates of the Lender an opportunity to be considered for such engagement(s) comparable to that afforded other prospective advisors. The Company recognizes that the Lender has not had the opportunity to complete its legal due diligence, including its review of franchise arrangements, or to conduct certain structural and environmental evaluations of the Portfolio Hotels. The Lender's obligation to make the Loan is subject to the Lender's satisfaction with (i) all third party reports with respect to the Portfolio Hotels that the Lender shall reasonably require, including, without limitation, appraisals, structural and environmental reports and title reports (the "THIRD PARTY REPORTS"), and (ii) all legal due diligence items that the Lender shall reasonably require with respect to the Portfolio Hotels, the Borrower and the Company, including, without limitation, all management agreements, franchise agreements, ground leases, space leases and filings in pending litigation (the "LEGAL DUE DILIGENCE ITEMS"). The Lender shall use reasonable efforts to arrange for its receipt 2 of the Third Party Reports not later than the 60th day following the Company's timely acceptance of this commitment letter. The Company shall promptly, and in any event within 10 days after receipt of the Lender's written request, make available to the Lender copies of requested Legal Due Diligence Items. If and when the Lender has determined to approve, for the purpose of satisfying the corresponding conditions to the making of the Loan, all Third Party Reports and all Legal Due Diligence Items (other than Legal Due Diligence Items that the Company has failed to make available as required above), the Lender shall deliver to the Company written notice (the "DILIGENCE COMPLETION NOTICE"), which shall be subject to the limitations set forth in the SPT. Following the 84th day (the "DUE DILIGENCE CUT-OFF DATE") after the Company's timely acceptance of this commitment letter, if the Lender has not delivered to the Company the Diligence Completion Notice on or before the Due Diligence Cut-off Date, the Company may, by written notice delivered to the Lender at any time thereafter terminate this commitment letter, and the obligations of the parties hereunder (other than the Company's obligations to pay the expenses required by the seventh paragraph of this commitment letter). The Lender shall promptly notify the Borrower of any findings from the Lender's review of the Third Party Reports and Legal Due Diligence Items that the Lender believes, individually or in the aggregate, would cause a failure of a condition precedent to the making of the Loan to be satisfied. With the cooperation of the Borrower, the Lender shall coordinate with the Borrower's counsel in engaging the service providers that will prepare Third Party Reports, all of which shall be addressed to the Lender and the Company. The Lender recognizes that all Third Party Reports are the property of the Company and may be made available to the Company and any party authorized by the Company, subject to the second sentence of the third paragraph of this commitment letter. The Company hereby represents, warrants and covenants that (i) all information, other than the Projections (as defined below), that it or its representatives have made or hereafter make available to the Lender in connection with the transactions contemplated hereby (the "INFORMATION"), when taken as a whole, is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading and (ii) all financial projections it or its representatives have made or hereafter make available to the Lender (the "PROJECTIONS") have been and will be prepared in good faith based upon reasonable assumptions. The Company shall furnish the Lender with such Information and Projections as the Lender may reasonably request and to supplement the Information and the Projections from time to time until the closing date for the Loan so that the representation and warranty in the preceding sentence is correct on such closing date. The Company acknowledges that, in underwriting the Loan, the Lender has used and relied on and will be using and relying on the Information and the Projections without independent verification thereof. The Company shall reimburse the Lender for all reasonable out-of-pocket costs and expenses payable by the Lender to third parties incurred before or after the date of this commitment letter in connection with the Loan or the preparation, negotiation, execution and delivery of this commitment letter, the Loan Documents and any other documentation contemplated hereby or thereby; the enforcement of the Company's obligations hereunder; due diligence investigations relating to the Portfolio Hotels, the Borrower, the Company and the Proposed Plan, the approval of this commitment letter and/or the Loan by the Bankruptcy Court 3 and/or any of the creditors or other committees participating in the Company's bankruptcy proceeding, participation with the Company in defending any appeal of the Confirmation Order, including, without limitation reasonable fees and expenses of counsel, appraisal costs, costs of environmental assessments, and costs of any inspecting architects, engineers or other consultants retained by the Lender. In addition, if the Closing occurs while any appeal of the Confirmation Order is pending, the Company shall indemnify the Lender for losses, costs and expenses resulting from such appeal. The Lender shall use its best reasonable efforts to (a) provide the Company with an estimated expense budget as soon as practicable after, and, in any event, within 14 days after, the Company's timely acceptance of this commitment letter, (b) provide the Company with notice of any material upward revisions to the expense budget as soon as practicable after the Lender determines that the same are appropriate, (c) provide the Company with a reasonably prompt notice and description of actual expenses incurred by the Lender for the account of the Borrower when such expenses reach $250,000, and each $100,000 increment in excess of $250,000 and (d) advise the Company in advance of its intention to incur more than $50,000 in out-of-pocket costs with respect to any due diligence item(s). The Lender's failure to perform its obligations set forth in the preceding sentence shall not relieve the Company of its obligations to reimburse the Lender for its costs and expenses. With respect to any opinions or other advice of local counsel required in connection with the Loan, the Lender and the Borrower shall use the same local counsel, reasonably acceptable to the Lender, for each jurisdiction in which a Portfolio Hotel is located. The obligations of the Company set forth in the immediately preceding paragraph shall continue and are and shall remain absolute obligations of the Company, whether or not Loan Documents are executed or any loan is made by the Lender or any conditions of lending are met, provided, however, that such obligations shall terminate upon the execution and delivery of the Loan Documents. The obligations of the Lender under this commitment letter shall be enforceable solely by the Company and may not be relied upon by any other person. This commitment letter and the SPT are for the Company's/Borrower's confidential use only and may not be disclosed by them to any person other than their employees, attorneys, financial advisors, members of the Company's official committee of unsecured creditors, such committee's financial advisors and as required in connection with obtaining approval of this commitment letter and the Final Plan by the Bankruptcy Court and then only in connection with the proposed transaction and, other than in connection with Bankruptcy Court approvals, on a confidential basis, except where disclosure is required by law or where the Lender consents to the proposed disclosure, which consent shall not be unreasonably withheld. Please indicate your acceptance of the commitment herein contained in the space indicated below and return a copy of this commitment letter so executed to Merrill Lynch Mortgage Capital Inc. at 4 World Financial Center 7th Floor, New York, New York, 10080; Attention Michael Nash. This commitment will expire at 5:00 p.m. on July 12, 2002, unless on or prior to such time Merrill Lynch shall have received a copy of this commitment letter executed by the Company. Notwithstanding timely acceptance of this commitment letter pursuant to the preceding sentence, the commitment herein contained will automatically terminate and the parties shall have no further obligations hereunder (other than the Company's obligations set forth in the seventh paragraph hereof) if (a) the Company does not file a motion with the Bankruptcy Court seeking the Approval Order (hereinafter defined) on or prior to 4 July 19, 2002, (b) the Bankruptcy Court does not enter an order (the "APPROVAL ORDER") approving the Company's execution of this commitment letter and the performance of the Company's obligations hereunder and the Approval Order has not become non-appealable with no appeal pending on or prior to August 30, 2002, (c) the Company does not pay either $500,000 installment of the Commitment Fee (as defined in the SPT) as and when due in accordance with the SPT; (d) the Bankruptcy Court does not enter an order (the "CONFIRMATION ORDER") confirming the Company's final plan of reorganization (the "FINAL PLAN") on or before November 15, 2002, or (e) the Closing has not occurred on or before November 30, 2002. Notwithstanding the foregoing, not earlier than September 1, 2002, the Company may request in writing (an "EXTENSION REQUEST") that the Lender agree to extend the deadlines set forth in clauses (d) and (e) each by not more than 60 days. If the Lender proposes to agree to such extensions, the Company shall pay the Lender $350,000 (the "EXTENSION FEE")in consideration of, and as a condition to, such agreement. If the Lender does not agree in writing to such extensions on or prior to the 10th day following the Lender's receipt of an Extension Request, the Company may, by written notice to the Lender given not later than the 20th day following the Lender's receipt of such Extension Request, terminate this commitment letter and the parties shall have no further obligations hereunder except for the Company's obligations set forth in the seventh paragraph hereof and its obligation to pay, if due in accordance with the SPT, the balance of the Commitment Fee. The Lender reserves the right to assign some or all of its rights and delegate some or all of its responsibilities hereunder to one of its affiliates. This commitment letter and the SPT supersede any and all prior versions hereof or thereof. This commitment letter may only be amended by a writing signed by all parties hereto. This commitment letter may be executed in one or more counterparts, each of which shall be deemed an original and all of which counterparts taken together shall constitute one and the same original. Executed copies of this commitment letter may be delivered by telecopy and, upon receipt, shall be deemed originals and binding upon the parties hereto. Without limiting or otherwise affecting the validity of executed copies hereof that have been delivered by telecopy, the Company and the Lender each agree to use its best efforts to deliver original signatures as promptly as possible following the execution hereof. 5 IF THIS COMMITMENT LETTER OR THE SPT OR ANY ACT, OMISSION OR EVENT HEREUNDER OR THEREUNDER BECOMES THE SUBJECT OF A DISPUTE, EACH OF THE COMPANY AND THE LENDER HEREBY WAIVE TRIAL BY JURY. THIS COMMITMENT LETTER SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. MERRILL LYNCH MORTGAGE CAPITAL INC. By: ---------------------------------- Name: Steven Glassman Title: Authorized Signatory Terms and conditions of this commitment letter accepted and agreed this 12th day of July, 2002. LODGIAN INC. By: ----------------------------- Name: David Hawthorne Title: Chief Executive Officer CC: R. Cartoon (Lodgian) S. Armstrong (Oaktree Capital) J. Gray (Blackstone) K. Caplan (Blackstone) 6 SCHEDULE 1 -- BUDGET 7 SCHEDULE 2 -- ASSIGNED PERCENTAGES 8 SCHEDULE 1 LODGIAN MERRILL LYNCH PORTFOLIO 2002 EXIT FINANCING BUDGET 56 HOTELS
JUL-02 AUG-02 SEP-02 OCT-02 NOV-02 DEC-02 INCOME STATEMENT ----------- ----------- ----------- ----------- ----------- ----------- Rooms Available 339,977 339,977 329,010 339,977 329,010 339,977 Rooms Rented 229,429 216,927 202,961 229,196 186,962 152,578 Occupancy % 67.5% 63.8% 61.7% 67.4% 56.8% 44.9% A.D.R. $ 78.56 $ 78.08 $ 75.95 $ 75.29 $ 72.57 $ 59.03 REVPAR $ 53.02 $ 49.82 $ 46.85 $ 50.75 $ 41.24 $ 30.98 Department Revenue Rooms $18,023,962 $18,937,031 $15,413,954 $17,255,121 $13,567,028 $10,533,207 Food 3,311,588 3,348,713 3,450,641 4,189,892 3,377,945 3,538,951 Beverage 685,010 710,285 715,014 759,574 655,868 924,998 Telephone 305,976 302,013 283,145 325,041 267,403 208,950 Other Operating Income 523,834 519,477 497,914 530,096 454,734 373,734 ----------- ----------- ----------- ----------- ----------- ----------- Total Revenue 22,830,371 21,817,518 20,360,678 23,059,724 18,322,979 15,579,639 Dept. Costs & Expenses Rooms 4,702,779 4,449,841 4,304,286 4,400,056 4,002,273 3,468,359 Food 2,708,155 2,717,546 2,796,410 3,100,520 2,668,577 2,861,161 Beverage 334,967 350,785 354,509 349,404 321,375 397,749 Telephone 202,917 197,689 191,229 214,527 197,678 162,981 Other Operating Expenses 337,681 324,324 318,073 333,960 309,219 242,927 ----------- ----------- ----------- ----------- ----------- ----------- Total Dept. Expenses 8,288,499 8,040,188 7,964,507 8,398,467 7,499,323 7,131,176 ----------- ----------- ----------- ----------- ----------- ----------- Gross Contribution 14,543,872 13,777,332 12,396,171 14,661,256 10,823,658 8,448,863 G&U Expenses General & Administrative 1,185,764 1,175,050 1,198,441 1,176,045 1,090,217 1,201,328 Advertising & Promotion 877,191 873,564 955,795 922,369 824,534 878,572 Franchise Expenses 1,564,362 1,500,189 1,341,015 1,518,451 1,207,468 916,389 Repairs & Maintenance 1,074,763 1,054,872 1,030,140 1,175,046 961,958 919,211 Utilities 1,209,841 1,196,189 1,141,473 1,060,747 1,007,784 1,059,429 ----------- ----------- ----------- ----------- ----------- ----------- Total G&U Expenses 5,911,921 5,799,884 5,666,884 5,853,679 5,091,937 4,974,929 ----------- ----------- ----------- ----------- ----------- ----------- House Profit 8,631,950 7,977,448 6,729,307 8,807,578 5,731,719 3,473,734 House Profit % 37.8% 36.6% 33.1% 38.2% 31.3% 22.3% Other Operating Expenses Management Fees 913,215 872,701 814,427 922,389 732,919 623,194 Equipment Rentals 123,257 123,354 124,402 125,358 121,702 122,693 Insurance 302,279 302,279 356,312 390,614 357,884 356,685 Property & Other Taxes 928,312 928,312 928,312 1,023,297 1,023,297 928,312 Other Expenses (Income) 45,000 45,000 45,000 45,000 45,000 45,000 Ground Rent 202,917 202,917 202,917 202,917 202,917 202,917 ----------- ----------- ----------- ----------- ----------- ----------- Total Other Operating Expenses 2,514,980 2,474,563 2,471,370 2,709,575 2,483,719 2,278,801 ----------- ----------- ----------- ----------- ----------- ----------- EBITDA $ 6,116,970 $ 5,502,885 $ 4,257,937 $ 6,098,003 $ 3,248,000 $ 1,194,934 =========== =========== =========== =========== =========== =========== 3RD 4TH QUARTER QUARTER 2002 2002 INCOME STATEMENT ----------- ----------- Rooms Available 1,008,964 1,008,964 Rooms Rented 649,317 568,736 Occupancy % 64.4% 56.4% A.D.R. $ 77.58 $ 72.71 REVPAR $ 49.93 $ 40.99 Department Revenue Rooms $50,374,957 $41,355,357 Food 10,110,943 11,106,789 Beverage 2,090,308 2,340,439 Telephone 891,134 801,394 Other Operating Income 1,541,225 1,358,583 ----------- ----------- Total Revenue 65,008,567 56,962,541 Dept. Costs & Expenses Rooms 13,458,906 11,868,688 Food 8,222,112 8,630,258 Beverage 1,040,261 1,068,528 Telephone 591,836 575,386 Other Operating Expenses 980,078 886,106 ----------- ----------- Total Dept. Expenses 24,291,192 23,028,968 ----------- ----------- Gross Contribution 40,717,375 33,933,575 G&U Expenses General & Administrative 3,559,255 3,487,591 Advertising & Promotion 2,706,570 2,625,495 Franchise Expenses 4,405,568 3,842,305 Repairs & Maintenance 3,159,775 3,057,213 Utilities 3,547,503 3,127,940 ----------- ----------- Total G&U Expenses 17,378,669 15,920,544 ----------- ----------- House Profit 23,338,706 18,013,031 House Profit % 35.9% 31.6% Other Operating Expenses Management Fees 2,600,343 2,278,502 Equipment Rentals 371,012 369,753 Insurance 960,870 1,105,183 Property & Other Taxes 2,784,937 2,974,908 Other Expenses (Income) 135,000 135,000 Ground Rent 608,751 608,751 ----------- ----------- Total Other Operating Expenses 7,460,913 7,472,094 ----------- ----------- EBITDA $15,877,793 $10,540,938 =========== ===========
SCHEDULE 2
LODGIAN PROPERTY SUMMARY ------------------------------------------------------------------------------------------------------ INDIVIDUAL PROPERTY GPI # YEAR VALUES AS A PERCENT # CHAIN/NAME CITY ST ROOMS BUILT OF TOTAL VALUE --- --------------------- -------------------- ---- ------ ----- ------------------- 1 Holiday Inn Silver Spring MD 213 1973 5.4% 2 Courtyard by Marriott Atlanta GA 181 1996 4.7% 3 Crowne Plaza Houston TX 291 1980 5.0% 4 Crowne Plaza Albany NY 384 1980 4.5% 5 Holiday Inn Select Dallas (DFW Airport) TX 282 1974 2.8% 6 Holiday Inn Select Windsor ONT. 214 1991 3.1% 7 Hilton Columbia MD 152 1982 2.6% 8 Doubletree Club Philadelphia PA 189 1972 2.8% 9 Crowne Plaza West Palm Beach FL 219 1982 2.4% 10 Holiday Inn Select Niagra Falls NY 397 1974 1.8% 11 Holiday Inn Select Strongsville OH 304 1972 2.4% 12 Holiday Inn Winter Haven FL 228 1967 1.6% 13 Holiday Inn Rolling Meadows IL 420 1983 2.2% 14 Courtyard by Marriott Bentonville AR 90 1996 1.9% 15 Hilton Troy (Northfield) MI 191 1976 2.6% 16 Holiday Inn Greentree PA 200 1972 1.7% 17 Crowne Plaza Cedar Rapids IA 275 1991 1.7% 18 Holiday Inn St. Louis North MO 392 1956 1.9% 19 Holiday Inn Frederick MD 158 1963 1.2% 20 Holiday Inn Towson (Cromwell MD 139 1972 1.7% Bridge) 21 Residence Inn Little Rock AR 96 1997 1.5% 22 Hampton Inn Pensacola FL 124 1985 1.5% 23 Courtyard by Marriott Paducah KY 100 1997 1.3% 24 Holiday Inn Austin TX 210 1984 1.3% 25 Holiday Inn SunSpree Myrtle Beach SC 133 1978 1.3% 26 Holiday Inn Valdosta GA 167 1963 0.8% 27 Holiday Inn Arden Hills/St. Paul MN 156 1973 1.6% 28 Courtyard by Marriott Abilene TX 99 1996 1.4% 29 Holiday Inn Pensacola FL 152 1961 1.2% (University Mall) 30 Fairfield Inn Valdosta GA 108 1963 1.2% 31 Holiday Inn East Hartford CT 130 1974 0.8% 32 Holiday Inn Jamestown NY 146 1979 1.3% 33 Holiday Inn Brunswick GA 126 1974 0.9% 34 Holiday Inn Sheffield AL 201 1981 1.0% 35 Holiday Inn York PA 100 1970 0.9% 36 Hurstbourne Hotel Louisville KY 398 1971 1.0% 37 Hampton Inn Dothan AL 113 1989 0.8% 38 Holiday Inn Express Pensacola FL 214 1962 0.7% 39 Courtyard by Marriott Florence KY 78 1995 0.9% 40 Quality Hotel Melaine LA 205 1985 0.9% 41 Holiday Inn Marietta (hotel & GA 196 1973 0.5% suites) 42 Holiday Inn Grand Island NY 261 1972 0.3% 43 Clarion Charleston SC 197 1981 0.4% 44 Holiday Inn Express Gadsden AL 141 1962 0.6% 45 Four Points Niagra Falls NY 189 1965 0.6% 46 Holiday Inn Baltimore West MD 135 1972 0.6% (Belmont) 47 French Quarter Suites Memphis TN 105 1980 0.7% 48 Holiday Inn Dothan AL 102 1961 0.3% 49 Holiday Inn Dallas (Mkt Center) TX 246 1971 0.5% 50 Holiday Inn Pittsburgh (Pkwy PA 180 1975 0.6% East) 51 Holiday Inn Glen Burnia MD 127 1973 1.3% 52 Residence Inn Dedham MA 81 1998 2.4% 53 Holiday Inn Baltimore, Inn MD 375 1964 7.8% Harbor 54 Holiday Inn Lancaster PA 189 1971 1.2% 55 Holiday Inn Baltimore - BWI MD 259 1973 5.4% Airport 56 Holiday Inn Jekyl Island GA 199 1972 0.6% ------ ---- ----- Totals/Averages 10,975 1975 100.0%
LODGIAN HOTEL PORTFOLIO SUMMARY OF PRINCIPAL TERMS AND CONDITIONS This Summary of Principal Terms and Conditions (the "SPT") is not a commitment by Merrill Lynch Mortgage Capital Inc.(the "LENDER") and the Lender shall have no commitment or obligation hereunder except as set forth in the commitment letter ("COMMITMENT LETTER") to which this SPT is attached. Capitalized terms not defined herein shall have the meanings assigned to them in the Commitment Letter. PROPERTIES: Fifty-six hotel properties (each, a "PORTFOLIO HOTEL") located throughout 20 states (with one Portfolio Hotel located in Windsor, Ontario), comprising 10,975 hotel rooms and more particularly described on Exhibit A attached hereto and made a part hereof. PARTIES TO THE AGREEMENT THE BORROWER: The Borrower shall be one or more single-purpose, bankruptcy remote entities (with organizational documents conforming to customary rating agency requirements for loans of this type), whose only assets are the Portfolio Hotels and related assets (such as inventory and receivables and franchise agreements, management agreements, insurance contracts, and other contracts, licenses and permits relating to the maintenance, renovation, use or operation of the Portfolio Hotels) pledged to the Lender (to the extent provided under "Security" below) and whose sole business shall be the ownership and operation of the Portfolio Hotels. If the Lender elects to advance a portion of the Loan Amount as a "mezzanine" loan to the owner(s) of the Borrower, the "mezzanine" loan borrower shall be a single purpose entity whose only asset is the Borrower Equity (as defined herein) pledged to the Lender and whose sole business shall be ownership of the Borrower Equity. The Borrower(s) shall be wholly owned and controlled by Lodgian Inc. (the "COMPANY"). If reasonably requested by the Lender, each Portfolio Hotel shall be owned at Closing by a separate, single purpose entity that satisfies the foregoing requirements. LENDER: Merrill Lynch Mortgage Capital Inc. and/or its affiliates. LOAN FACILITY LOAN AMOUNT: $286,200,000. PURPOSE: The Company shall use the proceeds of the Loan to (1) refinance an existing $195,600,000 mortgage loan secured by first priority mortgage liens on 50 of the 56 Portfolio Hotels, and (2) refinance two existing mortgage loans in the aggregate principal amount of $60,600,000 secured Page 1 by first priority mortgage liens on the remaining six Portfolio Hotels. The remaining proceeds shall be used (1) to fund cash collateral requirements for letters of credit, (2) to fund a capital improvement reserve or (3) for general corporate purposes, including, but not limited to paying transaction expenses. However, such remaining proceeds may not be used to acquire any hotel property. LOAN TERM: Maturity Date: Two years from Closing. Extension Options: The Borrower shall have the option to extend the maturity of the Loan for three additional consecutive periods of one year each (each, an "EXTENSION PERIOD"); provided, however, that only one extension option may be exercised at a time. The option for the first Extension Period may be exercised by the Borrower by written notice to the Lender given any time not later than 45 days prior to the Maturity Date. The option for each subsequent Extension Period may be exercised by the Borrower by written notice to the Lender not earlier than 120 days, but not later than 45 days, prior to the first or second anniversary of the Maturity Date, as applicable. Each Extension Period will commence and become effective on the day following the original Maturity Date, or the day following the first or second anniversary of the Maturity Date, as applicable. If (1) no monetary default exists and is continuing at the time notice is given or on the date the first Extension Period would otherwise commence, (2) the Borrower shall have entered into an interest rate cap agreement (an "ELIGIBLE CAP AGREEMENT") with a notional amount equal to the principal amount of the Loan from time to time, a term through the extended Maturity Date, a counterparty having a credit rating of not less than "AA" or its equivalent, and a "strike" rate of not greater than 6.50% per annum, and (3) the Borrower shall have executed and delivered all documents reasonably required by the Lender, the Borrower shall have the right to exercise its option to extend the maturity of the Loan for the first one-year Extension Period, subject to no other conditions except for timely notice. The Borrower's right to extend the Loan Term for additional Extension Periods shall be subject to satisfaction of the following conditions: o - The existence of a DSCR (hereinafter defined) at the time of commencement of the Extension Period of at least 1.30x; provided, however, that the Borrower may partially prepay the Loan (such prepayment, a "SUPPLEMENTAL PRINCIPAL PAYMENT") from the proceeds of a contribution of additional cash equity in an amount necessary to achieve a DSCR of 1.30x. - The existence of a Debt Yield Ratio (hereinafter defined) of at least Page 2 13.75%; provided, however, that the Borrower may make a Supplemental Principal Payment from the proceeds of a contribution of additional cash equity in an amount necessary to achieve a Debt Yield Ratio of 13.75%. - The Borrower shall continue to possess all material licenses and permits necessary to operate 90% of the hotel rooms then remaining in the portfolio in substantially the same manner as operated on the date of Closing. - There shall exist no uncured Event of Default and no default ("DEFAULT") that, with notice or the passage of time or both, would constitute an Event of Default. - The Lender shall have received the Extension Fee (hereinafter defined). - The Borrower shall have entered into an Eligible Cap Agreement. - Execution and delivery of all documents reasonably required by the Lender. INTEREST RATE: LIBOR plus the Applicable Margin. "APPLICABLE MARGIN" means 350 basis points or, following an Event of Default, 850 basis points. "LIBOR" means the applicable London interbank offered rate for deposits in U.S. dollars appearing on Telerate Page 3750 as of 11:00 a.m. (London time) two business days prior to the first day of the applicable interest period and having a maturity equal to the duration of such interest period, provided that, (1) if Telerate Page 3750 is not available for any reason, LIBOR for the relevant Interest Period shall instead be the applicable London interbank offered rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two business days prior to the first day of such interest period, and having a remaining term to maturity equal to such interest period, and (2) if no such report is available, LIBOR for the relevant interest period shall instead be the rate determined by the Lender to be the rate at which it offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two business days prior to the first day of such interest period, in the approximate amount of its portion of the relevant loan and having a maturity equal to such interest period. LIBOR shall be adjusted for Federal Reserve Board reserve requirements. LIBOR interest periods will be one month. Page 3 Interest shall be payable in arrears on the last day of each interest period, upon any prepayment (whether due to acceleration or otherwise) and at final maturity. Interest shall be calculated for actual days elapsed on the basis of a 360-day year. SECURITY: The Loan will be secured by (1) a first mortgage lien on all land and improvements constituting each Portfolio Hotel owned by the Borrower in fee, and a first mortgage lien on the Borrower's leasehold estate in and to land and improvements constituting each Portfolio Hotel as to which the Borrower owns a leasehold estate, (2) a perfected first priority security interest in the personal property, fixtures and equipment used in the operation of each of the Portfolio Hotels, (3) a first priority assignment of leases, rents, receivables and other income, (4) a first priority assignment of all management, license (to the extent permitted by law), franchise (to the extent assignable, the Borrower shall use commercially reasonably efforts to cause such assignment) and other significant agreements, including any operating agreements, (5) a perfected first priority security interest in all permits (to the extent permitted by law), approvals, contracts and other agreements in connection with the renovation, use or operation of each of the Portfolio Hotels, (6) a perfected first priority security interest in all of the Borrower's cash management accounts, escrows and reserves, including the Portfolio Improvement Reserve and the Lockbox Account, (7) a perfected first priority security interest in the membership or other equity interests ("BORROWER EQUITY") of the Borrower held by the owner(s) of the Borrower, (8) a first priority pledge of the interest rate cap agreement and (9) other customary items of security for a loan of this size and type. PREPAYMENT: The Loan will be prepayable in whole but not (except as expressly contemplated hereby) in part at any time during the Loan Term, subject to payment of a fee (a "PREPAYMENT FEE") of (a) 3% of the amount prepaid if prepaid during the first year of the Loan Term, (b) 2% of the amount prepaid if prepaid during months 13 through 18 of the Loan Term or (c) 1% of the amount prepaid if prepaid during months 19 through 24 of the Loan Term. Notwithstanding the foregoing, the Borrower will not be required to pay a Prepayment Fee with respect to prepayments of up to 12% of the original Loan Amount made as a result of Permitted Releases (as described below). RIGHT OF FIRST OFFER: The Lender shall have a right of first offer with respect to any refinancing of the Loan, in whole or in part, upon maturity, in connection with a prepayment in full and/or in connection with a Permitted Release, in each case provided, however, that the Company or one or more of its affiliates retains title to the Portfolio Hotels that will be the subject of such refinancing. Page 4 PARTIAL RELEASES AND Individual Portfolio Hotels may be released RELEASE PRICING: from the lien of the mortgages (a "PERMITTED RELEASE") if (i) the Borrower determines to withdraw a Portfolio Hotel from the collateral pool, (ii) the Lender receives a principal prepayment equal to the greater of (x) 75% of net sale proceeds (in the case of a sale) and (y) 120% of the portion of the Loan allocated to such Portfolio Hotel ("ALLOCATED LOAN AMOUNT") and (iii) following such Permitted Release and prepayment, the DSCR and Debt Yield Ratio are equal to or greater than the DSCR and Debt Yield Ratio immediately prior to such Permitted Release. RECOURSE: The Loan will be non-recourse to the Borrower; provided, however, that the Borrower and the Company shall indemnify the Lender for standard "carve-outs" to the non-recourse provision (e.g., fraud, waste, misappropriation of funds, certain environmental matters, a transfer of any Portfolio Hotel or direct or indirect ownership interest in the Borrower in violation of the Loan Documents, or a violation of the "SPE" covenants). The Loan shall be fully recourse to the Borrower and (unless there is a "mezzanine" loan and the bankruptcy filing or interference is directed by the Lender as holder of the Borrower Equity following its acquisition thereof) the Company (1) in the event of a voluntary bankruptcy filing by the Borrower, or (x) an involuntary bankruptcy filing made by a controlling or controlled affiliate or (y) an involuntary bankruptcy filing which a controlling or controlled affiliate causes to be made, in any case, which filing is not withdrawn or dismissed within 90 days or (2) in the event of (x) a contest by the Borrower of the Lender's enforcement of the Loan Documents following maturity of the Loan or acceleration of the Borrower's payment obligations on account of a failure to make a timely payment of principal or interest (a "MONETARY DEFAULT") or (y) a contest, without a good faith basis, of the Lender's enforcement of the Loan Documents following maturity of the Loan or acceleration of the Borrower's payment obligations for reasons other than a Monetary Default. INTEREST RATE PROTECTION: The Borrower shall enter into an Eligible Cap Agreement. AMORTIZATION: During the first year of the Loan Term, the Borrower shall make monthly principal payments (in addition to interest) of the lesser of $250,000 and the Excess Cash Flow for that month, provided, however, that if Excess Cash Flow in any month exceeds the amount necessary to make the required principal payment, such excess shall be applied to reduce principal to the extent of "shortfalls" from prior months. Commencing on the first anniversary of the Closing, the Borrower shall make monthly principal payments (in addition to interest) of $375,000. Commencing on the second anniversary of the Closing and through the Maturity Date (including any Extension Periods), the Borrower shall make monthly Page 5 principal payments (in addition to interest) of $500,000. Notwithstanding the foregoing, if any principal prepayment made in connection with a Permitted Release exceeds the Allocated Loan Amount of the released Portfolio Hotel, such excess may be "applied" by the Borrower to offset its obligations to make the foregoing scheduled principal payments. If the principal amount of the Loan is ever reduced to or below 30% of the original Loan Amount, all Excess Cash Flow shall be applied monthly as a principal prepayment, without imposition of a Prepayment Fee and without regard to the preceding sentence. ASSUMABILITY: The Loan may be assumed in whole, but not in part, subject to reasonable approval by the Lender of the transferee (and, if the Loan has been securitized, letters from the applicable rating agencies that such assumption will not result in a downgrade, withdrawal or qualification of any rating assigned to the securities evidencing an interest in the Loan) and payment of any reasonable costs and expenses incurred by the Lender. CLOSING: Closing shall take place on the day following the first business day that is at least 11 days after entry of the Confirmation Order. "CLOSING" means the execution and delivery of the Loan Agreement and all other loan documents, the satisfaction of all Conditions Precedent to Closing and the funding of the Loan. LOCKBOX ACCOUNT: A Lockbox Account shall be maintained on behalf of the Lender at a bank acceptable to the Lender. All rents, receivables and other revenue generated in connection with the Portfolio Hotels shall be deposited directly into the Lockbox Account. The Lender will select a servicer, acceptable to the Borrower in its reasonable discretion, to administer, at the Borrower's expense, the Loan, including the Lockbox Account and all other accounts, escrows and reserves. In general, and assuming the absence of a pending notice of Default, an Event of Default or the existence of a Cash Trap Period, the lock box arrangement will provide that funds therein be applied first, to taxes, insurance and similar items, second, to other property expenses and/or reserves established therefor as set forth in a budget approved by the Lender, third, to debt service payable on the Loan, and fourth, as and when directed by the Borrower. ASSIGNMENT, PARTICIPATION, The Lender shall have the right, without SALE AND SECURITIZATION: consent of the Borrower, to assign, syndicate, sell, securitize or participate all or any portion of the Loan, and to negotiate any necessary intercreditor agreement, satisfactory to the Lender. The Lender also reserves the right to bifurcate the Loan into two or more notes (which may include, without limitation, an A/B note Page 6 structure or a first priority mortgage loan and a "mezzanine" loan secured by Borrower Equity held by special purpose entities, owned directly or indirectly, by the Company), provided, however, that any such structure shall not result in an increase to the Borrower in its overall borrowing costs with respect to the Loan, but without regard to the Borrower's obligation to pay its counsel, as described below. The Borrower shall cooperate in such assignment, syndication, sale, securitization (including in connection with obtaining credit ratings), participation or bifurcation process, and Lender shall pay all costs in connection therewith except for costs and fees of the Borrower's counsel, which the Borrower shall be obligated to pay. FEES AND EXPENSES EXTENSION FEE: 0.25% of the then outstanding Loan Amount for each extension (other than the first Extension Period), payable by the Borrower on or prior to the first day of the Extension Period. UP-FRONT FEE: 1.375% of the Loan Amount payable to the Lender by the Borrower at Closing. COMMITMENT FEE: $1,000,000 to be paid by the Borrower to the Lender as follows: (i) $500,000 within two business days after the date on which the Approval Order has become non-appealable, with no appeal pending; and (ii) $500,000 within two business days after receipt by the Company of the Diligence Completion Notice delivered by the Lender on or before the Due Diligence Cut-off Date, provided, however, that the Diligence Completion Notice shall be subject to satisfaction of the Updating Condition (as hereinafter defined) and shall not constitute approval of any due diligence matters arising subsequent to delivery of the Diligence Completion Notice. The Commitment Fee shall be non-refundable; provided, however, that if the Loan closes, the Borrower's obligation to pay the Up-Front Fee shall be reduced by the amount of the Commitment Fee and any Extension Fee. EXPENSES: The Company shall pay or reimburse the Lender from time to time, whether or not the Loan closes, for all reasonable out-of-pocket costs as described in the Commitment Letter. The Lender shall not be required to pay any brokerage fees or commissions arising from or in connection with the making of the Loan (other than any fees payable to any broker engaged by the Lender). The Lender represents that it has not dealt with, and will not deal with, any broker in connection with the Loan other than any broker engaged by the Lender. Page 7 CONDITIONS CONDITIONS PRECEDENT TO CLOSING: The closing of the Loan will be subject to customary conditions, the conditions precedent set forth in the Commitment Letter and the following: - The Lender's receipt of all Loan Documents and other documentation relating to the Loan reasonably required by the Lender in forms reasonably satisfactory to the Lender. - The Confirmation Order shall have been entered and consummation of the Final Plan shall not be stayed pending appeal. This is referred to as the "CONFIRMATION ORDER CONDITION". - The Final Plan and the Confirmation Order, as each pertains to and/or affects the Borrower, the Loan and/or the Portfolio Hotels, shall be reasonably acceptable to the Lender. The Final Plan shall provide for (1) the distribution to the Company's general unsecured creditors (excluding holders of its CRESTS) in exchange for their pre-petition claims not less than two-thirds of the Company's voting equity ownership and not greater than an aggregate $150 million liquidation preference of preferred stock of the Company; (2) representation on the Company's Board of Directors for the Company's general unsecured creditors (excluding holders of the CRESTS, and consisting of entities comprising the official creditors committee or entities with comparable investment experience) constituting not less than 2/3 of the Board; and (3) distribution to the holders of the Company's CRESTS in exchange for their pre-petition claims common stock of the Company. - Review and reasonable approval by the Lender, or a designated expert approved by the Lender, of the following with respect to each of the Portfolio Hotels: - Final plans and specifications for any specifications for any renovations. - Final capital improvement cost budget. - The appraisal referred to below. - A current as-built ALTA survey. - All title and easement documents. - All relevant environmental information, including a Page 8 satisfactory Phase I report and reports of any additional due diligence as may be required, or recommended in such report. - All soil tests and engineering reports. - Receipt by the Lender of an extended coverage policy of title insurance containing only such exceptions as the Lender may reasonably approve and including such customary endorsements and reinsurance as the Lender may reasonably require. The title insurer(s) shall be selected by the Lender; provided, however, that, if the direct title insurance is not provided by the LandAmerica Financial Group family of underwriters ("LANDAMERICA"), the premiums for direct title insurance shall not be in excess of those that LandAmerica would charge and the estimated time of completion and delivery of up-to-date title insurance commitments shall not be reasonably likely to delay the date of Closing. - If any Third Party Report dated no earlier than August 15, 2002 is more than 150 days old at Closing, receipt by the Lender of an update of such report showing that there has been, no material adverse change occurring after the date of the original report. This is referred to as the "UPDATING CONDITION". - Receipt by the Lender of an "as-is" real estate appraisal of all of the Portfolio Hotels, which appraisal shall be performed by an appraiser reasonably acceptable to the Lender, be addressed to the Lender and the Company and conform to USPAP and FIRREA guidelines. - The Lender's review and reasonable approval of all management agreements (and agreements subordinating the same to the Loan) and franchise agreements. - Receipt by the Lender of all fees and expense reimbursements required to be paid on or before the Closing. - Receipt by the Lender of all customary legal opinions (including a non-consolidation opinion, and opinion as to the Bankruptcy Court's approval of the Loan and to the satisfaction of the Final Order Condition) regarding the Borrower, the Company and the Loan Documents, in form and substance, and from counsel, reasonably satisfactory to the Lender. - A minimum DSCR on the date of Closing of 1.45x. Notwithstanding the foregoing, the Company shall have the right to exclude from the collateral pool Portfolio Hotels having an aggregate Page 9 Allocated Loan Amount of not more than $30,000,000 and, in such event, the Loan Amount shall be adjusted accordingly and none of the foregoing conditions shall be required to be satisfied with respect to such excluded Portfolio Hotels. REPRESENTATIONS AND WARRANTIES Customary representations and warranties for a loan of this size and type, including, without limitation, representations regarding corporate/partnership existence and standing, authorization and validity, absence of material litigation and material contingent obligations (except, in each case, as disclosed to and approved by the Lender in writing), compliance with applicable laws, ownership of properties, insurance, absence of a Default or an Event of Default. COVENANTS GENERAL AFFIRMATIVE: Affirmative covenants customary for a loan of this size and type, including, without limitation, covenants relating to compliance with applicable laws, maintenance of insurance, keeping of books and records, maintenance of properties, payment of taxes, furnishing of periodic financial statements and reports, compliance certificates and other financial information and maintenance of the interest rate cap agreement with a counterparty whose obligations do not fall below "AA-" (or its equivalent). FF&E RESERVE: The Borrower shall maintain in an account pledged to the Lender an amount equal to 4% of total gross revenue of the Portfolio Hotels (remaining subject to the lien of the Loan) as an FF&E reserve. The Borrower shall make monthly deposits to the account to maintain such FF&E reserve in the required amount. In the absence of a continuing default, deposits to and disbursements from the account will be controlled by the Borrower pursuant to an annual budget approved by the Lender. Upon the occurrence and during the continuance of an Event of Default, the Lender will control disbursements from the account, subject to the manager's right to draw funds from the account for normal repairs, replacements and maintenance expenses or otherwise in accordance with the management agreement. The manager will be required to provide to the Lender a complete accounting of any use of the reserve on a monthly basis. Page 10 TAX AND INSURANCE ESCROW: The Borrower shall be required to make monthly deposits into an escrow account maintained by the Lender sufficient to pay all real estate taxes and insurance premiums for each of the Portfolio Hotels. The Borrower shall be required to maintain insurance coverage subject to commercially reasonable deductibles (including self-insured retention amounts) and limits consistent with hospitality industry practice for comparable properties securing securitized loans of comparable amount and otherwise reasonably acceptable to Lender including, without limitation, terrorism insurance and environmental insurance insuring against damage or liability as a result of mold, but only to the extent such terrorism and environmental insurance are available at rates that are commercially reasonable (as compared to rates charged to and paid by owners of properties comparable to the Portfolio Hotels). ENVIRONMENTAL REMEDIATION RESERVE: The Lender may require the establishment of a reserve, in an amount to be reasonably determined by the Lender, for the purpose of funding any remediation of any environmental conditions identified in any current environmental report obtained by the Lender at one or more of the Portfolio Hotels; provided, however, that such environmental condition is of a type that lenders that originate comparable loans for securitization customarily require be remediated. The Borrower and the Company shall covenant to carry out any operations and maintenance plan required by the Lender. CASH FLOW RESERVE: During a Cash Trap Period, all Excess Cash Flow shall be deposited with and held by the Lender in an account controlled by the Lender and shall constitute additional security for the Loan; provided, however, that, so long as no Event of Default then exists, deposited amounts (i) may, at the Borrower's election, be held in the account, applied to prepayment of the Loan, be used to make capital expenditures approved by the Lender or be used to make up to $3 million of scheduled debt service payments and (ii) shall (to the extent of any funds remaining) be released to the Borrower, if the Cash Trap Period terminates, no new Cash Trap Period commences for 90 days following such termination and no Default then exists. "CASH TRAP PERIOD" means the period during which (1) the DSCR (calculated quarterly, except following the commencement of a Cash Trap Period, then monthly) is below 1.30x; or (2) the Debt Yield Ratio (calculated quarterly, except following the commencement of a Cash Trap Period, then monthly) is less than (a) 13.25% in the first year of the Loan Term, (b) 13.75% in the second year of the Loan Term, (c) 14.00% during the first Extension Period, (d) 14.25% during the second Extension Period and (e) 14.50% during the third Extension Period. The Borrower may cause the termination of a Cash Trap Period by means of a Page 11 Supplemental Principal Payment in an amount equal to the greater of (1) 120% of the amount required to cure the violation of the DSCR and Debt Yield Ratio requirements and (2) 1% of the then current Loan Amount. "EXCESS CASH FLOW" means all cash available after payment of debt service on the Loan, operating expenses, management fees, and other amounts required to be paid pursuant to the Loan Agreement including, without limitation, all applicable reserves, and the amount of any capital expenditures made in accordance with the Borrower's budget or otherwise with the Lender's approval from cash in excess of available reserve amounts. "DEBT YIELD RATIO" means, at any time of determination, Net Cash Flow for the trailing 12-month period divided by the then outstanding Loan Amount. "NET CASH FLOW" means NOI less (a) a management fee equal to the greater of actual management fees and 4% of gross annual revenues of the Portfolio Hotels remaining subject to the lien of the Loan, (b) an FF&E Reserve of 4% of gross annual revenues of the Portfolio Hotels remaining subject to the lien of the Loan, and (c) franchise fees. "NET OPERATING INCOME" ("NOI") means net income before management fees, interest, income taxes, depreciation, amortization, FF&E reserves and franchise fees. "DEBT SERVICE COVERAGE RATIO" ("DSCR") means, at any time of determination, Net Cash Flow for the trailing 12-month period divided by the amount of interest (assuming an interest rate equal to the greater of (1) the then current yield on the 10-year United States Treasury Note plus the Applicable Margin and (2) the then current Interest Rate (such greater interest rate, the "TEST RATE")) that the Borrower will be required to pay over the succeeding 12 months plus, in the case of any determination after the first anniversary of the Closing, principal amortization that would be required in respect of the then outstanding principal amount of the Loan over the first 12 months of a 25-year amortization schedule, calculated using the Test Rate. GENERAL NEGATIVE: Restrictive covenants customary for a loan of this size and type including, but not limited to, restrictions on (1) dividends and distributions following an Event of Default or otherwise in a manner inconsistent with the lock-box arrangement, (2) other indebtedness, (3) direct or indirect transfers of Portfolio Hotels (other than a transfer permitted under the Loan Documents), (4) investments, (5) liens and encumbrances, (6) amendments to or replacements of franchise, management or other specified Page 12 agreements, (7) contravention of "SPE" requirements, (8) specified corporate and organizational actions, such as merger, creation of subsidiaries, dissolution, etc., (9) changes in nature, scope and/or place of business, (10) affiliate transactions, (11) debt cancellation, (12) alterations and (13) settlement of claims. REPORTING The Borrower will be required to provide to the Lender financial and other information with respect to the Borrower, the Company and the Portfolio Hotels, as applicable, including the following: - Annual audited (by a "Big Four" accounting firm, or other accounting firm reasonably acceptable to the Lender) financial statements of the Borrower within 120 days, and the Company within 90 days, of their fiscal year end. - Quarterly financial statements for the Borrower and the Company within 45 days of quarter end. - Quarterly compliance certificate from the Chief Financial Officer, Treasurer, or authorized representative of the Borrower confirming that there are no defaults under the Loan and, as required, a calculation of the DSCR. - Quarterly compliance certificate from the Chief Financial Officer, Treasurer, or authorized representative of the Company's confirming compliance with the Company's financial covenants. - Annual projected operating and capital budgets for each Portfolio Hotel property in the Portfolio Hotels for the upcoming 12-month period, to be received by the Lender by February 15 of each year. - Monthly operating statements for each Portfolio Hotel to include occupancy, average daily room rate and revenue per available room, within 30 days of month end. - Any other reports the Lender may reasonably require. EVENTS OF DEFAULT Customary events of default for a loan of this type including, without limitation, failure to make payments when due; breach of covenants; breach of representations and warranties; bankruptcy or insolvency (or related events) of the Borrower; and judgments. Page 13 This SPT is intended as an outline only and does not purport to summarize all the conditions, covenants, representations, warranties and other provisions which would be contained in definitive legal documentation for the financing contemplated hereby. Any commitment of the Lender is subject to negotiation and execution of definitive Loan Documents in form and substance reasonably satisfactory to the Lender. Page 14 EXHIBIT A LIST OF PROPERTIES
# Year Rights Chain/Name City ST Rooms Built Owned ---------- ---- -- ----- ----- ------ Holiday Inn Silver Spring MD 231 1973 FS Crowne Plaza Houston TX 291 1980 FS Courtyard by Marriott Atlanta GA 181 1996 FS Holiday Inn Select Windsor ONT. 214 1991 FS Doubletree Club Philadelphia PA 189 1972 FS Holiday Inn Select Dallas (DFW Airport) TX 282 1974 FS Hilton Troy (Northfield) MI 191 1976 FS Hilton Columbia MD 152 1982 FS Residence Inn Dedham MA 81 1998 FS Crowne Plaza West Palm Beach FL 219 1982 FS Holiday Inn Select Strongsville OH 304 1972 FS Holiday Inn Rolling Meadows IL 420 1963 FS Courtyard by Marriott Bentonville AR 90 1996 FS Holiday Inn St. Louis North MO 392 1956 FS Holiday Inn Select Niagara Falls NY 397 1974 FS Crowne Plaza Cedar Rapids IA 275 1991 FS Holiday Inn Greentree PA 200 1972 FS Holiday Inn Towson (Cromwell Bridge) MD 139 1972 FS Holiday Inn Arden Hills/St. Paul MN 156 1973 FS Holiday Inn Winter Haven FL 228 1967 FS Residence Inn Little Rock AR 96 1997 FS Hampton Inn Pensacola FL 124 1985 FS Courtyard by Marriott Abilene TX 99 1996 FS Courtyard by Marriott Paducah KY 100 1997 FS Holiday Inn SunSpree Myrtle Beach SC 133 1978 FS Holiday Inn Austin TX 210 1984 FS Holiday Inn Jamestown NY 146 1979 FS Holiday Inn Frederick MD 158 1963 FS Fairfield Inn Valdosta GA 108 1963 FS Holiday Inn Pensacola (University Mall) FL 152 1981 FS Hurstbourne Hotel Louisville KY 393 1971 FS Holiday Inn Brunswick GA 126 1974 FS Courtyard by Marriott Florence KY 78 1995 FS Quality Hotel Melairie LA 205 1985 FS Holiday Inn York PA 100 1970 FS Hampton Inn Dothan AL 113 1989 FS Holiday Inn Valdosta GA 167 1963 FS Holiday Inn Express Pensacola FL 214 1962 FS Holiday Inn Pittsburgh (Pkwy East) PA 180 1975 FS Four Points Niagara Falls NY 189 1965 FS Holiday Inn Express Gadsden AL 141 1962 FS Holiday Inn Baltimore West (Belmont) MD 135 1972 FS Holiday Inn Marietta (hotel & suites) GA 196 1973 FS Holiday Inn Dallas (Mkt Center) TX 246 1971 FS Clarion Charleston SC 197 1981 FS Holiday Inn Grand Island NY 261 1972 FS Holiday Inn Dothan AL 102 1961 FS Holiday Inn Baltimore, Inn Harbor MD 375 1964 LH Holiday Inn Baltimore - BWI Airport MD 259 1973 LH Crowne Plaza Albany NY 384 1980 LH Holiday Inn Glen Burnie MD 127 1973 LH Holiday Inn Lancaster PA 189 1971 LH Holiday Inn Sheffield AL 201 1981 LH Holiday Inn East Hartford CT 130 1974 LH French Quarter Suites Memphis TN 105 1980 LH Holiday Inn Jekyl Island GA 199 1972 LH